IOC to go ‘aggressive’ on petrochemicals

RAGHUVIR SRINIVASAN M RAMESH Chennai | Updated on January 20, 2018

AK Sharma, Director-Finance, IOC

Prove to be a hedge against losses that happen when crude oil prices plunge

Indian Oil Corporation intends to make “aggressive investments” in petrochemicals in the next few years, says the company’s Director-Finance AK Sharma.

IOC, the country’s biggest oil refiner, also produces a range of petrochemicals — LAB, Polypropylene and PTA.

Last year, when the drop in crude oil prices caused IOC a loss of ₹9,000 crore — the petrochemicals business helped buttress the bottomline by contributing to a third of the company’s earnings before interest, depreciation, tax and amortisation.

Petrochemicals, therefore, proved to be a hedge against losses that happen when crude oil prices plunge.

(Refinery products such as petrol and diesel are linked to international prices; when crude prices drop, the product prices also fall in tandem. Refiners who may have bought crude at higher prices and stocked-up their tanks would have to take losses due to the price dips.)

The other natural hedge – of production of crude oil and natural gas – has not helped IOC much and the company’s upstream assets have so far not yielded much.

“We are very encouraged by the contribution of petrochemicals,” said Sharma, in a chat with journalists.

Without giving out details, he named polypropylene and mono ethylene glycol among the petrochemicals that IOC would like to produce more of.

Since crude prices are now inching up, IOC is likely to make inventory gains in the current quarter, Sharma said.

Greenfield refinery

In the meantime, the company is gearing to set up a greenfield, mega refinery in collaboration with the other state-owned oil refiners HPCL and BPCL, Sharma said.

The 60-million-tonne refinery would come up in Maharashtra, perhaps on the southern coast, where land for the project is being identified by the state government.

Further, as directed by the government, IOC along with public sector Coal India Ltd and NTPC Ltd, has just formed a joint venture with the Fertilizer Corporation of India, to revive the latter’s defunct fertiliser units at Barauni, Sindhri and Gorakhpur, Sharma said.

FCI owns 11 per cent of the venture, while the other three (cash rich) PSUs will hold the rest.

Though unrelated to its core business, IOC is happy to be called upon by the government to lend its expertise and resources to revive sick fertiliser units, Sharma said.

Published on June 23, 2016

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