In an interview with Vikas Srivastava, R Ramachandran, director (refineries) of Bharat Petroleum, outlined the company’s plans to significantly invest in petrochemicals.
The merging of Brent-Dubai crude prices in recent months has given Bharat Petroleum (BPCL) an opportunity to try a range of crude, and also look at unexplored markets like Russia and the US for low-sulphur crude. Besides, the continuing expansions at refineries has given the company an ability to process high-sulphur crude to benefit from price differentials. In an interview with Vikas Srivastava, R Ramachandran, director (refineries) of Bharat Petroleum, outlined the company’s plans to significantly invest in petrochemicals to ensure a pipeline of about 15-20% of products coming from the vertical as a long-term strategy to align with the government’s focus on cleaner transport such as electric vehicles. Excerpts:
How has a drop in crude impacted your gross refining margins and what is the outlook for FY18?
It is expected that BPCL’s gross refining margin on an average would go up by $1.5-$2 per barrel from the current level of $5.3 per barrel by the third quarter of FY18.
What is the status of expansions undertaken at Kochi, Bina, Mumbai and Numaligarh? After the expansions, would these refineries be able to refine heavier crude to benefit from light heavy crude differentials?
The Rs 16,000-crore expansion at Kochi got completed in March 2017. The commissioning of the units during the course of September would increase the operating capacity to 15.5 mmtpa. At Bina, we are already implementing a project which will increase capacity to 7.8 mmtpa from the current level of 6 mmtpa by July 2018. We also have plans to double this capacity and build a large petrochemical complex during the next five-six years. There is also a proposal for enhancing the capacity at Numaligarh to 9 mmtpa from 3 mmtpa at present. In Mumbai, the refinery capability is expected to remain around 14-15 mmtpa.
As far as usage of heavier crude at these refineries is concerned, we have moved to 100% high sulphur crude at Kochi refinery through bottoms upgrade. The refinery was earlier using 40-50% low sulphur crude. The Bina refinery already has 100% high sulphur processing capability, but at Mumbai we still have to do the bottoms upgrade with 30% still running on low-sulphur crude. However, the falling differentials between Brent and Dubai crude are favourable for Mumbai as we can buy light crude at the same price as heavier crude.
What are the new initiatives being taken up by BPCL to counter the increasing competition from private players?
We have increased our focus on technology and started to use analytics and automation in a very big way. Going ahead, it will help us strategise against competition in creating an overall strategy in terms of pricing, logistics and operations.
With the government considering cleaner transport such as electric vehicles (EVs), what would be your strategy towards production of petroleum products in the near future?
As far as BPCL’s strategy to deal with EVs is concerned, we look upon this development as an opportunity. When CNG was introduced in buses in Delhi, we adapted that as parallel business. Today, we have our city gas distribution presence in several states, either through our own distribution networks or through joint ventures, and it is continuing to expand. In the long run, we will see how to coexist with renewables, produce high-quality fuels and expand our range of products. While the current contribution of petrochemicals in the product portfolio of our company is small, our long-term strategy would be to significantly invest in petrochemicals with an aspiration to have about 15-20% of our products coming from petrochemicals.