IndianOil to Look Abroad, Diversify, to Cut Losses
New Delhi   10-Mar-2010
State-run IndianOil, India's largest listed company by sales, plans to buy oil and gas assets overseas, expand its petrochemical business and build a liquefied natural gas terminal, to help it reduce exposure to selling discounted fuel to domestic consumers, its new chairman said. "Africa is our first preference," IndianOil Chairman Mr. Brij Mohan Bansal told Dow Jones Newswires. "We are open to other continents too, as long as it is economical to bring the crude to India." IndianOil, an oil marketing and refining company, is joining other major state-run Indian energy companies, including flagship oil group Oil & Natural Gas Corp. and Coal India, which produces more than 80% of India's total coal, in unveiling ambitious overseas expansion plans. IndianOil, which gets more than 90% of its revenue from petroleum product sales, is losing 1.06 billion rupees ($23.3 million) daily selling cooking and auto fuels at state-set prices. It and other state-run companies are partially compensated through discounts on crude sold by upstream firms and partly through subsidies, but they have to carry part of the cost. To help contain refining costs and stem losses, state-run oil refining and marketing companies, like Bharat Petroleum Corp. have joined private-sector peers Reliance Industries Ltd. and Essar Oil Ltd., in scouring for overseas oil and gas assets at economical prices. IndianOil hopes the diversification will help it generate more profits. "It's a balancing act (between losses from domestic sales and expanding into other businesses)," said Mr. Bansal, who took over as IndianOil's Chairman on March 1. IndianOil will try to meet at least 20% of its crude oil needs from its own overseas assets, he said. It imported 47.78 million metric tons or around 960,000 barrels a days of crude in the year ended March 2009, the company's annual report showed. Mr. Bansal said that IndianOil would prefer to buy stake in exploration and producing blocks in joint venture with other state-run companies. It has a capital expenditure plan of 500 billion rupees to 600 billion rupees over the next five years. The company has decided to put on hold for two years any new greenfield refinery projects, including proposed refineries in Turkey and Nigeria, Mr. Bansal said. This would allow it to concentrate on diversification and on projects already underway, including its 300,000 barrels a day refinery being built at Paradip in Orissa state. In Late February a senior government official said a 10% stake in the refinery had been offered to Saudi Arabian Oil Co., or Saudi Aramco. IndianOil plans to invest 200 billion rupees in its petrochemical projects over the next five years, on top of its to its 600 billion rupees capex plan. It is now commissioning a naphtha cracker in the northern town of Panipat, which will help it get 150 billion rupees in revenue from petrochemicals in the next financial year that begins April 1, from an estimated 60 billion rupees this fiscal year. IndianOil is also considering setting up a liquefied natural gas import terminal with an initial capacity of 2.5 million tons, in southern India. The refiner has already started feasibility studies, with these due to be complete by the end of 2010, Mr.Bansal said. Engineering and construction company Larsen & Toubro Ltd. and state-run power producer NTPC Ltd. have expressed interest in the project, Mr. Bansal said.