Date:16/03/2004 URL: http://www.thehindubusinessline.com/2004/03/16/stories/2004031601540400.htm

Back BPCL to halve product offtake from Reliance

Archana Chaudhary

Mumbai , March 15

BHARAT Petroleum Corporation Ltd (BPCL) has decided to cut by half its product offtake from Reliance Industries Ltd's Jamnagar refinery in the coming fiscal.

According to BPCL officials, Indian Oil Corporation's (IOC) decision to convert the 1,443-km Kandla-Bhatinda product pipeline into a crude carrier has forced the company to take lower product volumes from Reliance.

The company, which picked up 3.5 million tonnes from Reliance's Jamnagar refinery last year, has agreed to buy only 1.7 mt, including LPG, this year for reaching markets in the North, a senior official told Business Line.

BPCL, which has a 9-mt refinery at Mumbai and subsidiary refineries at Kochi in Kerala and Numaligarh in the North-East, gets product supplies from Reliance and IOC refineries for petrol stations in the North.

Oil companies source transport and domestic fuels from each other's refineries in the regions where they do not have product sources. These products are moved through pipelines, which are a monopoly of public sector companies, especially IOC. As the financial year edges towards closure, oil PSUs are finalising annual product-offtake agreements with other public and private sector refineries.

Said the BPCL official: "Indian Oil has notified us (oil companies) that work on converting the Kandla-Bhatinda pipeline into a crude carrier will begin this October. Since Reliance products are moved North through this pipeline, we have no other option but to depend more on IOC's refineries in the North than take products from Reliance. All PSUs have almost halved offtake from RIL."

Although Reliance offered use of its own proposed product pipeline network, other oil PSUs have been sceptical of the offer as it would take more than 18-20 months before the first of Reliance's two proposed pipelines linking Jamnagar to the North are put in place.

Reliance had entered into product sale agreement with the public sector oil marketing companies a few years ago when it was not allowed to set up retail outlets. From April 2002, when it was allowed to set up retail outlets, the contracts with the PSUs allowed for a committed offtake of around 13.5 mt for another two years.