Mangalore Refineries...sinking in oil - Views on News from Equitymaster

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Mangalore Refineries...sinking in oil

Dec 15, 1999

Mangalore Refineries and Petrochemicals (MRPL) is facing inventory problems arising from an inability to market its products. The company also tried to export 40,000 tonnes of furnace oil but cancelled the tender since the prices were unremunerative. MRPL is a joint venture between the A.V. Birla group and Hindustan Petroleum (26% equity stake each). The refinery has been battling containment problems since the commissioning of its expansion from 3 million to 9 million tonnes.

Last month the refinery had to shut down for about a week because of surplus diesel. This month, the problem is with surplus furnace oil. Shutting down a refinery is an extreme measure and involves huge energy losses. The refinery has about 30 days of storage capacity but production has to be stopped when the tanks start overflowing.

The refinery produces about 100,000 tonnes of the product every month, which it is finding difficult to sell within the country. Incidentally, both Indian Oil and Bharat Petroleum are importing furnace oil in Mumbai. However, the cost of shipping MRPL products from Mangalore to Mumbai makes it more expensive than imports.

Furnace oil is a free product and with a major battle on for market shares, bottomlines are under pressure. MRPL is likely to have offtake problems till the demand picks up.

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