High crude price hits Mundra to Delhi pipeline start-up

Vol 11, PW 6 (26 Jul 07) Midstream & Downstream

Hindustan Petroleum is unable to use its newly laid petroleum products pipeline from Mundra port in Gujarat to Delhi because of high global crude prices.

Completed on May 27th, this 1050-km (mostly) 18-inch diameter pipeline cost Rs1700cr ($377m) to lay and is now “under commissioningâ€‌. But before the pipeline is used, it needs to be filled with 195,000 tonnes of products, mainly diesel, which will remain inside as what is known as â€کline-fill’ quantity.

Another 30% is needed to test the pumps and the tanks before usage. “So far only dry tests have been conducted on the pumps,â€‌ we hear.

But with crude prices at their present high (around $73/barrel) levels, HPCL cannot afford to lock in the total 235,000 tonnes of (mainly) diesel needed as â€کline-fill’ to test the pipeline facilities. So far only a negligible amount of diesel has been injected into the pipeline.

“By mid-August we’ll have only about 7000 tonnes of products in,â€‌ says an HPCL source. HPCL says it is unable to spare any of its own production as â€کline-fill’.

“We ourselves are living from hand-to-mouth,â€‌ says a source. “And we are not getting enough products from Reliance either.

â€‌ Since HPCL’s domestic production is unable to meet regular demand, it is importing more petroleum products than usual. “Imported products are costlier,â€‌ adds HPCL.

“Why should we fill up the line with such expensive productsâ€‌ Adds another HPCL official: “We’ve purchased a white elephant (the pipeline) with money from our pockets. Now the elephant is standing around with no work to do.

â€‌ HPCL says it will have to wait till crude oil prices “cool downâ€‌ before using the Mundra to Delhi pipeline, the first of its kind in India laid as a common carrier under new oil ministry rules for product pipelines. HPCL had to set aside 25% capacity on this pipeline for use by other petroleum product transporters.