Indian Oil in talks with Rosneft for sourcing crude oil: Chairman Sanjiv Singh
Economic Times, Delhi   31-Jan-2020

New Delhi: Indian Oil Corporation (IOC), the country's largest fuel retailer is in talks with Russian state-owned oil giant Rosneft for sourcing crude oil under a term contract, Chairman Singh told reporters at a press conference here.

Singh, on the occasion of the company's third quarter financial results, shared information on a host of issues including price premium for BS VI fuel, impact of IMO 2020, and the status of the mega west coast refinery. Edited Excerpts..

Q. Is the company in talks with Rosneft for sourcing crude oil?

Ans. We have been exploring this possibility seriously for quite some time and we are close to finalising our deal with Russia, there are certain commercial terms which are being finalized, it should happen. We cannot disclose the quantity and other details as we are still in talks with Rosneft.

Q. Could you provide an update on the mega west coast refinery? Was the MoU signed with Saudi Aramco for the west coast refinery binding for Aramco?

Originally the site was indicated to be in ratnagiri district, subsequently Raigad was being looked at. An updated configuration study has been carried out keeping in mind the new location. Presently the cost estimates of shortlisted configurations are being worked out. The issue of land is yet to be firmed up, after the new state government was formed talks are again underway on land location.

It was not to that extent binding, as they have committed to the investment approval stage initially, because no such final binding commitment can be made by any stakeholder until we have the finality with respect to the overall cost, configuration and land.

Q. Do you plan to sell BS VI fuel at a premium? Will the hike be staggered?

Ans. We are under the process of working out the implications on pricing. There will be a quality premium as far as BS VI is concerned. The premium will be applicable only when the BS VI fuel starts being dispensed at retail outlets. I do not think that the premium will be very large to require staggering. As there is no exact product like BS VI being traded internationally, prices will have to be calculated indirectly based on the closest available international product.

Q. What has been the impact of IMO 2020? Have shipping costs increased since the maritime fuel specification came into force?

Ans. The impact of IMO 2020 has been more on bunker fuel trade rather than overall shipping cost, as there are many other factors impacting shipping costs today. IOC was first to supply IMO 2020 bunker oil in India in October. We supplied around 0.4 MT of bunker fuel and this year we will supply around 1.2 MT. We are able to place the product in all major ports of the country. Gujarat and Haldia refineries are producing IMO 2020 bunker fuel. As IMO compliant bunker fuel is more expensive than the conventional fuel there is a marginal impact on shipping cost also.

Q. What was the trend of overall petroleum demand in the third quarter?

Ans. Diesel demand is still positive today if we look at the first nine months of the current fiscal as compared to last year. It has picked up especially in the last two months, not too high though. Petrol is close to 8 per cent, it had always been robust. Auto sales have also fared better during the third quarter as compared to the second quarter. We are seeing positive growth in almost all the products now.

Q. Most petroleum products do not fall under the ambit of GST, what kind of costs had the company had to bear in the form of stranded taxes as input credit cannot be availed on these products?

Ans. On the revenue account it is close to Rs 2,000 crore per year annually.

Q. How has been the capacity utilisation of Ennore LNG terminal?

Ans. We are now pricessing 2.6-2.7 MMSCMD from Ennore terminal. We have already commissioned the first phase of the pipeline from Ennore to Manali. By the end of this year we should be able to connect Bangalore on one side and Trichy, Madurai on the other side. After that the capacity utilisation of the terminal will quickly ramp-up.