Covid-19 made us realise petrochem can de-risk fuel biz: IOC Chairman
Today petrochemical gives 25 per cent of our profit and 5-10 per cent of revenue. This ratio will change but turnover will mostly come from fuel but profitability I intend to get from petrochemical
NEW DELHI: Shrikant Madhav Vaidya took over the reins of India’s largest refiner and fuel retailer as the Coronavirus pandemic set off the oil industry’s gravest crisis in 100 years. But the challenge presents new opportunities to de-risk the fuel business, the IndianOil chairman tells Sanjay Dutta in an interview. Excerpts:
Q: Covid-19 exposed the fault line in fuel marketing when demand tanked during the lockdown, hitting refinery operation and bottom line. How has the shock changed your business outlook?
A: We realised that petrochemical expansion can de-risk our fuel business. We could keep running our refineries (even when fuel demand is down). IOC was a late entrant in the petrochemical business because we were not allowed to earlier. Our first project was the Gujarat LAP project. Then the next big one on a global scale was the PXPTA unit in Panipat. But we really forayed into polymers with the Panipat naphtha cracker in 2010. Today we are No. 2 (producer) but nowhere near the No. 1. So there’s plenty of opportunities as petrochemical is the building block for everything from a kitchen jar, textile yarn to PPE kits.
Q: How does the petrochemical blueprint look like?
A: We are leveraging our R&D strength and the in-house INDMAX technology is a big boost. We installed INDMAX at all our major refineries that we could during the upgrade for BS-VI fuels. It’s a high propylene-making unit and has the ability to yield ethylene from ‘off-gases’. So everywhere the INDMAX came, a polypropylene unit also came up. Most of my major refineries now have a petrochemical footprint. The natural synergy is to go into textile yarn, which we are doing at Bhadrak. We are consciously investing more and more in petrochemicals while keeping our footprint firmly in the fuel business.
Q: How much of your future business will be petrochemical?
A: Paradip, Panipat and Gujarat (refineries) have petrochemical intensity, or how much crude gets converted, of 25 per cent. But all-India, it is 5-6 per cent. We intend to take it up to at least 10-12 per cent. We have plans of having something at every refinery so that each can de-risk its fuel business.
Today petrochemical gives 25 per cent of our profit and 5-10 per cent of revenue. This ratio will change but turnover will mostly come from fuel but profitability I intend to get from petrochemical.
Q: How will you protect your petrol and diesel volumes as competition hots up once BPCL is privatised?
A: Being the biggest retailer, we are always under threat of losing market share to any new entrant. So we have to evolve. It can’t be business as usual. Because unless we evolve, we further lose ground. Today, we have about 40 per cent market share and I intend to maintain that or regain the ground we have lost.
I am happy to share that all our pumps are automated. CRM (customer relationship management) package is in place. We are now ensuring all IOC pumps have the look and feel to match anybody. We are damn sure of delivering Q&Q (quality and quantity). That’s the first thing any customer looks for.
We will leverage the strength of R&D for differentiated fuels. If I give a differentiated product then I stand to gain. Otherwise, the quality is the same. It’s all BIS check. We have started this in LPG with ‘Extra Tej’, which reduces heating time by 8-10 per cent. R&D is working heavily on lubes. So what we are trying to do is to offer a lubes package and fuels package.
Q: How will emerging mobility solutions affect traditional petrol pumps?
A: The world is changing and we are fully aware of that. So our ‘petrol stations’ will turn into ‘Energy Stations’, offering a bouquet of services from EV charging, battery swapping, auto LPG and gas. So whatever type of vehicle a customer has, our pumps will have the fuel. At the moment we will have a footprint for scaling up as the trends emerge. I don’t know the rate at which the other forms of energy come but I expect at least 15-20 per cent of our pumps to become energy stations in 5-6 years.
Q: Is there a rethink on the ambitious refinery capacity expansion plan, including the west coast refinery, in view of the tepid growth in demand?
A: I firmly believe that demand has not been destroyed (by Covid-19) but has got deferred. No plan has been shelved as such but maybe, they will be paced out slightly, staggered a bit. But the demand projections require that the planned refineries come up.