The recent ups and downs of the crude oil market owing to various reasons have seen the prices fluctuating recently. As the Arab nations are still the main exporters the recent turmoil there has had a major effect in the situation. M K Surana, HPCL Chairman, feels that the rise in prices is still not an indication of any structural change, it is more a reaction towards the geopolitical situation.
The state-run Hindustan Petroleum Corporation Ltd (HPCL) is entering a new phase, with Oil and Natural Gas Corporation (ONGC) expected to take over the firm by March-end. In an interview, HPCL Chairman and Managing Director M K Surana shared his views about the recent spurt in global crude oil prices, acquisition of the Mangalore Refinery and Petrochemicals Ltd (MRPL) and the company’s expansion plans.
In the past 7-10 days, crude oil has moved drastically. In the past two weeks, it has moved from $57 to $65 and then again to $63. There are some triggers like tension in Saudi Arabia, Iraq, the crisis in Venezuela, the perception about inflationary pressure in the US, and the pending Organization of the Petroleum Exporting Countries meeting in November. The level of compliance on OPEC cuts has been good. Going forward, Surana deducts, it should remain in the region of $57-65 a barrel. If it crosses the $65 mark it might create some structural changes.
Benefiting from MRPL-HPCL merger
HPCL sells more than it produces. The demand is growing and it is already short of refining capacity. Also, MRPL is producing petroleum products but is not into marketing in a big way. Bridging the gap between production and marketing is the primary concern. The second part is that each refinery should have a secondary processing facility.
On the crude procurement front also, it will be an advantage, as we will have a large basket. While we are not into petrochemicals, we have set up a department for the segment. If ONGC Mangalore Petrochemicals is also a part, it will bring the petrochemicals portfolio with it. With that, the Rajasthan refinery and planned Kakinada complex, we will have a presence in the north and the south in petrochemicals.
Entry of foreign players
Already, players like Reliance and Essar are there. Whoever comes will take a share of the PSUs. Right now, private players have a share of only 6%. Their share has not grown at the same pace during the second quarter of FY18 as it did in the first. We have to see how the pie is growing.
In the first six months, we have also seen an 8% growth in petrol, 3.8% in diesel, and 10.6% in LPG compared to last year. This is above or at par with the industry average, which is 7.9%, 3.8%, and 10.1%, respectively, and above private sector growth. All products, in which HPCL deals, put together, PSUs grew by 2.8%, the industry, including private players, by 3.7%, and HPCL by 4.1%. We will ensure that our market share continues to grow.
The demand for overall petroleum products is set to grow at around 4-5%, for which there is a rerquirement for more refineries. India has the potential to develop as a refining country. In terms of petrochemicals, demand is growing and our per capita consumption is very low so there is a potential demand. Therefore, all refineries that are coming up have petrochemical projects added to them. An overall investment of about Rs 60,000 crore, including Rs 35,000 crore in marketing infrastructures is under planning for the future.
Source: Business Standard