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Informist, Wednesday, May 20, 2026

 

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--BPCL: FY26 gross refining margin at $11.74/barrel
--CONTEXT: Comments by BPCL's mgmt in a post-earnings analyst call
--BPCL: Have completed 42% of project at Mozambique project site
--BPCL: To spend INR 250 bln as capex in FY27 vs INR 204 bln spent FY26
--BPCL: Sourcing 10% more spot cargo to meet shortfall in long-term crude
--BPCL: Brazil project delayed by 1-2 years, expect oil delivery from 2031
--BPCL: May need to invest $1.2 bln more in Brazil project over 3-4 years
--BPCL: Don't see any major price escalation for 3 ongoing projects in India
--BPCL: Do not foresee any stress on balance sheet for FY27
--BPCL: See under-recovery on retail oil products as short-term challenge
--BPCL: No shortage of retail fuels, no stoppage of credit to dealers
--BPCL: Unable to keep crude inventory of more than 30 days
--BPCL: Can absorb cashflow mismatch for 1-2 months, difficult in long term
--BPCL: Expect debt-equity levels to come down to 0.4-0.5 from 1:1
--BPCL: Have 41 mln tn per yr of refinery capacity but low crude ownership
--BPCL: Allocating funds to target 6-7 mln tn per yr of crude ownership
 

 

By Sunil Raghu and Shruti Nair

 

AHMEDABAD/MUMBAI – Bharat Petroleum Corp. Ltd. is allocating funds with a target to accrue ownership of at least 6–7 million tonnes per annum of crude oil in the long term, the company's management told analysts and investors in a post-earnings conference call Wednesday. The state-owned oil refiner and marketer has refining capacity of 41 million tonnes per annum but needs to source the majority of its crude from outside, making it largely dependent on developments outside its control.

 

"...We should have either rights on the crude or we should have share of profit on the crude. Accordingly, we are targeting around 6 to 7 million metric tonnes of crude we should have our own. That is the reason we have allocated capital," VRK Gupta, director, finance, Bharat Petroleum Corp. said.

 

The need for crude ownership is also mirrored in BPCL having to source more spot cargo currently. The company had signed long-term cargoes to meet 55% of its refining needs. However, the series of geopolitical upheavals have resulted in the company seeing only 45–46% of its term requirements met. This has forced the company to meet the 10% shortfall through spot cargo available at a premium or high cost. The company also faces limited available infrastructure and cannot store inventory for more than 30 days. For the financial year 2025–26 (Apr-Mar), the company maintained an average inventory of 26 days, which currently ranges from 25–27 days, which Gupta said, can be extended by one-two days at the most. 

 

Gupta also reiterated that there was no shortage of retail fuels such as petrol and diesel, or even crude oil. "Even if we see our refinery shares, the operations are continuing at 118% of refinery capacity utilisation. That means crude is available," he said. On whether the oil marketing company had changed its policy of extending credit to dealers at retail level, Gupta said that while there has been no shortage of credit to the dealers, some controls exist. "We give the credit, but within three days or four days, once they collect the cash, they have to pay back to the company. So if there is any default, then those customers, we put a control," Gupta added.

 

On under-recoveries being faced by the company, the BPCL official said that while the current under-recovery on liquefied petroleum gas stood at an average of INR 650 per cylinder, they are hopeful the government would continue to extend help. He said that they see under-recoveries on oil products currently as a "short-term" challenge which is unlikely to translate into any kind of long-term stress on the balance sheet for entire FY27. Though he did add caution that while the company can absorb the cash flow mismatch for a couple of months, it does become difficult if the situation persists in the long run.

 

The company posted a net profit of INR 31.91 billion for the March quarter, down about a percent on year, with its revenue for the quarter growing nearly 7% on year to INR 1.19 trillion, excluding excise duty of INR 162.47 billion. The company recorded gross refining margin of $11.74 per barrel in FY26, compared to $6.82 per barrel in FY25. The gross refining margin is the difference between the cost of crude oil and the value of refined products. It is a key indicator of the pricing, profitability, and financial health of refineries.

 

Sharing details of the company's plans for capital expenditure, the finance director said that they would spend INR 250 billion in FY27, compared to INR 204 billion spent in FY26. Of the FY27 capex, nearly INR 110 billion would be spent on three major projects at the Kochi, Mumbai and Bina refineries, INR 100 billion on new retail outlet and infrastructure expansion, INR 29 billion on city gas distribution network, and INR 22.50 billion for equity infusion for the ongoing projects of subsidiary Bharat PetroResources Ltd.

 

The BPCL management said that it also does not see any price escalation at three of its projects in India, including the expansion of Bina refinery in Madhya Pradesh. As for the polypropelene project at the Kochi refinery in Kerala, the management said 85–90% of the project has been awarded and INR 50 billion–INR 55 billion already approved. The third project is at Mumbai refinery, which was approved last year and work has just started.

 

On the company's investments in Mozambique, the management said that 42% of the work has been completed. The company has invested in the Rovuma Offshore Area 1 gas project in Mozambique through a subsidiary. The investment is to secure access to liquefied natural gas supplies from East Africa and strengthen the company's global upstream portfolio and diversify beyond West Asia. The company hopes to receive the first LNG cargo from this project in 2028.

 

The company has also invested in Brazil to explore hydrocarbon reserves in deep water blocks. The total project is around $6.4 billion, with BPCL's share at around 40%, or $2.8 billion. The company may be required to invest $1.2 billion over a period of three to four years, Gupta said. The company had expected oil to come from this block in 2028–29. However, contracting a floating, production, storage and off-loading vessel took longer than usual, delaying the project by one-two years. Now, the management expects oil from this block in 2031 and natural gas by the end of 2031.

 

At 1341 IST, shares of BPCL traded at INR 290.30 per share on the National Stock Exchange, up 1.3%.  End

 

US$1 = INR 96.82

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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