It is the country’s largest oil refining and marketing company with a capacity of over 65 million tonnes. With 10 refineries and a near 50 per cent market share in fuel retail, IndianOil is head and shoulders above the rest in the hydrocarbons sector.
With so much going in its favour, is there any cause for worry? For one thing, it is nearly 15 years since IOC set up a refinery (the last was Panipat in 1998). Its Paradip facility, conceived over two decades ago, is expected to be operational only towards the second half of 2013-14.
Smaller rivals
In contrast, smaller rivals such as Hindustan Petroleum Corporation and Bharat Petroleum Corporation, have already commissioned new refineries over the last 3-4 years.
HPCL actually shelved its Ratnagiri refinery planned with Oman Oil (planned during the time of IOC’s Paradip facility) and opted for Punjab as the new site. Today, it has a nine million tonne facility in Bhatinda with L.N. Mittal Group as partner. It recently laid the foundation stone for its next refinery in Rajasthan scheduled for commissioning by 2017.
Likewise, BPCL’s Bina refinery in Madhya Pradesh is doing brisk business, while plans are afoot to set up a new facility in Allahabad during the course of this decade. For the moment, the combined capacities of HPCL and BPCL (at 60 mt) are still lower than IOC’s but these new projects, coupled with expansions in existing facilities, could rapidly bridge the gap.
From IOC’s viewpoint, the good news is that it is only a matter of time before Paradip becomes a reality. The downside is that it has taken way too long considering that BPCL and HPCL were quicker with readying the Bina and Bhatinda refineries.
The other concern for IOC is that some of its facilities, particularly in the North-East, are dated (Digboi was actually commissioned way back in 1901).
The company recently indicated its intent to set up a refinery on the West Coast though the exercise of scouting for a location has not yet begun. “IOC could have comfortably snapped up Mangalore Refinery & Petrochemicals when it was up for a pittance,” says a top industry source.
Is it time for IOC to step up the gas? Or is too much being made of a trivial issue? Since the time it commissioned its Panipat refinery, Reliance and Essar have already created capacities of over 80 million tonnes, while HPCL and BPCL have moved on, too.
It is ironical to think that it was IOC’s near monopolistic hold in the early 1990s that prompted Arthur D. Little to recommend a level-playing field in India’s hydrocarbons sector. At that point in time, both BPCL and HPCL were pygmies in comparison to IOC, but have got a lot more focused and aggressive since then.
In IOC’s defence, the fuel pricing crisis has been a huge obstacle to its growth plans over the last 5-7 years. Being the largest company in the public sector, it bore the brunt of a subsidy regime especially during 2009 when crude prices soared to nearly $150/barrel. “Borrowings went through the roof and project implementation schedules possibly went awry as a result,” says an oil sector official.
The only difference is that the crisis was a challenge for BPCL and HPCL too except that they continued to invest in their new refineries. In the process, these two companies managed to establish a stronger presence in the northern region.
“Being a bigger company, it is natural for IOC to have too many things on its plate. Perhaps, it just needs to prioritise better and work towards a new set of objectives,” adds the official.