India adds refinery capacity as Modi backs expansion

Prime Minister Narendra Modi said Saturday that India will keep expanding crude oil refining capacity to strengthen energy security, after inaugurating the country’s first new refinery in a decade. Officials said the Rajasthan project adds 180,000 barrels a day of capacity and reflects New Delhi’s bet that domestic fuel demand will remain durable even as some Western markets reduce refining assets.

Rajasthan refinery adds 180,000 barrels

The greenfield refinery in Rajasthan’s Thar desert was built at a cost of $8.3 billion and has annual petrochemical production capacity of 2.4 million tonnes. Commercial operations began on June 22, and the plant is expected to process about 150,000 barrels a day of imported crude.

The project is a joint venture between Hindustan Petroleum Corporation Ltd. and the Rajasthan government. Officials said it will mainly produce diesel, petrol and petrochemicals, giving India more ability to turn imported crude into domestic fuels and exportable refined products.

India’s installed refining capacity rises by about 3.5% to 5.4 million barrels a day with the project. The country is currently the world’s fourth-largest refiner, and its expansion strategy rests on sustained transport fuel use, petrochemical demand and slower electric vehicle adoption than in richer economies.

The macro effect depends on crude flows. If Indian demand holds, refiners may support global crude purchases while adding refined-product supply into regional markets; if demand softens, margins could come under pressure and new capacity may weigh on Asian fuel spreads. India is expected to lift refining capacity to 6.2 million barrels a day by December 31, 2030.