IndianOil in danger of losing invincible aura
New Delhi   24-Sep-2010

It is still a force to reckon with in terms of refining capacity and market share. Yet, for the first time in its many decades of dominance, IndianOil seems to be losing its aura of invincibility.

Even while the Centre has kicked off the process of fuel price deregulation, IOC is still to zero in on the next Chairman who can ideally steer the company without a hitch for the next five years.

There are enough candidates for the top job but within oil industry circles, the general consensus is that IOC would do well to emulate the Air India example of roping in a chief operating officer and leveraging his global experience to chalk out an aggressive roadmap.

“IOC is the jewel of India's hydrocarbons sector and could find itself increasingly vulnerable without a growth strategy in place. The need of the hour is to think big even though it means taking risks in the bargain,” an oil industry official said.

This is especially relevant at a time when many directors on its board are due to retire within a year. There is no issue on their replacements but the big challenge is getting the right man for the top job. “It is time to think differently and there are lessons to be learnt from Air India and the Tata Group which have recruited expatriates to take them forward,” the official added.

Capacity

For the moment, the company's domestic refining capacity of 60 million tonnes plus looks impressive and even though this will be enhanced to over 80 mt in the short-term, not everyone is convinced that this is enough to put IOC on a solid growth foundation.

For one, its dominance in the northern region could now be challenged by Hindustan Petroleum Corporation's Bhatinda refinery scheduled for commissioning in early 2011-12. Bharat Petroleum Corporation, likewise, is betting big on its Bina refinery that will service the product-starved central zone of the country.

In contrast, IOC's 15-mt Paradip refinery is still a little time away and its location has been a subject of debate for sometime now. Critics say it is a cyclone-prone zone which is not the ideal bet for a refinery. “Not only would this mean incurring extra costs but Orissa's own needs of petro-products is minuscule,” sources said.

PSU rivals

IOC does not buy this argument, though, and officials have constantly maintained that the Paradip refinery will have a big role to play in the eastern region. The company has a refinery at Haldia, West Bengal, and a handful in the North-East. The absence of one on the west coast is, doubtless, a drawback and this is where HPCL and BPCL have an edge with their refineries in Mumbai.

“IOC should have snapped up Mangalore Refinery & Petrochemicals when it was up for grabs years ago. This would have made a big difference to its presence in the western region,” sources said.

Even while there is no immediate threat to IOC's supremacy, the fact remains that its PSU rivals are now working overtime to grow their market shares and also enter new areas of growth such as exploration and production and alternative fuels.

“Things could get tricky for IOC if its market share falls below 40 per cent. It will then be an uphill task to get this back,” an oil industry veteran said.