OREANDA-NEWS. August 29, 2011. A nation perennially lacking in oil and gas assets is set to become the top petro products exporter in Asia overtaking South Korea, thanks to rapidly rising refining capacity.

Petro products are obtained after distillation of crude oil and include petrol, diesel, kerosene, LPG, furnace oil, aviation turbine fuel and naphtha. As on June 2011, India’s exports of refined products stood at 0.95 million barrels per day, while South Korea was at around 1.1 million barrels.

The Indian figures include only the exports of private refiners such as Essar Oil and Reliance Industries, according to the data from Platts. Downstream players such as government oil companies also refine but don’t export the stuff.

India’s exports are also 68% more than China, Asia’s biggest crude importer, which refines around 0.30 million barrels per day. Vandana Hari, Asia editorial director, Platts, a Singapore-based global information provider on energy and metals, during Platts Oil Forum on Tuesday, said with no major refining capacity coming up in South Korea in the next couple of years and a major capacity ramp up happening in India, India is expected to take over South Korea very soon.

India will be adding refining capacity of close to 800,000 barrels per day (bpd) till 2013. The first to come up will be a 120,000 bpd refinery coming up at Bina in Madhya Pradesh by BPCL and partner.

Later in the year, HPCL and Mittal will be commissioning an 180,000 bpd plant at Bathinda in Punjab. Next year, Essar Oil will be expanding its capacity of Vadinar refinery from 300,000 bpd to 375,000 bpd, while Nagarjuna Oil and Indian Oil will be adding a capacities of 120,000 bpd and 300,000 bpd, respectively, by 2012-13.

Experts, however, are apprehensive about the return on investment from these ramp-ups because of subdued markets abroad. “While exports will surely draw dollar revenues for exporters, will they continue to enjoy excellent margins?” asks Jigar Shah, head of research from brokerage Kimeng Securities.

There are two reasons for this: one, the demand for automotive fuel world over has come down and the price difference between sweet crude and sour crude, which is extensively leveraged by export-oriented refiners, has narrowed.

“I don’t think Reliance, which has the finest refinery in the country, can go back to margins of USD 15 per barrel anymore,” he said, adding that most of the export-focused refiners are based on sour crude.

A top official in one of the biggest private sector refiners in India said the superior Brent sweet or light crude is currently priced at USD 110 per barrel while sour or heavy crude is around USD 106. High-tech refiners enjoy good margins when they refine sour crude and export it.