Indian Oil Corporation (IOC), the leading fuel pipeline company and refiner in the country, plans to invest around Rs3,000-5,000 crore over the next five years to increase pipeline capacity.
In the current fiscal, the company plans to increase pipeline capacity by 22% and pipeline length by 727km. IOC currently has a pipeline length of 9,273km.
“We plan to increase our pipeline capacity to 75 million tonnes per annum (mtpa) from the existing capacity of 61.72 mtpa,” a senior IOC executive, who did not wish to be identified, said.
The company is also hopeful that it may secure the engineering, supervision, operation and maintenance contract for the Jehang Samsung pipeline. IOC already has a 12.5% equity stake in the $2 billion (Rs8,400 crore) pipeline from the Black Sea to the Mediterranean Sea. The other partners in the pipeline include Eni SpA of Italy and Calik Enerji A.S. of Turkey. The 560km pipeline will ship Caspian crude to the Ceyhan refinery that is being planned in Turkey.
“As it is a big job, we expect our share of the contract to be substantial,” the executive added, while declining to put a value on IOC’s returns from the contract.
IOC also plans to enter the gas pipeline engineering procurement construction (EPC) business in a big way and would take care of the engineering part of the contracts.
“As not many fuel pipelines are being constructed, gas pipeline construction is a big area of opportunity,” the executive said. IOC already has a tie-up with PJSC Stroytransgaz—a Russian construction company—for constructing pipeline projects in India and abroad.
Arvind Mahajan, executive director at accounting firm KPMG, said, “It is a right move as no new fuel pipelines are being built. They also have a proven capability in fuel pipelines and this is a good way to leverage that. However, IOC does not have long-term expertise in the construction of the gas pipeline and will have to build new competencies.”
IOC posted Rs1.65 lakh crore as its turnover for the first three quarters of 2006-07, a 22.59% jump over its turnover of Rs1.35 lakh crore for the corresponding period in 2005-06.