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State-run oil refiner Indian Oil’s board of directors on Friday approved setting up a new refinery in Nagapattinam in Tamil Nadu, chairman and managing director SM Vaidya said at a press conference.
He said the refinery will have an annual refining capacity of 9 million metric tonnes and an investment of ₹31,500 crore. A joint venture between Indian Oil and its subsidiary Chennai Petroleum Corporation, the project will be completed within 48 months from the dates of investment approval and statutory clearances, Vaidya added.
The project will source 80 per cent of materials and services indigenously, he said. The refinery will produce diesel and petrol meeting Bharat Stage VI standards, and 6 per cent of the crude processed will go into making petrochemicals. “We have kept margins to increase petrochemical production,” he added.
Chennai Petroleum holds over six acres of land, and another 6.58 acres of land is in advanced stages of acquisition, Vaidya said, adding that the firm expects to obtain the land rights by March. Product evacuation from the refinery will take place via two existing pipelines in the region and jetties, utilising the port-based location of the refinery.
Vaidya indicated that funding for the project will come mainly from debt. “Our debt-to-equity ratio is quite healthy at 0.6621. We have the appetite for raising debt,” he said.
Apart from debt, both Indian Oil and Chennai Petroleum will put in 25 per cent of the equity portion each, and a financial or strategic partner will meet the balance equity , said Sandeep Kumar Gupta, director, finance, Indian Oil. The National Iranian Oil Company subsidiary will remain involved in the project through the minority stake that it owns in Chennai Petroleum, he added.
Q3 profit zooms
For the October-December quarter, Indian Oil’s net profit rose to ₹4,917 crore, growing 210 per cent compared to the same period in the previous financial year. Vaidya credited inventory gains and higher petrochemical margins for this bottom-line performance. Additionally, the firm was helped by exchange rate fluctuation and improvement in interest costs, Gupta said.
The board has declared an interim dividend of ₹7.5 per share.
The revenue from the operations during the third quarter stood at ₹1.48 lakh crore. Indian Oil refineries operated at 100% capacity in the third quarter, Vaidya said. Except for ATF, the production has almost reached pre-Covid levels for all other products, he said.
At $2.19 per barrel, gross refining margin improved from the previous quarter but is still about half of $4.09 per barrel -- the level it was during the same period in the last financial year.
Vaidya said he expects diesel consumption in the fourth quarter of the ongoing financial quarter to grow yearly.
In the financial year 2022, fuel consumption will grow beyond the financial year 2020 (which reflects pre-Covid levels), he added, crediting the optimism around vaccines.
Amid oil-producing nations' decision to cut supply, Vaidya said the firm will continue sourcing crude through a mix of term and spot contracts.
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