CPCL Manali Refinery to Make Special Lube Oils from 2026

CPCL will spend ₹1,600 crore on a new lube oil plant at Manali. This plant will make 242,000 tonnes of special lube oils each year, starting in 2026.
By Newsroom | Business, India |

Chennai Petroleum Corporation Limited (CPCL) has commenced construction on a specialized facility at its Manali Refinery designed to produce Group II and Group III lube oil base stocks (LOBS). This project, budgeted at ₹1,600 crore, marks a strategic departure from traditional base oil production to meet evolving domestic market requirements for higher-grade lubricants.

The project is set to yield an annual output of 242,000 tonnes of Group II/III LOBS, providing a localized supply chain for the Indian Oil Corporation (IOC) integrated lube complex.

Financial/Operational MetricsStatus/Details
Project Cost (LOBS Unit)₹1,600 crore
Annual Target Capacity242,000 tonnes (Group II/III)
Annual Capex Allocation₹700–800 crore (Next 2 years)
Primary Funding Split₹250–300 cr (Maintenance) / ₹400–500 cr (LOBS upgrade)

Capital Expenditure and Strategic Alignment

The move coincides with a planned doubling of CPCL’s annual capital expenditure to the ₹700–800 crore range for the 2026–2027 period. Management frames this spend as a transition toward value-added operations. The capital allocation serves two primary functions:

  • Operational Sustainability: Maintenance of legacy units and minor industrial upgrades.

  • Portfolio Shift: Dedicated funding for the modernization of LOBS units 2 and 3, signaling a shift toward higher-margin refined products.

Nagapattinam Refinery and 'Opportunity Crude'

While the Manali site focus remains on lubrication technology, the broader Refinery Expansion project at Nagapattinam remains in a state of suspended activity. Although over 1,200 acres of land have been acquired for this joint venture—held 75% by IOC and 25% by CPCL—the initiative awaits critical clearance from the Cabinet Committee on Approvals (CCA).

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Market fluctuations continue to influence refinery margins. CPCL continues to utilize "opportunity crude" (predominantly Russian imports), which constituted roughly 30% of total intake in the previous fiscal year. However, the economic incentive of this practice has shifted; management reports that price discounts on such crude narrowed to less than $1 per barrel by the end of Q4 FY25.

Contextual Evolution

The industrial landscape in Manali is currently undergoing consolidation. IOCL has recently launched trial operations at its integrated grassroots lube complex nearby, which is slated to house diverse outputs including brake fluids, transformer oils, and diesel exhaust fluids. CPCL’s concurrent move into specialized base stocks acts as a domestic integration effort to insulate the regional manufacturing hub from volatile import dependencies for high-grade lubricant bases.

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Frequently Asked Questions

Q: What is CPCL building at its Manali Refinery?
CPCL is building a new plant at its Manali Refinery to make special Group II and Group III lube oil base stocks. This is a new type of oil for lubricants.
Q: How much will the new lube oil plant cost and when will it be finished?
The new plant will cost ₹1,600 crore. It is expected to start making 242,000 tonnes of special lube oils each year from 2026.
Q: Why is CPCL building this new plant?
CPCL is building the plant to meet the growing need for better quality lubricants in India. This will help India make its own special lube oils instead of importing them.
Q: What else is happening with CPCL's projects?
CPCL is also planning to increase its spending on upgrades and maintenance to ₹700–800 crore each year for the next two years. However, a big refinery project in Nagapattinam is still waiting for government approval.