State-owned Bharat Petroleum Corporation Ltd (BPCL) which recorded a 19.6% jump in its consolidated profit for the third quarter of FY25 has revised its capex target for the current fiscal year upwards from Rs 13,000 crore to Rs 16,000 crore and set the goal for 2025-26 at around Rs 19,000 crore. The company is also planning to come out with an initial public offering for Maharashtra Natural Gas Ltd – its joint venture with GAIL India by mid 2025-26, chairman and managing director G Krishnakumar and director-finance Vetsa Rama Krishna Gupta told Arunima Bharadwaj in an interview. While the company sees some shortage of Russian oil supplies in the short term owing to US sanctions, it is hopeful that Russian supplies will revive. Excerpts:

On the company’s Q3 financial performance and the short-term outoook 

This quarter we recorded a stellar performance. We have Rs 4,649 crore profit after tax on a standalone basis compared to Rs 2,397 crore during second quarter of FY25, almost 94% increase on QoQ basis. We have had a good growth in sales volume at around 4% and an EBITDA of Rs 20,001 crores during April to December period. Our capacity utilisation of all three refineries put together is 107% even though there were shutdown periods during this quarter.

In terms of petrochemicals we have just concluded the project finance of Rs 31,800 crore for Bina refinery expansion. In terms of our renewable ambitions, we have approved the 50:50 JV formation with Sembcorp Green Hydrogen India to create around 3.5-4 GW renewable assets. We have also undertaken other initiatives for expansion in CGD business. We have made good progress in terms of achieving the minimum work programmes. 

This quarter the refining performance while compared to the previous quarter is much better. Our refining margin in Q3FY25 is at $5.6 per barrel compared to $4.41 per barrel in the previous quarter. 

Impact of the latest US sanctions on Russian oil supplies on the company 

Every month around 35-38% throughput is coming from Russian crude. Now, almost 180 vessels have been put on sanctions, so it may impact our supplies from Russia on a temporary basis. We will have to wait and see for two to three months. Even Russia has not cut down any production and is continuously keeping the same production levels. Immediately in the next one or two months we may see a shortage of Russian cargoes but at the same time, crude is available from other markets like the Middle East. Supply side there is no issue. Maybe commercially we were getting a bit of benefit from Russian cargoes which may not be available for a couple of months. 

On pricing differential between crude oil sourced from the Middle East and Russia

If we go to the Middle East market, they are asking for $2-$3 per barrel premium because these are not on term basis but on spot basis. In the spot market, the demand has gone up due to the non-availability of Russian cargoes.

But when we are approaching the traders (in Russia), they are telling us not to worry. The traders will find out some ways and means that the supplies come back. It’s a matter of time, maybe one or two months. We have to wait and see.

Wherever commercially viable crude is available, we approach those particular traders. Even recently we have received one cargo from Argentina also.

On Capex targets for 2025-26

For FY25, we have initially estimated a capex target of Rs 13,000 crore. Capex spent in April-Dec 2024 is around Rs 12,000 crore. We are revising current year’s target to around Rs 16,000 crore and are hopeful that by the end of the year we may reach this target.

For FY26 we have estimated around Rs 18,500-19,000 crore of capex requirement. It is the initial estimation, we will finalise the number by the end of Feb. 

Ongoing and future projects  

Bina refinery’s capacity is 7.8 million metric tonnes per annum which is likely to go to 11 MMTPA. The refinery expansion is likely to be over by September 2027. Along with that we are getting the world class ethylene cracker unit which is expected to be commissioned by May 2028. 

Currently, we are establishing a de aromatised solvent unit in Mumbai refinery at the cost of Rs  500 crore and expect it to be commissioned in the year 2025. Along with that, in the Kochi refinery we are getting a polypropylene unit at the cost of Rs 5,000 crore. 

Regarding coal regasification, we are working with Coal India. Once the DFR (detailed feasibility report) is prepared, then we will be able to give more details. We’re looking at coal regasification to syngas and syngas will be converted to natural gas. It will be a JV with Coal India. Broadly we are looking to set this up close to Chandrapur in Maharashtra.

On current crude oil prices and marketing margins 

We expect crude oil prices to be around $70-75 per barrel at least in the long term. In the short term, Brent prices have gone up to $80 per barrel but we don’t foresee any logic for crude prices to go beyond $80/bbl level because demand is not picking up from China. 

Once crude comes back to $70-75/bbl level, the margins will be at a standard level and not be affected. Refining spreads have already moderated and this low level of refining spreads will continue for a longer period of time.

On greenfield refinery cum petrochemical complex in Andhra Pradesh

The Board has approved Rs 6,000 crore towards pre-project activities including land identification, feasibility studies and environmental assessment for the complex in Andhra Pradesh. It has not yet reached a final investment decision (FID). As per initial estimations, the project is viable but we expect to finalise numbers by December 2025. 

On diversification into renewable energy

We have very small installed capacity as of now, around 120 MW. One project is already under working progress for 150 MW. Recently we got one tender from NTPC for 150 MW and another 30 MW tender from NHPC. Our ambition at least in the next couple of years is to take this RE capacity to 2 GW and by 2030 we want to take this particular capacity to 10 GW. That is the reason we have formed a JV with Sembcorp. Initial investments in the renewable side will be in solar, wind, followed by green hydrogen.

On Maharashtra Natural Gas IPO

Gail India and BPCL are the promoters of MGNL. We have given our in principle approval from the board side which is now subject to other regulatory approvals from the ministry and DIPAM. We are submitting our proposal to the ministry. Once we get the approval, we can take it up to merchant bankers and take it forward. Maybe we can look at it (IPO) of around Rs 1,000 crore by the mid of 2025-26. 

On share of petrochemicals in  business mix

It is around 2% but our ambition is to take it to 8% of our total portfolio by 2028-29. 

On BPCL’s E&P activities overseas

We are expecting the lifting of force majeure in our exploration and production projects in Mozambique anytime now. All the back-end activities are going on. Maybe we may have to wait one or two months. Once they remove force majeure, activities will speed up. In Brazil, the FID is not yet completed because the tendering process has not yet completed. At the same time we are exploring regions including Africa for development of producing fields.

On Budget expectations

We expect that ATF and natural gas should come under GST. The government has supported us in the past on under recovery on LPG. We are confident that the government will support us this year also.