Indian Oil lines up `1.8L-crore capital expenditure for 5 years

India’s largest refining and oil marketing company Indian Oil Corporation (IOC) has lined up capital expenditure to the tune of R1.83 lakh crore between FY18 and FY22. A large chunk of the proposed investment would go towards expansion of refineries and marketing-related facilities such as setting up of terminals, the PSU told analysts in a recent conference call.

In the current financial year, IOC is spending R19,000 crore. In the next five years, R50,000 crore would be spent towards ramping up refining capacity, while another R40,000 crore would be spent under marketing initiatives, said an analyst present at the conference.

Another R22,000 crore is earmarked for pipelines expansion, R30,000 crore for exploration and production and R29,000 crore for petrochemicals business.

Currently, IOC is in the process of making a 15 million tonnes per annum greenfield refinery at Paradip in Odisha operational. “Despite all the initial glitches, the Paradip refinery has finally been commissioned. The second quarter FY17 volume stands at 1.7 million tonnes and current utilisation is at 65%. By March 2017, quarterly run rate of of the refinery would be 3.7 to 4 million tonnes. Post 90% utilisation level, it would start making positive gross refining margin,” Dhaval Joshi, research analyst at Emkay Global Financial Services said in a note.

IOC aggressive expansion strategy comes at a time when India is racing to add capacity to meet increasing fuel consumption. India is poised to surpass Japan as the world’s third-largest oil user this year and will be the fastest-growing crude consumer in the world through 2040, Bloomberg quoted Paris-based International Energy Agency saying.

With the government freeing petrol and diesel prices coupled with direct subsidy transfer for domestic cooking gas, IOC has more leg room for investments. Earlier, due to delayed compensation of subsidies, the company’s debt piled up leaving little room for investing in new projects.

IOC’s gross debt has come down by nearly 21%to R41,885 crore as of September 30, against R53,404 crore on March 30, said A K Sharma, director (finance) of the government-owned firm.

IOC controls 11 of India’s 23 refineries. The group refining capacity is 80.7 million tonnes per annum — the largest share among refining companies in India. It accounts for 35% share of country’s refining capacity.

IEA estimates sees India’s fuel demand to touch 329 million tonnes by 2030. Currently, India’s total refining capacity stands at 230 million tonnes a year. The total fuel demand in FY16 was 183.5 million tonnes, according to the petroleum ministry.

In order to meet the demand, the Prime Minister Narendra Modi government has proposed a mega 60 million tonnes a year refinery in Ratnagiri district of Maharashtra. The project is to be setup by IOC in joint venture with other public sector firms.