Indian Oil planning $2.4bn investment to make ethanol

Indian Oil Corp, the nation’s biggest refiner, plans to spend Rs160bn to build a plant for producing synthetic ethanol as it seeks to secure supplies of the biofuel to meet mandatory blending norms.

Bloomberg
Mumbai


Indian Oil Corp, the nation’s biggest refiner, plans to spend Rs160bn ($2.4bn) to build a plant for producing synthetic ethanol as it seeks to secure supplies of the biofuel to meet mandatory blending norms.
The state-run company is studying the project to produce 1 million metric tonnes of ethanol annually for blending with gasoline, S Mitra, executive director at Indian Oil, said in an interview. Indian Oil plans to seek investment approval from its board next year, after which the facility, to be located at Paradip in eastern India, will take about four years to complete, he said.
The refiner will partner with Dallas-based Celanese Corp for the ethanol project, which will use petroleum coke as feedstock from Indian Oil’s two refineries in the region, Mitra said.
India is facing a supply shortage of the biofuel, hindering plans to achieve mandatory 5% blending, Oil Minister Dharmendra Pradhan said earlier this month. In December, the federal government allowed ethanol production from non-food feedstock including petrochemicals to improve availability.
Indian Oil and two other state-run refiners, Hindustan Petroleum Corp and Bharat Petroleum Corp, are seeking 2.66bn litres of ethanol in the 12 months to November 30, 2016. The supply shortage is prompting Indian Oil, which would need nearly half of the projected requirement, to consider producing its own ethanol, Mitra said.
Indian Oil, which also runs the biggest network of fuel stations in the country, bought about 186mn litres of ethanol for blending through the year to March 31.
Indian Oil shares fell 1.1% to Rs405.25 at the close in Mumbai, after falling as much as 3.5% earlier.
The benchmark S&P BSE Sensex rose 0.6%.
In India, ethanol is primarily produced from molasses, a byproduct of sugar making. Molasses output depends on the sugarcane crop, which varies each year. “At the moment we are short on ethanol and sugarcane farmers won’t be able to produce enough,” Mitra said in Mumbai. The ethanol unit will come up within a petrochemicals complex being built by Indian Oil adjacent to its newly-built 15mn metric ton-a-year oil refinery on the country’s east coast.