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Mr. B N Bankapur, Director (Refineries),
Indian Oil Corporation Ltd.
Undeterred by spiralling crude prices and mounting pressure of revenue losses on sale of sensitive petroleum fuels, India's largest oil retailer, IndianOil (IOC), continues to scout for new avenues to meet the country's rising demand.
"The thought process must start now," director-refineries B N Bankapur said, describing the company's ambitious plans to set up another greenfield refinery along the western coast.
The state-owned company owns and operates 10 of India's 20 refineries, with a total annual refining capacity of 65.7 million tonne per annum (mtpa).
IOC may start the groundwork — feasibility study and site identification — for the project once it begins operations at its ongoing refinery project at Paradip, Orissa, Bankapur said.
The company's gross refining margin is seen at $4.5-5.0 a barrel during October-December, almost unchanged sequentially.
Bankapur said IOC will go ahead with its ongoing refining capacity expansion projects in spite of the current adverse business conditions due to mounting losses.
"There are no plans to hold any of our ongoing projects. Instead, we want to complete our ongoing projects ahead of schedule and effort to that extent is large," Bankapur said.
He, however, maintained that if the losses continue to rise for a longer period, then the new projects may get hampered due to lack of funds.
"If the company starts making loss, whatever future plans I am talking about may not happen. If there is lack of funds, the board may have to relook the new projects," Bankapur said.
Earlier, IOC had shelved its plan for a petrochemical plant at Paradip due to lack of funds.
However, the company is optimistic about its future and has lined up many expansion plans.
IOC also plans to expand its refineries in Koyali and Mathura.
It is looking at raising the capacity of the Koyali refinery in Gujarat, its biggest refinery, to 18 mtpa from the current 13.7 mtpa, Bankapur said. "In 3-4 months, we will seek in-principle approval from the board for the Koyali refinery expansion."
He, however, said land acquisition was an issue at Koyali, which may lead to a little delay in start of work. The refinery has a capacity to process 274,000 barrels of crude per day.
As for Mathura, Bankapur said, the company is waiting for the Supreme Court's decision on the fate of the industrial units in the region before moving ahead with its expansion plans.
A Supreme Court decision is pending on the issue of curbing expansion of industrial units in the vicinity of the Taj Mahal to avoid damage to the heritage site due to pollution. These units include IOC's Mathura refinery.
The apex court's verdict is expected soon. "We are very hopeful about a favourable judgement any time now," Bankapur said.
The company may also take up plans to expand the Mathura unit's capacity by 3 mtpa after the ruling from 8 mtpa now.
IOC plans to build India as a refinery hub, instead of looking at acquiring refineries overseas, Bankapur said. "Why should we look at refineries outside the country when there is so much potential here? I strongly believe that India has a great potential to be a refinery hub as the capex and the logistics cost are low here."
The company plans to spend around Rs.12,000-13,000 crore on refinery expansion during financial year 2011-12.
Construction work at IOC's Rs. 30,000 crore Paradip refinery is on full stream. "The work on Paradip refinery is going on schedule. Few of the units are likely to be commissioned by March 2012, the rest will be operational by July 2012 and the refinery will be fully operational by November 2012," Bankapur said.
The refinery will largely cater to the domestic market, but the company may also export a small quantity of oil products from it, he said.
"The idea is, there should be no shortage of products in the domestic market. We need to be self-sufficient on our own first. We may export a little bit from Paradip after meeting the domestic demand," he said.
As per the original plan, the refinery was to export at least 2.05 mtpa petrol and 124,000 tonne of naphtha, out of its total annual output of 15 mtpa. However, due to surging domestic demand, the public sector company now plans to cater largely to the domestic market.
The Paradip refinery will produce 5.97 mtpa diesel, 3.4 mtpa petrol, 1.45 mtpa kerosene, 536,000 tonne liquefied petroleum gas, 124,000 tonne naphtha and 335,000 tonne of sulphur.
According to Bankapur, IOC is likely to tie up crude supplies for the Paradip refinery within a year, and the refinery is expected to get its first cargo by February-March 2012.
The country's largest importer of crude oil, IOC also plans to buy more crude from Angola and Nigeria on term contracts, Bankapur said. Currently, India imports around 9 mtpa crude oil from Angola on term contracts.
Bankapur said the recent issues with Iran over oil payments has not made a major impact on the company's operations.
