IOC to enter power biz, expand Panipat refinery
New Delhi   26-Apr-2011

IndianOil (IOC) mulls foray into power trading business. The government-owned enterprise also has plans to expand its refinery at Panipat and may set up another coastal refinery after completion of the Paradeep refinery. “We are interested in merchant power business. Definitely, we have the desire. We have the synergies for it,” RS Butola, chairman of IOC, said. Butola, formerly managing director at OVL, took over as chairman of IOC in February.

IOC generates nearly 1,100-1,200 mw from its captive power plants located adjacent to its existing refineries. The refiner plans to use petroleum coke, a by-product after refining crude oil, to generate electricity.

“IOC getting into merchant power trading business is not a huge strategic move as such. A power plant takes at least three-four years to set up. It will not be a big contributor for the refiner at least in the next 5-10 years. It will be one of their by-product kinds of business, which is also done by other energy companies such as ONGC,” said Alok Deshpande, research analyst at Mumbai-based Elara Securities (India).

When asked if IOC already has excess power to sell, BN Bankapur, director of refineries in the company said, “Our power generation is very close to what we need. We have just little more than what we need. Practically speaking, we do not have much power that we can give to others. Only place, we have committed to sell is 5 mw from Digboi refinery to Assam grid. The agreement has already been signed.”

At the same time, IOC will consider exporting petroleum products to Pakistan if government removes restriction on trade of sensitive items. “If the restriction goes, we are ready to supply diesel as well as petrol to Pakistan...it’s an opportunity and a market for us,” said Bankapur. If government lifts the ban, IOC is likely to expand its 15 mt refinery in Panipat, the director added.

“Merchant power trading is at a nascent stage in the country. Out of total energy consumption of 800 billion units in the country, only 30-40 billion units are under short-term contracts,” opin­ed Subhranshu Patnaik, senior director at international consulting firm Deloitte Tou­che Tohmatsu India.