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IOC eyes revenue of $300 billion by 2030

IOC eyes revenue of $300 billion by 2030
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First Published: Fri, Jul 13 2007. 12 31 AM IST
Updated: Fri, Jul 13 2007. 12 31 AM IST
Mumbai: With private companies such as Reliance Petroleum Ltd expanding rapidly, Indian Oil Corp. (IOC) is setting far-reaching goals.
“We had undertaken our last visioning exercise five years ago where we planned to have a target of $60 billion (Rs2.4 trillion) revenues by 2011-12,” said Sarthak Behuria, IOC chairman in a recent interview. “We are well on ourway to achieve that, but we need to revise our strategy in the context of changed circumstances and have set a newtarget of $300 billion in revenues by 2030.”
IOC reported revenues of Rs2.21 trillion for fiscal 2006-07. It ranks 20th among global petroleum refining companies in terms of annual sales. The company has also decided to increase the group’s refinery capacity by over one-third to 80-85 million tonnes per annum (mtpa) over the next four years.
IOC and its associates control 60.2 million tonnes (mt) of India’s refining capacity. By March, however, Reliance will rival the IOC group with a refining capacity of 60mtpa.
IOC has for long towered over the Indian petroleum business, controlling 10 of India’s 19 crude oil refineries with a group market share of 46.9% of petroleum products and 67% of downstream sector pipelines capacity. But Reliance Petroleum’s 27mtpa refinery is slated to become operational in March, adding to its 33mtpa refining capacity.
But, unlike Reliance, which is primarily targeting exports of refined products overseas, IOC wants to expand into a transnational integrated energy company, but with a core focus on serving the Indian market.
Still, like Reliance, the company is also trying to upgrade the quality of its refineries to produce higher-value products and also use lower grade crude oil. “We are upgrading all our refineries to produce Euro III compliant auto fuels and are also adding equipment like secondary units and delayed cokers, which will allow us to buy sour crude which will help us improve our profitability by almost $3-4 per barrel,” Behuria said.
Reliance currently enjoys the highest gross margin of any Indian refiner as it has a plant that can process viscous and acidic crude oil into high-grade auto fuels. “Availability of this relatively sour crude is much higher in the Middle East, whereas low sulphur crude has to be transported to India from Nigeria which itself adds on between $1 and $1.5 per barrel in additional freight costs,” said Behuria.
Crude oil laced with sulphur accounts for less than 50% of crude used. IOC hopes that it can increase the share of low grade crude to 65%. IOC will still make lower gross refining margins than Reliance because it has obligations to supply the domestic market with petroleum products even if it’s losing between Rs2-4 per litre on sales of auto fuels.
“We will have to sell naphtha and fuel oil used in power plants as per our commitments even though, theoretically, we could configure the refineries to produce none of the low value products. We have to sell bitumen in Punjab and elsewhere for the road construction projects,” said Behuria.
And like Reliance, IOC is also getting into the petrochemical business in a big way. IOC has set up a linear alkyl benzene plant (used to manufacture detergents) at its Gujarat Refinery and already has 38% marketshare in India in addition to exporting to Indonesia, Turkey, Thailand, Vietnam, Norway and Oman.
An integrated 550,000 tonnes per annum paraxylene/purified terephthalic acid plant for polyester intermediates is already in operation at Panipat, while a million tonnes per annum naphtha cracker with downstream polymer unit is also coming up at Panipat.
However, unlike Reliance, which plans to use the natural gas produced from its Krishna Godavari basin to convert partly into high value petrochemicals, IOC will use its share of gas sourced from Petronet LNG to supply gas-hungry consumers in the country.
“Our foray into gas and auto LPG is primarily towards ensuring that, as the consumption of fuels changes, we are there even more aggressively to protect our share. We also need to be present in environment-friendly fuels,” said Behuria.
The chairman said IOC is looking only to operate or maintain refineries rather than invest in them. It is, however, acquiring an 11% stake in the trans-Mediterranean pipeline being built by Eni Spa.
It has recently set up a subsidiary in Dubai to undertake trading and is expanding its business in Sri Lanka by catering to the refueling needs of ships that call at ports in Sri Lanka.
“We also plan to export around 5mtpa of output from our Panipat refinery to South-East Asia and China, which will boost our total exports to 8-9mtpa,” said Behuria.
“IOC should remain the market leader in the petroleum industry since they have a huge number of retail outlets across India and it is not easy to replicate their network,” said Abhinav Goel, associate director, Fitch Ratings India.
“IOC is in the nascent stage in the petrochemical sector, but will emerge as a big player after the completion of naphtha cracker plant in Panipatby 2009.”
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First Published: Fri, Jul 13 2007. 12 31 AM IST
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