Rising refinery utilization in India provides glimmer of hope despite devastating impact of COVID-19

Gradual appreciation of refinery utilization is likely to enable the refining companies to continue growing

Refinery

COVID-19 heavily impacted the key end-use segments such as transportation and manufacturing sectors among others, hitting the demand for fuel products in India. This forced  the Indian  refiners to re-align their operating models and supply chain cycles to ensure business continuity. Despite all these, the gradual appreciation of refinery utilization is likely to enable the refining  companies to remain focused on key growth projects that would ensure long-term competitiveness to deliver strong future growth, says GlobalData, a leading data and analytics company.

Haseeb Ahmed, Oil and Gas Analyst at GlobalData, comments: “Several Indian refineries have reduced their operating capacities while a few others have suspended operations to outlast the current crisis. Manali – a 211 thousand barrels per day (mbd) refinery, operated by Chennai Petroleum Corp Ltd, has decreased runs by 40%, as the demand for fuel products in India is yet to fully recover. Besides shutting down its smallest CDU, the Mangalore Refinery and Petrochemicals Limited (MRPL) has been running its other two CDUs at 50% due to lower products demand owing to COVID-19 impact.”

India’s refinery utilization in March 2020 fell by around 12% compared to February 2020 as the demand for fuel products fell, with country-wide lockdown being imposed from 23 March 2020 onwards. Utilization fell even further in April and started to gain traction in May as lockdown restrictions started to slightly ease. Since then, utilization rates have improved and it is expected  to improve further in months to come.

Ahmed concludes: “Although the situation is gradually getting back to normalcy, demand for diesel is not expected to gain a sudden surge as the heavy industries are coping with their recovery challenges. However, gasoline demand is likely to recover over the next two-three quarters as lockdown eases. The reduced non-essential travel and the increased usage of private transport are expected to dent the fuel demand in the medium-term.”

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