By Anupama Airy
(* Pl read the Disclaimer)
With 23 refineries already in place and another new 60 million tonnes per annum very large refinery cum integrated petrochemical project being planned jointly by Indian Oil Corporation with sister public sector oil companies at a huge cost of Rs 1.5 to 1.8 lakh crores in Maharashtra, India is clearly on its path to emerge as a major refining hub that will cater to the demand of South East Asian region. Indian Oil alone owns 11 of the 23 refineries spread across various locations of India.
From operating a 116 years old refinery at Digboi (in Assam) to its latest refinery that is just few months old at Paradip (in Orissa), the company has plans to turn all its refineries into integrated units with some value added production of petroleum products and petrochemicals. Following sustained investments to upgrade technologies over a period of time, IOC is currently using as high a 200 varieties of crude oil from across the world at its 11 refineries some of which were earlier set up only to process specific crude grades only.
A mega investment plan of Rs 1,80,000 crore has been chalked out by the company for the next 5-6 years in various projects across the oil refining and other projects.
Chairman and Managing Director of IOC, B Ashok spoke in detail to Anupama Airy on the company’s mega capacity expansion plans on the refining and petrochemicals side, a move that offers tremendous opportunities to investors at home and from across the globe.
Indian Oil is also an active player in the upstream and midstream oil and gas business and is currently laying India’s largest pipeline……, all of which hold tremendous scope for investors to work in India with the company. The company also has plans to execute solar, wind and nuclear power capacities and establish its presence as a players in most segments of energy.
Q: What as per you is the scope for investments in India’s downstream oil and gas sector and specifically as regards projects of Indian Oil Corporation, what kind of linkage can you establish with the government’s Make in India drive?
A: With the growth in Indian economy, the need for energy is going to be substantially more than what it is now. Speaking from the perspective of the downstream industry, although Indian Oil is an integrated oil and gas company across the value chain (be it upstream, midstream or its core business of downstream operations) but we are the largest refiners with substantial petrochemical manufacturing capacity besides significant presence in laying and operating of pipelines as also the one with the biggest marketing network for selling petroleum products along with petrochemicals.
At Indian Oil, we have committed investments worth Rs 1,80,000 crores in the next 5-6 years. This in itself is going to drive a lot of growth in the whole economy. This will also create opportunities for many other companies who will be involved in building this infrastructure thereby offering direct and indirect investment and job opportunities within and to companies across the globe. From that perspective, a number of public and private sector industries are going to be involved in the growth story of Indian Oil. Here the Make in India concept has got a lot of linkage.
For instance, while modernisation of our retail networks few years back, we decided to replace all our old mechanical fuel dispensing units with modern, automatic and technically advanced fuel dispensing units. This decision saw Indian Oil emerging as the world’s largest buyer of these modern dispensing units and people connected with manufacturing of such units across the globe especially in Japan and Europe saw this is a huge opportunity and came and set shops in India to meet our requirements of such units being the single largest buyer. This move by those global players created opportunities for local businessman in terms of sourcing of local content. So this is one of the biggest examples of the Make in India drive.
Then in Panipat, where we have the largest petrochemical units, we started a unit for manufacturing SBR at a cost of Rs 1000 crore. Most of the raw material came from Panipat refinery and we made this synthetic rubber, which is a key component for any tyre manufacturer. Till that unit came in, the entire requirement of domestic tyre manufacturers was being met by imports. So this is another example of aligning our projects with the Make in India objectives.
Then, PM Narendra Modi has himself dedicated our INDMAX unit in Paradip refinery as a Make in India example. Here our refining technology has replaced an international technology (or the FCC Technology), which is mostly coming from the Western world through an indigenous technology. We have set up a 4 million tonne unit where, we also manufacture double the quantity of propylene than LPG. Given the value addition in this technology, today everyone if looking at this technology. Hopefully there will be a time in future when we can sell this technology to the developed nation. These are some examples where we have played a role and going forward because of our huge investments, I think there is far more scope for aligning IOC’s operations with that of the Make in India initiative. I think I see a lot of scope of a “Houston (in USA) or Aberdeen (Scotland) being created in India itself” especially in light of the growth that the energy sector is going to have in the coming years.
Q: With IOC present across the entire oil and gas value chain, which segment offers the best potential in terms of attracting investors to set up shops in India?
A: I would say there is no limitation as there is enough growth and scope in every segment. If you are talking of refining technology people to come and set shop here, I can equally see the engineering and design people, steel manufacturers to set shop for specialised services to the last mile of ancillary units for petrochemicals segment that can come. So I feel there is tremendous scope across all segments of our businesses. There lie lot of Indian entrepreneurial development opportunities as also for global players because of the market potential that India offers.
Q: IOC owns 11 of the 23 refineries that India currently has. Tell us something about your refinery capacity and expansion plans in the years to come?
A: IOC is the largest in the country and currently our refining capacity is about 35% of India’s overall refining capacity at 80 million tonnes or 1.6 million barrels a day. Going forward, the brownfield capacity expansion plans will take our refining capacity to 105-110 million tonnes in the next 5-6 years. A large part of our Rs 1,80,000 crore investment has already factored this brownfield expansion investment plans. But going further forward, there is also scope for green field refineries to be set up in India as well. We are playing the lead role in setting up a very large refinery in the west coast of India and likely in Maharashtra. We are looking at a 60 million tonnes per annum or the largest refinery in the world.
Q: Will it be something like the private sector company Reliance Industries’ 60 mtpa refinery at Jamnagar?
A: Reliance executed its refinery in two phases. Probably our refinery will have larger crude oil units as against that of Reliance. We may have three 20 mtpa crude processing units that will make this 60 mtpa refinery the largest in the world. It will be one facility although we will start initially by putting up two units of 20 mtpa each and add another 20 mtpa subsequently. But if demand picks up faster, we may look at putting up this entire 60 mtpa capacity refinery straightaway. The petrochemical units will also be developed along with the refinery so that it comes up as a huge integrated refining and petrochem complex.
While this refinery is conceived as a joint venture with our sister PSUs–BPCL and HPCL, we are also open to participation from overseas investors. As its takes on an average anywhere between Rs 2500-3000 crore per million tonne, you can imagine the cost of this mega refinery at between Rs 1.5 to 1.8 lakh crores.
Q: What are your capex plans for the current year and going forward?
A: We are investing close to Rs 15000-16000 crore this year. This is as part of our earlier plan of spending Rs 56,200 crore for the 12th five year plan. We will be stepping this up and spend at the rate of Rs 25000-30,000 crore a year in line with our capex for next 5 years of Rs 1.8 lakh crores. The spending may be slightly lower in the initial years but will pick as projects progress on the development front. Our board has already cleared a lot of projects (refining would be around Rs 50000 crores, petrochemicals and renewable energy plans will be another Rs 50,000 crores, and about Rs 30,000 crore investments going in our upstream ventures and the balance would be in marketing and other related activities) for implementation over the next 5-6 years. But certainly even in 2017-18, the capex will be higher than the Rs 12,000 crore spend during the current financial year.
Q: Your oldest refinery at Assam is 116 years old. What kind of technology upgradation measures are you undertaking to run such old refineries in line with current requirements of fuel quality etc?
A: I am glad to share that our oldest refinery is catering to the market in line with present fuel quality requirements. We keep on constantly upgrading our refineries to meet the fuel quality requirements of the day and will continue to do so as India is committed to implement not only Euro IV of BS IV specifications by April 2017 but also directly shift to Euro VI from April 1, 2020. Most ongoing work at our refineries is happening to upgrade the quality of fuel in line with the requirements along with the expansions that we are talking about. While our refineries at Guwahati, Bongaigaon, Barauni and Digboi refinery were designed to use the Assam crude, as a result of upgradations carried out, while Bongaigaon and Barauni have already started processing imported crude and another two years down the other two refineries at Guwahati and Digboi will also to process imported crude.
(*Disclaimer: These interviews have been done by Anupama Airy, Founder and Editor of EnergyInfraPost.com for The Confederation of Indian Industry (CII) which along with the Union Ministry of Petroleum and Natural Gas and state-owned Oil and Natural Gas Corporation (ONGC) is organising a conference during the Abu Dhabi International Petroleum Exploration Conference (ADIPEC) event on November 8th. The title of CII’s conference is : India – Emerging Investment Destination in New Energy Landscape.
The ADIPEC event is being organised by Abu Dhabi National Oil Company (ADNOC) at the Abu Dhabi National Exhibition Center (ADNEC) from 7 – 10 November 2016 and is one of the world’s largest technical oil & gas conferences.
The theme this year is Strategies for New Energy Landscape and the exhibition will see the participation of key stakeholders, senior industry delegates, and 2000+ exhibitors from over 120 countries.
The CII conference will focus on investment avenues in India’s oil & gas sector, covering upstream, midstream and downstream operations, with special emphasis on the Government’s Make In India campaign. A key focus area would be opportunities for the Indian oil field services sector to support the global industry with technological expertise and skilled manpower. Speakers will include senior Government officials, public and private sector multinationals from the oil & gas sector, investment agencies, and reputed industry consultants.)