IOC to invest Rs 13,000 crore to produce Euro-VI auto fuel by 2020
Indian Oil Corporation (IOC) is in an expansion mode as country’s fuel demand is growing at a fast pace, driven by the transportation sector. Meanwhile, the government has decided to leapfrog from Euro-IV to Euro-VI compliant petrol and diesel, making it necessary for refineries to undertake upgrades in time. Sanjiv Singh, IOC’s director-refineries, shares with InfralinePlus his company’s business plans.
Are you confident that IOC will be able to meet deadlines for introducing Euro-IV and Euro-VI compliant auto fuel?
Indian refineries are gearing up to meet strict timeline of April 2020 set for supplying superior fuels for BS VI emission norms. India has been following fuel and emission norms in line with European standards, normally known as Euro norms. Fuel specifications are specified to meet the emission standards corresponding to meet the specific emission standards such as Euro IV, Euro V or Euro VI. Countries around the world had been making the minor changes in fuel specifications depending upon their specific requirements. India will be switching over to 100 per cent BS IV emission norms by April 2017.
India has made a very ambitious and challenging plan to leap from BS IV to BS VI within a span of three years. Such a quantum jump within a span of three years is being attempted, perhaps for the first time by any country in the world. Our Mathura, Panipat and Paradip refineries are ready to produce Euro-IV. Although the deadline is tight, we are confident of supplying 100 per cent Euro-IV compliant petrol and diesel. Operating cost will increase due to technical upgrades that we will have to undertake at refineries to produce euro-IV fuel. It is true pricing varies from place to place but cost should be recoverable.
Several new projects have been approved during 2015-16. As per the recent Government guidelines, BS-VI quality fuel norms are to be implemented in the entire country from April 1, 2020. To this end, various revamps and installation of new units are envisaged at Gujarat, Panipat, Mathura, Haldia, Digboi and Bongaigaon refineries. In Guwahati, BS-VI Motor Spirit compliance will be achieved with the commissioning of INDAdept-G and Catalyst replacement of HDT unit. Paradip Refinery is ready for supply of BS-VI grade high-speed diesel.
Another upcoming project is INDMAX at Bongaigaon, which coupled with Indmax Gasoline Hydrodesulphurization (IGHDS) unit and associated facilities will increase distillate yield of the refinery, while making the refinery BS-VI capable.
What are your expansion plans?
Our Gujarat, Panipat, Barauni and Mathura refineries are set for capacity expansion. We have drawn up investment plan of Rs 15,000 crore which has also been approved by our board. We will additionally invest Rs 6,700 and Rs 12,000-13,000 crore for technological upgrades at our refineries to produce Euro-IV and Euro- VI compliant auto fuel.
IOC is in expansion mode. What gives you so much confidence about prospect of fuel demand growth?
Our internal and international estimates suggest that India’s fuel demand will increase to 470-500 million tonnes per annum by 2040. Diesel demand is being driven by the transportation sector. Our refineries have achieved a new record of crude throughput of 56.1 MMT with a capacity utilization of 103.5 per cent during the year 2015-16. Our nine refineries also marked the best-ever combined distillate yield of 80.5 per cent, surpassing the previous best of 78.8 per cent during 2014-15. Many refineries achieved all-time high crude processing.
What is the strategy behind setting up a 60 mmtpa-refinery in Maharashtra that IOC has planned along with BPCL, HPCL? How is the progress in implementing the project?
Presently, we have excess refining capacity but in 15 years, demand and supply will match. Refineries take time to build. That is why we thought we should go for capacity addition. It will be a coastal refinery and extremely competitive. So we can also export products from the refinery if necessary. We have done preliminary configuration. We have also contacted the Maharashtra government for land.
Does IOC have any plan to step up crude import from Africa given the political instability in the Middle East?
African crude is sweeter, lighter and costlier compared to the oil available from the Middle East. So, you cannot run away from the Middle East when it comes to sourcing crude oil for Indian refineries.
How has subsidy phase-out helped IOC?
Following removal of subsidies, our cash flows have improved; working capital requirement has come down.
Government’s LPG push in rural areas means more business for IOC. How you look at it?
We have social commitment to meet and are not driven by commercial considerations alone. We have been retailing imported petrol even at a loss.
Government has targeted to electrify all villages by 2018. What are you going to do with the kerosene produced in your refineries after that?
Kerosene currently being produced at our refineries can be converted into aviation turbine fuel. A small quantity can also be converted into diesel. Some technological changes will be required to do so.
What are your new business plans in the North-East region?
IOC is the biggest marketing player in the North-East. Numaligarh Refinery Ltd (NRL) is laying a 4.5 million tonne-pipeline to transport crude oil. We will source 1.5 million tonne crude through the proposed pipeline for the Bongaigaon refinery. We are also looking at importing LPG via Bangladesh.