NEW DELHI (Reuters) - An Indian Oil Corp unit plans to invest $5.5 billion to gradually raise the capacity of its smallest refinery co-owned by Iran to 300,000 barrels per day (bpd), its chairman said, to help meet a surge in demand for refined products in the world's fastest growing major economy.
The Nagapattinam plant operated by IOC's subsidiary Chennai Petroleum Corp requires a complete overhaul to produce the cleaner, higher grade fuels needed to meet rising demand in southern India, said B. Ashok, chairman of the two firms.
India, seen as the most important driver of world energy demand growth in the years to come, is building new refineries and expanding a number of existing plants to meet demand.
According to a 2015 report by the International Energy Agency (IEA), India will require up to 329 million tonnes of oil products annually by 2030. As of last year India consumed 183 million tonnes of refined products, government data showed.
The government is also planning a countrywide switch to the use of cleaner transport fuels compliant with Euro IV emission standards from April and with the Euro VI standards from April 2020.
CPCL's two plants, in which Iran's Naftiran Intertrade Co Ltd has a 15.4 percent stake, are located in the southern state of Tamil Nadu.
Initially the oil processing capacity of the Nagapattinam plant will be raised to between 120,000 bpd and 180,000 bpd and in the next phase to 300,000 bpd, Ashok said.
Nagapattinam site has extra land available that makes expansion easier to accommodate than at CPCL's bigger 210,000 bpd Manali refinery, Ashok said.
IOC, the country's biggest refiner, has already announced separate plans to spend 500 billion rupees ($7.3 billion) by 2022 to raise its refining capacity by about 30 percent to 2.08 bpd.
Expansion of the Nagapattinam plant is not a part of that plan and IOC is also now considering raising the capacity of its Panipat refinery in northern India to 500,000 bpd from the initially planned 400,000 bpd.
Ashok said a proposal for the Nagapattinam project is likely to be considered by the board in three to four months after the preliminary studies are completed.
Asked about the cost of the plant he said, "The thumb rule is that setting up a million tonnes of capacity costs 25 billion rupees".
($1 = 68.5100 Indian rupees)
(Editing by Greg Mahlich)