India’s future oil refineries may be smaller in capacity than current ones due to problems with acquiring land, Indian Oil Minister Hardeep Singh Puri said on Tuesday.

The country intends to build new refineries to increase its annual refining capacity to nine million barrels per day (mbpd). The current capacity stands at approximately 5.2mbpd, according to Reuters.

“Refineries are high cost. We are looking at a large [capacity] of 20 million tonnes per annum, [through] smaller [refineries], because if I make [them] too big then land acquisition and other issues get in the way,” Puri told reporters on the sidelines of an industry event.

He added that the government still needs to create a framework for expanding its oil refining capacity. Puri also told reporters that new refiners would make petrochemicals and green hydrogen, among other products.

Problems surrounding land acquisition in India have long plagued the expansion of large-scale oil refineries. Last year, it was reported that plans for a 15,000-acre, 1.2mbpd refinery, a joint venture planned with oil companies Saudi Aramco and ADNOC, might be abandoned and replaced with several smaller refineries due to land purchase issues.

India has rapidly expanded its recent oil product exports. This comes after the country’s imports of crude oil rose when Russia began redirecting its exports to Asia, following European sanctions. India has also become a key exporter of fuel products to Europe due largely to its increased output.

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By GlobalData

Before Russia’s invasion of Ukraine, Europe imported an average of 154,000bpd of diesel and jet fuel from India. By April 2023, this had risen to approximately 200,000bpd. India’s diesel exports to Europe rose 12%-16% in the last fiscal year, reaching 150,000bpd-167,000bpd. Approximately 50% of India’s total exports of jet fuel are now shipped to Europe, or 70,000bpd-75,000bpd, up from 40,000bpd the previous year.