IndianOil sheds its conservative image
New Delhi   14-May-2012

IndianOil, the country's largest public sector refiner, is shedding its conservative and cautious image.

Compelled to meet domestic requirements first, the company is reworking its refinery strategy which will allow it greater flexibility in deciding crude oil sourcing and eventually cut down operating costs.

Mr Rajkumar Ghosh, Director (Refineries), IndianOil, said, “The company is evaluating its refinery capacity – adding new capacity or up gradation of existing refineries – based on the assessments given by our marketing division.”

Expansions

IndianOil proposes to expand the Gujarat refinery from the current 13.7 million tonne a year to 18 mt by 2016-17. Other expansions include Panipat to 18 mt, Mathura to 11 mt and a grassroot refinery in the West Coast with a capacity of 15 mt.

The capacity augmentation is being done in such a way that refineries are able to process any kind of crude – from heavy to light.

But, unlike their private sector counterparts, public sector refiners have to first cater to domestic demand, which means assured supply of crude oil (term-contracts) should be in place, he said.

IndianOil has flexibility for only about 20 per cent of its total crude oil requirement to explore other crude baskets. In 2011-12, including Chennai Petroleum Corporation, IndianOil as a group imported 65.7 million tonne of crude. Of this, almost 40 million tonne was from term contracts with National Oil Companies of countries such as Iraq, Kuwait, Saudi Arabia, the UAE. Almost 12-15 million tonne came from domestic sources (including Cairn).

IndianOil can process heavy crude at its refineries at Panipat and Gujarat. Further, the Gujarat refinery configuration is being so done that it can process any variety of crude. “Other refineries of the company can also process all types of crude but there are environmental stipulations that need to be followed. Refineries in India cannot burn sulphur beyond a limit,” Mr Ghosh, said.

Cost factor

While the domestic private sector refiners like Reliance Industries Ltd (RIL) have been processing heavier crude, IndianOil has now started processing heavier crude from Mexico (Maya) and Ras Garib (Egyptian).

Cheaper than the light, sweet crude, the wider spectrum of crude variety gives IndianOil a competitive advantage. Besides, it also brings down the refinery costs.

The heavy crude is almost 10-14 per cent cheaper than other crude varieties, an official said. While Maya is almost $ 11 a barrel cheaper than Brent, Ras Garib is cheaper by $ 4 a barrel from Dubai price. From April-till May 11, 2012, Dubai crude averaged $115.84 a barrel, while Brent has averaged at $ 118.13 a barrel.