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Informist, Thursday, Jan. 23, 2025

 

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--BPCL: May have 9 mln tn/yr refinery, 4 mln tn/yr petchem unit in Andhra
--BPCL: Have identified land on Andhra coast for proposed project
--BPCL: May need INR 950 billion for proposed Andhra refinery project
--BPCL: May spend INR 250 billion-INR 300 billion in capex post FY27
--BPCL: May spend INR 900 billion in capex next year
--BPCL: To spend INR 500 billion on Bina refinery project
--BPCL: To spend INR 250 billion on exploration, Mozambique and Brazil
--BPCL: Board has approved capex of INR 1.3 trillion so far
--BPCL: Seek to spend INR 1.7 trillion in capex
--BPCL: Replacing Russian crude could have small impact on GRMs
--BPCL: Renewable spend to be INR 30 bln in FY26, INR 30 bln in FY27
--BPCL: Have allocated INR 100 bln for renewables spend
--BPCL: Hope to achieve 2 GW renewables target in 2 years, 10 GW by 2030
--BPCL: To get gas from Mozambique in 2028-29
--BPCL: Getting benefit of 15-20 bps on new debt for BPRL refinance
--BPCL: To refinance all INR 83-bln BPRL loans as no cash flow generation
--BPCL: To offset fall in Russian crude with crude from West Asia
--BPCL: Forsee 20% cut in Russian crude from March
--BPCL: Russian crude offers discount of $3/barrel
--BPCL: Not getting sufficient Russian cargo for March
--BPCL: Have finalised Russian crude cargo for Jan-Feb
--BPCL: Supplies of Russian crude coming down
--BPCL: Russian cargo accounted for 31% of cargo refined in Oct-Dec
--CONTEXT: Comments by BPCL's management in post-earnings analyst call
--BPCL: Have capacity to process 34-35% Russian crude

 

 

By Sunil Raghu and Gopika Balasubramanium

 

AHMEDABAD/MUMBAI – State-owned oil refining and marketing firm Bharat Petroleum Corp. Ltd. said on Thursday that it is yet to get Russian crude cargoes in sufficient numbers for March delivery and this may hit its margins adversely going ahead.

 

Speaking to analysts in post-earnings conference call, BPCL's management said that historically, the refiner processes around 34-35% of crude coming in from Russia. While its capacity had come down to 31% in Oct-Dec, it helped BPCL earn better margins, as Russian crude was available at a discount of $3-$3.5 per barrel.

 

As per published reports, in 2021, prior to Russia's invasion of Ukraine in 2022, India imported 4.2 million barrels per day of crude, of which 24?me from Iraq, 16% from Saudi Arabia, 10% from the US, and 2% from Russia. With the US pushing for sanctions on Russian global trade, Russia offered discounts to countries that were willing to buy its crude. Since then, the share of India's imports from Russia has climbed to almost 40%, and the country imported around 4.46 million barrels per day of crude oil in December.

 

The state-run BPCL benefitted from this discount, which bumped up its gross refining margins. BPCL, however, said that while it has finalised sufficient Russian cargoes for the months of January and February, it is yet to get Russian crude for March delivery and beyond. It is also open to sourcing alternate crude from West Asia to fill the likely gap in its need. "(The) commercial benefit may not be available in case Russian cargos do not come to India. We are seeing at least a 20% cut in Russian cargoes for the month of March," BPCL's management said. This, they said, would have "some" impact on its already depressed gross refining margins. BPCL, which announced its Oct-Dec earnings on Wednesday, stated that its gross refining margins for the quarter were at $5.95 per barrel compared to $14.72 per barrel a year ago.

 

Generally, BPCL imports around 55% of its crude requirements as long-term imported crude and balance from spot market. The management said that this year too, it would broadly be in the same range and would mainly be sourced from Saudi Arabia, Abu Dhabi, the US and Iraq.

 

Speaking of ongoing and future capital expenditure, BPCL's management said they aspired to invest INR 1.7 trillion, of which their board had already approved and committed projects of around INR 1.3 trillion. Of this, around INR 250 billion would be spent on exploration sites in Mozambique and Brazil, around INR 500 billion on the Bina project in Madhya Pradhesh, around INR 50 billion on the Kochi refinery and petrochemicals project in Kerala, and INR 220-250 billion on city gas distribution network expansion. While it plans to spend INR 190 billion-INR 200 billion in 2025-26 (Apr-Mar), post that the company proposes to spend around INR 250 billion-INR 300 billion a year.

 

The management also gave project updates during the call. Talking of its brownfield 3 million tonnes per annum oil refinery and 3 million tonnes petrochemical project at Bina, BPCL's management said the work on this INR 490 billion project was on schedule, and they hope to commission it by May 2028.

 

Speaking of the proposed refinery project in Andhra Pradesh, BPCL said that it plans to set up a coastal refinery and it has already identified land for the same. They said they are looking for 6,000 acres for the project and may need to spend INR 61 billion to acquire land. While it is mulling a 9-million-tonne oil refinery and another 4-million-tonne petrochemicals facility in Andhra Pradesh, BPCL will finalise the plans once a detailed project report is ready in 8-10 months. It would take another four years for the project to be commissioned once the construction work begins. For now, BPCL estimates the project cost at around INR 950 billion.

 

BPCL, like most other state-run companies, is working on growing its investment in the renewables business. The company's management said it hopes to achieve a target of setting up renewable assets of 2 gigawatts capacity in the next couple of years and 10 GW by 2030. With a capital expenditure outlay of INR 100 billion, BPCL plans to spend INR 30 billion in FY26 and another INR 30 billion in FY27.

 

The management was also upbeat about its investment in the city gas distribution business. It said BPCL was on track in terms of its minimum work programme, especially on setting up compressed natural gas stations. So far, it has set up 139 CNG stations and completed 21,555 km of pipeline, but is a little bit short in terms of piped natural gas domestic connection. Against their target of 11 million connections, they have achieved just 20% of their minimum work programme. Going forward, the company seeks to add 165 CNG stations in FY26 and 200 every year subsequently. BPCL also plans to invest INR 25 billion in the compressed biogas business.

 

On the issue of repayment of INR 83 billion in debt of its wholly-owned subsidiary Bharat PetroResources Ltd., or BPRL, BPCL's management said it was looking primarily to refinance it and roll-over the debt. BPCL was keen on refinancing the debt as BPRL was not generating any cash. BPRL has exploration blocks in India, Brazil, Mozambique, East Timor, Indonesia, Australia, and Russia. Its portfolio includes blocks in various stages of exploration, appraisal, development and production. BPCL said that it expects the Mozambique project to be complete by FY29 and resume natural gas supply from there.

 

On Thursday, shares of BPCL ended 2.3% lower at INR 271.25 on the National Stock Exchange. End

 

 

US$1 = INR 86.46

 

Edited by Tanima Banerjee

 

 

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