HPCL on expansion drive with ₹60,000-cr capex

V Rishi Kumar Hyderabad | Updated on September 18, 2018

J Ramaswamy, Director, Finance

Most of the funds to go for Vizag, Barmer, Mumbai refineries and Gujarat LNG terminal

Hindustan Petroleum Corporation Ltd (HPCL), the oil ‘Navaratna’, is on a major expansion-cum-consolidation drive that involves a ₹60,000-crore capital expenditure plan.

The amount is likely to increase by about ₹15,000 crore if some other projects under consideration are included.

J Ramaswamy, the company’s Director - Finance, said: “The investment is three-pronged — it will lead to huge capacity expansion, augmenting BS VI compliant fuels, bottom upgradation and consolidation at the existing refining and processing facilities, and a greenfield project.”

Speaking to BusinessLine on the sidelines of an event here, Ramaswamy, along with S Jeyakrishnan, Director - Marketing, outlined the company’s plans, which entail a capex of over ₹60,000 crore by 2022.

In addition to this, investments in pipeline projects and upcoming ventures are under various stages of consideration. HPCL is making significant investments in the production of BS VI fuels, which will become mandatory on April 1, 2020.

“The Vizag refinery complex will see a total investment outlay of ₹21,000 crore, which will see the expansion of the refinery from 8.3 mtpa to 15 mtpa,” said Ramaswamy, adding that it will also cover the production of BS VI fuels and bottom upgradation.

While the Mumbai refinery will see an investment of about ₹5,000 crore, where the capacity will be increased from 7.5 mtpa to 9.5 mtpa, the joint venture greenfield refinery planned at Barmer in Rajasthan will see the setting up of a 9 million-tonne integrated refinery and petroleum complex.

The Barmer project is being taken up as a 74:26 joint venture with the Rajasthan government.

Clearance for Barmer

The Barmer project, expected to see an outlay of over ₹43,000 crore, has most of the clearances in place including land and environment clearance. Referring to another project planned in Gujarat, where an LNG terminal will be set up at an outlay of ₹4,000 crore, Ramaswamy said: “This project is being taken up through a 50:50 joint venture with the Shapoorji Pallonji Group.”

The expansion plans will be funded through a combination of internal accruals, debt and other instruments, Ramaswamy said. There is also a possibility of raising funds overseas, he added.

HPCL’s current debt-equity ration is 0.5:1 but there is potential for greater flexibility, he said.

Asked about the fuel demand in the backdrop of spiralling prices, Jeyakrishnan said: “In the first quarter there was some pressure but in the near and long term, it is likely to see a growth of 7-8 per cent.”

Apart from being interested in city gas supply networks, the company is also strengthening its pipeline networks in various parts of the country, which will enable it to play a bigger role in India’s energy story, Ramaswamy said.

Published on September 18, 2018

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