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July 28, 2020

Impact of COVID-19 on Indian Refinery Sector

COVID-19 heavily impacted key end-use segments such as transportation and manufacturing sectors among others, hitting the demand for fuel products in India.

By GlobalData

COVID-19 heavily impacted key end-use segments such as transportation and manufacturing sectors among others, hitting the demand for fuel products in India.

This forced Indian refiners to re-align their operating models and supply chain cycles to ensure business continuity. Despite all these, Indian refining companies are likely 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.

Several Indian refineries have reduced their operating capacities, while a few others have suspended operations to outlast the current crisis. Manali – a 211,000 barrels per day (Mbpd) refinery, operated by Chennai Petroleum Corp Ltd., has decreased runs by 40%, as demand for fuel products in India is yet to fully recover. Besides shutting down its smallest CDU, the Mangalore Refinery has been running its other to CDUs at 50% in response to lower products demand due to the 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 nation-wide lockdown being imposed from March 23, 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 for June 2020 over May and it is expected to improve further in months to come.

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. Reduced non-essential travel and the increased usage of private transport are expected to dent fuel demand in the medium-term.

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