What is a low toxicity base oil from kerosene project report?
A low toxicity base oil from kerosene project report is a detailed project report (DPR) for a plant that strips aromatics out of kerosene. The plant raises the flash point and gives a clean base fluid for oil based drilling mud. It covers process, machinery, kerosene supply, approvals, project cost, finance and five-year projections.
Promoters use it to size the plant and raise a term loan, and banks use it to judge whether the unit can repay.
Also known as: LTBO plant project report, low toxicity mineral oil (LTMO) project report, dearomatised kerosene project report, drilling fluid base oil business plan.
Low toxicity base oil from kerosene manufacturing plant cost in India
Our sample report models a 6.2 KL per day plant (kilolitres per day), or 2,046 KL a year at full capacity, running 330 days. It starts at 60% utilisation and reaches 80% in Year 5, selling base oil at ₹89,200 per KL.
| Land and site development | 43.31 |
|---|---|
| Building and civil works | 185.24 |
| Plant and machinery | 331.62 |
| Other fixed assets | 33.73 |
| Contingencies | 25.84 |
| Preliminary and pre-operative | 15.49 |
| Working capital margin | 42.96 |
| Total | 678.19 |
| Promoter's contribution (25%) | 169.55 |
|---|---|
| Term loan from bank (75%) | 508.64 |
| Cash credit limit (separate) | 128.86 |
| Total project cost | 678.19 |
DSCR (debt service coverage ratio) shows how many times yearly cash earnings cover loan instalments and interest. The sample averages 1.37 but drops to 1.20 in Year 2, when the first full year of repayments meets a thin margin. That year is the one a credit officer will study.
Term loan at 10.5% with a 6-month moratorium and 54 monthly instalments. All figures are illustrative.
Low toxicity base oil from kerosene manufacturing process
Kerosene already has the right boiling range for a light drilling base oil. The job is to take out the aromatic compounds that make diesel and raw kerosene toxic, then raise the flash point. The sample report uses the oleum (fuming sulphuric acid) route, which needs no hydrogen supply.
- Feed testing
Each kerosene tanker is checked for aromatic content, distillation range and flash point before it is unloaded, because feed quality sets acid consumption and yield.
- Acid treatment
Oleum is dosed into agitated reactors with cooling, since the reaction gives off heat; aromatics react and move into a heavy acid layer.
- Sludge separation
The batch settles and the acid sludge is drawn off from the bottom and sent to a disposal route agreed with the pollution board.
- Neutralisation and washing
Dilute caustic soda neutralises leftover acid, and water washes remove salts before the oil goes forward.
- Clay treatment
Activated bleaching clay takes out colour, odour and polar traces, and a filter press separates the spent clay.
- Fractional distillation
Light ends are stripped to lift the flash point, and the oil is cut to the boiling range in the buyer's specification.
- Testing and dispatch
Every batch is tested for aromatics below 1%, flash point and viscosity, then loaded into tankers or drums.
Which dearomatisation route suits a standalone plant?
Three routes can bring kerosene aromatics down to drilling grade. The choice decides capital cost, waste and how low the aromatics can go, so settle it before you ask for quotations.
| Acid (oleum) treatment | Lowest capital cost and simple batch equipment, which is why the sample uses it. Acid and clay are consumed on every batch, and acid sludge has to be handled and disposed of safely. |
|---|---|
| Solvent extraction | A selective solvent pulls aromatics out and is recovered and reused. CSIR-Indian Institute of Petroleum has a patented re-extraction process for kerosene, heavy naphtha and gas oil that runs at mild conditions without hydrotreating and suits standalone units without a hydrogen plant. |
| Catalytic hydrogenation | Hydrogen saturates aromatics over a catalyst and can reach the lowest aromatic levels, but needs a hydrogen source, high-pressure reactors and spent catalyst handling. It fits refinery-scale budgets more than a standalone unit. |
| What the buyer sees | All three must meet the same lot tests. The route mainly changes your cost per KL, yield and the waste you must manage. |
Raw materials: kerosene, oleum and clay
Kerosene is 84% of raw material cost in the sample, and raw materials are 59.2% of sales. It must be non-PDS kerosene bought from an oil marketing company. Indian Oil's guidelines for industrial buyers ask for advance payment, the buyer's own tanker, a KYC form and an indemnity bond. The buyer also declares the end use and may not resell.
| Raw material | Share of cost | Year 3 (₹ lakh) |
|---|---|---|
| Industrial (non-PDS) kerosene | 84% | 635.82 |
| Oleum and sulphuric acid | 8% | 60.55 |
| Activated bleaching clay | 5% | 37.85 |
| Caustic soda lye | 3% | 22.71 |
| Total | 100% | 756.93 |
Supplies are ex main installation, so freight from the depot to your plant is your cost. Plan the site with that distance in mind.
Machinery for a low toxicity base oil plant
The fractional distillation column is the largest single item in the sample, followed by the acid treatment reactors. Most vessels in acid service need acid-resistant lining or suitable alloy, which a quotation must state.
| Equipment | What it does | Sample cost (₹ lakh) |
|---|---|---|
| Fractional distillation column with reboiler and condensers | Strips light ends and cuts the boiling range | 69.64 |
| Acid treatment reactors with agitators and cooling | Reacts aromatics with oleum under temperature control | 56.38 |
| Kerosene receiving tanks and transfer pumps | Unloads and holds feed kerosene | 43.11 |
| Clay contactor and filter press | Polishes the oil and removes spent clay | 33.16 |
| Product storage tanks and tanker loading system | Holds tested lots and fills tankers | 33.16 |
| Neutralisation and water wash vessels | Removes leftover acid and salts | 26.53 |
| Thermic fluid heater | Supplies heat to the distillation reboiler | 26.53 |
| Acid sludge settling and separation tanks | Separates sludge from treated oil | 23.21 |
| Quality control laboratory with GC and flash point tester | Tests aromatics, flash point and viscosity | 19.90 |
| Total plant and machinery | 331.62 | |
Costs are the sample report's estimates for a 6.2 KL per day plant. Get current quotations before you finalise.
Utilities, manpower and plant services
| Power and fuel | ₹73.85 lakh in Year 3 in the sample, 5.8% of sales, including fuel for the thermic fluid heater that drives distillation |
|---|---|
| Cooling | Cooling water for the acid reactors and the distillation condensers; temperature control during oleum dosing affects acid use and oil colour |
| Tank farm | Feed and product tanks sized for tanker lots and about 30 days of kerosene stock, laid out to meet the PESO licence conditions |
| Waste handling | Covered storage for acid sludge and spent clay, and an effluent treatment plant for caustic and wash water |
| Manpower | 27 people in the sample, including 9 skilled operators for reactor, distillation and lab shifts; Year 1 wage bill ₹60.42 lakh |
| Laboratory | Gas chromatograph for aromatics, closed-cup flash point tester and viscometer, so every lot is released against the buyer's specification |
Licences and approvals for a low toxicity base oil unit
Petroleum storage and waste rules shape this plant more than most chemical units. Start these approvals before you order equipment.
| Petroleum storage (PESO) | Kerosene is on PESO's list of petroleum that needs a storage licence under the Petroleum Rules, 2002. Class B stocks (flash point 23–65°C) above 2,500 litres need a licence; Class C stocks (65–93°C) below 45,000 litres need one-time PESO approval instead. Test the flash point of your feed and product. |
|---|---|
| Processing approval | PESO's FAQs state that petroleum may be blended, reformed, cracked or refined only in a refinery approved by the Chief Controller of Explosives. Ask PESO early how your treatment process will be classed. |
| Pollution board consent | Consent to establish and operate. CPCB criteria list manufacturing of lubricating oils, grease and petroleum based products in the Red category; confirm your category with the state board. |
| Hazardous waste authorisation | Spent clay containing oil, oily sludge and effluent treatment sludge appear in Schedule I of the hazardous waste rules for petroleum refining. Agree storage and disposal of acid sludge with the board as well. |
| Kerosene supply | Non-PDS kerosene from an oil marketing company under the Kerosene (Restriction on Use and Fixation of Ceiling Price) Order, 1993 as amended in 2015, with an end-use declaration. |
| Basic registrations | Udyam and GST registration, factory licence, fire NOC and an industrial power connection. |
Rules checked October 2026 from the sources listed below. Requirements vary by state; confirm with each authority.
Who buys low toxicity base oil in India?
Demand comes from oil and gas drilling. India's environment standards for the drilling industry prohibit diesel based mud onshore. Where oil based mud is needed, they say low toxicity mud with aromatic content below 1% should be used. That is much stricter than older definitions abroad, where a European patent describes low toxicity oil as one with less than 10% aromatics.
Offshore, chemical additives in drilling fluid must pass a 96-hour toxicity test on mysids or local sea species, and unusable oil mud cannot be discharged at sea. Buyers therefore value suppliers who hold test data and deliver the same grade lot after lot.
- Drilling fluid service companies that blend and run mud systems
- Oil and gas exploration and production operators
- Drilling and well service contractors
- Oilfield chemical traders
- Ink, coating and specialty solvent users, for off-spec cuts and low odour grades
Approval comes before orders: drilling fluid buyers trial a new supplier's oil in their own lab before placing a contract. Budget for sample lots and a few months of qualification in your working capital.
Mistakes that weaken a low toxicity base oil project report
- Treating every litre of kerosene as saleable
Aromatics leave with the acid sludge and light ends are stripped in distillation. A report that skips the yield loss overstates sales and DSCR.
- Assuming supplier credit on kerosene
Non-PDS kerosene is sold against advance payment. If the report assumes creditor days the oil company does not give, the cash credit limit comes out too small.
- No disposal plan for acid sludge and spent clay
Without a named disposal route and its cost, the pollution board can hold consent and the running cost is understated.
- Leaving the PESO question to the end
Tank capacity, layout and safety distances depend on the petroleum class and licence. Changing them after civil work starts is expensive.
- Relying on one drilling customer
Drilling demand follows rig contracts. A report with a single buyer and no plan for other outlets looks risky to a lender.
How NPCS helps you set up a low toxicity base oil plant
- Route and capacityCompare acid treatment, solvent extraction and hydrogenation for your budget, feed and target grade.
- Kerosene and yield modelWork out feed needs, yield loss, chemical use and waste volumes batch by batch.
- Bank-ready project reportProjections, DSCR and working capital built around advance payment for kerosene.
- Approvals and layoutTank farm layout, PESO and pollution board requirements, and a waste plan for your state.
NPCS's client list includes an assignment for this product and 269 assignments for specialty chemical projects, prepared since 1994 for entrepreneurs, banks and companies in India and abroad.
What's inside the low toxicity base oil from kerosene sample report
- Introduction
- Uses and applications
- Market potential
- Manufacturing process
- Raw materials
- Plant and machinery
- Land, building and utilities
- Manpower
- Licences and approvals
- Project cost and means of finance
- Working capital
- Projected profitability
- Cash flow statement
- Projected balance sheet
- Depreciation
- Term loan repayment
- Debt service coverage
- Break-even analysis
- Financial ratios
- Key assumptions
- Conclusion
- Monthly loan repayment schedule
19 pages, five-year projections, illustrative figures.
Open sample reportFree sample or a report for your project?
| What you get | Free sample | NPCS report for your project |
|---|---|---|
| Capacity and location | Typical unit | Your capacity, site and state |
| Figures | Illustrative | Built on current prices and quotations |
| Machinery suppliers and quotations | No | Yes |
| Market survey for your region | No | Yes |
| Bank or scheme format (PMEGP, term loan) | No | Yes |
| Use for a loan application | No | Yes |
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Low Toxicity Base Oil from Kerosene project report: frequently asked questions
What is the cost of a low toxicity base oil manufacturing plant in India?
Our sample report models a 6.2 KL per day plant at a total project cost of ₹678 lakh. Plant and machinery is ₹332 lakh and building and civil works ₹185.24 lakh. Cost rises with the treatment route: a hydrogenation unit costs far more than an acid treatment or solvent extraction unit. Your own report works out the figure for your capacity, route and site.
What is low toxicity base oil used for?
It is mainly the continuous oil phase of oil based drilling mud, used when water based mud cannot handle problem formations. Because most aromatic compounds are removed, it is less toxic to people and marine life than diesel. Smaller volumes go into low odour solvents for inks and coatings and into carrier oils for specialty formulations.
How is low toxicity base oil made from kerosene?
Kerosene is tested, then treated to remove aromatics, either with oleum in cooled reactors, with a selective solvent, or by catalytic hydrogenation. In the acid route the sludge is separated, and the oil is neutralised, washed and clay treated. Fractional distillation then strips light ends to raise the flash point and cuts the oil to the boiling range the buyer specifies.
What aromatic content is allowed in low toxicity base oil?
Below 1% for onshore drilling in India. The Environment (Protection) Third Amendment Rules, 2005 prohibit diesel based mud onshore. Where oil based mud is needed for specific geological problems, they say low toxicity mud with aromatic content below 1% should be used. Buyers test every lot for aromatics, so the plant needs a gas chromatograph and an agreed test method.
Is low toxicity base oil manufacturing profitable?
It can be, with thin margins. In our illustrative sample, the unit earns a 13% return on investment in Year 3, with net profit of ₹88 lakh on sales of ₹1,278 lakh. Break-even is at 46% of capacity. Margins are thin because kerosene is 84% of raw material cost, so profit depends on the spread between kerosene price and the contract price for the base oil.
Which licences are needed for a low toxicity base oil plant?
Expect a PESO licence for storing kerosene and the finished oil, and pollution board consent to establish and operate. You also need hazardous waste authorisation for spent clay and sludge, and a non-PDS kerosene supply arrangement with an oil marketing company. Udyam, GST, factory licence and fire NOC apply as for any plant. Requirements differ by state, so confirm each one locally.
Is the sample project report PDF free, and can I use it for a loan?
The sample is free to view and download. It is an illustrative report that shows the format and depth of an NPCS report. Its figures are representative and not based on a real project, so it should not be submitted to a bank. For a loan, NPCS prepares a report for your own capacity, process route, location and lender.
Sources and references
- Environment (Protection) Third Amendment Rules, 2005, G.S.R. 546(E): standards for the oil drilling and gas extraction industryMinistry of Environment and Forests, Government of India (FAOLEX copy), checked Oct 2026
- Revised FAQs on the Petroleum Rules, 2002Petroleum and Explosives Safety Organisation (PESO), checked Oct 2026
- List of petroleum requiring licencePetroleum and Explosives Safety Organisation (PESO), checked Oct 2026
- Guidelines for sale of non-PDS SKO to parallel marketers and industrial customersIndian Oil Corporation Ltd, checked Oct 2026
- Categorisation of industrial sectors under Red as per CPCB criteriaState Pollution Control Board, Odisha, checked Oct 2026
- Schedule I: list of processes generating hazardous wastesDelhi Pollution Control Committee, checked Oct 2026
- Dearomatisation of middle distillates through re-extraction technologyCSIR-Indian Institute of Petroleum, Dehradun, checked Oct 2026
- EP 0254412 B1: Low toxicity oil composition and use thereof in drilling fluidsEuropean Patent Office, checked Oct 2026
The NPCS project team, led by Ajay Kumar Gupta
This page and its sample report are prepared and reviewed by the NPCS project team, which has written techno-economic feasibility studies and detailed project reports since 1994.
Ajay Kumar Gupta founded Niir Project Consultancy Services (NPCS) and leads the organisation. With 40 years of experience in MSME project consulting, he has built the team that has delivered more than 28,000 project reports for clients worldwide, helping entrepreneurs plan and finance profitable manufacturing businesses.
- Published
- Last updated
- Next review
- Oct 2027
- Reviewed by
- NPCS project team
This page is reviewed every 12 months, or sooner when scheme limits, GST rates, BIS rules or pollution categories change. The sample report is illustrative: its figures are generated from industry-typical ratios for a unit of this size, checked so every statement balances, and are not taken from any client project.