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RajKumar Ghosh , Director (Refineries), IOC

03 Mar 2014

The Indian Oil Corporation (IOC) is the country’s biggest crude refiner. It operates 10 out of 22 refineries in India with a combined capacity of 65.7 mmtpa which is 31 per cent of the country’s total refining capacity. The corporation is also setting up its biggest refinery so far at Paradip at an investment of more than `30,000 crore. However, the company is also in an expansion mode and is keen to venture into gas business. IOC’s Director (Refineries), RajKumar Ghosh shares the company’s ongoing and future plans with Neeraj Dhankher. Excerpts.

The 15-mmtpa Paradip refinery project in Odisha has been delayed by close to two years. What are the reasons? What is the current completion schedule for the `30,000 crore project?

The commissioning schedule for the refinery is from June to September 2014. We had various problems till July 2012 which have now been overcome. There was law and order problem as well as delays in getting forest and environment clearance. As the project got delayed, many of the contractors felt that the price quoted by them earlier was low. So there are problems of cash flow for some of the contractors. But there was also a major delay by the vendors, especially supply delays. But orders were placed on time.

At one point, IOC was keen to set up a petrochemical complex along with the refinery at Paradip. But the decision was shelved. What are your current plans for the petrochemical segment?

The petrochemical segment will come up in subsequent phase. We have a poly propylene project of `3,150 crore which is in Detailed Feasibility Report (DFR) stage. Once that is approved by our board, we will implement that project.

Not just the refinery, but the evacuation mechanism also seems to be a worry. The Paradip-Raipur- Ranchi pipeline which will evacuate products from the refinery to the market is also running behind schedule due to various reasons.

We are trying to commission a part of the pipeline project by June 2014 so that the products can be supplied to marketing terminal. Rest of the project will be commissioned by the end of 2014.

How will you evacuate products from the refinery in the meantime?

We will explore the sea route. We are already putting up a south jetty for coastal movement of products.

Will the delay in completion of the Paradip-Ranchi pipeline impact refinery capacity utilisation initially?

Refineries of this magnitude take time to come in full operation and utilisation. By the time the refinery is commissioned, I feel the pipeline will also be ready. The refinery will not operate at full capacity from the first day. It will take time and will happen only over a period of time as there are many other units which have to be commissioned one after the other. So commissioning of the refinery will be as per sequence.

IOC was keen to avail a two-year extension of tax breaks available for refineries so that its delayed Paradip refinery can avail the benefit through exemption under section 80IB (9) of the Income Tax Act. Have you given up on that demand?

Yes, we had written to the petroleum ministry seeking an extension of tax breaks available till March, 2014. However, it did not happen.

IOC and Kuwait have been discussing various areas of cooperation. What is the current status?

Yes, they have visited us and we have had discussions. They are interested in equity participation in some of our projects such as Paradip or Paradip petrochemical complex. Nothing has been decided as yet, and it is all at an early stage.

Are there any talks with Kuwait on sourcing additional crude for the upcoming 15-mmtpa refinery at Paradip?

With regards crude sourcing, we have to get 15 mmt for the Paradip refinery. We have to source it from different countries and Kuwait is and will be one of the major sources for this refinery.

Can you please elaborate on IOC’s crude requirements for 2014-15?

We are still finalising our plans in this regard. Our plan is to import around 58 mmt for IOC’s refineries. But we are not planning our crude import targets on the basis of throughput. Rather, we will be focussing on our margins this time. Many times in the past we have seen that while we increase our refinery throughput, there is not much change in the margins. Hence, now we are planning on how to make more profit instead of only increasing throughput. We are trying to maximise high sulphur crude processing especially from Middle East and Latin America. In terms of suppliers, we are receiving crude from Brazil, Columbia and Mexico. We are also trying to import crude oil from Venezuela. We will also be receiving cargo from Canada. We are trying all types of crudes.

IOC is striving to expand itself in the gas business. How will it impact the company’s market share in fuel marketing?

IOC is a refining and marketing company. But in future, gas business will displace the liquid volumes. Which means gas will replace naphtha and furnace oil and we will lose market share in naphtha. This is why we are keen to get into the gas market. Whatever market share we will lose in liquid fuel will be compensated by gas. This way we will continue to retain our total market share in energy.

What are your capital expenditure plans for 2014-15?

While Paradip refinery will be commissioned this year, there will still be a lot of capital expenditure by way of payments to contractors, vendors and licensors. This year (2013-14), IOC’s capex was around `11,230 crore for all our business segments, of which `6,000 crore was for refineries. This proportion is expected to be the same next year as well.

Apart from Paradip refinery, what are the other projects which will be commissioned in the near future?

Most of the projects to be commissioned in near future will be bottom up barrel upgradation projects, along with expansion of existing units.