 "BPCL to spend Rs 1 lakh crore in next 5 years: S Varadarajan")
How do you view BPCL’s performance this year?
We have done pretty well. For the first time, net profit has exceeded Rs 5,000-crore. Profit after tax stood at Rs 5,048.5 crore against Rs 4,060 crore in 2013-14. The gross refining margins generated by our refineries at Kochi and Mumbai continue to be the highest among public sector refineries. Internal cash generation during the year was higher at Rs 5,989 crore, 30 per cent more than Rs 4,585 crore in 2013-14.
What are the growth plans and segments?
Our teams of 100-plus people have taken nearly eight to nine months in devising an integrated corporate strategy document designated ‘Project Sankalp’ — our resolve to take the next giant leap. The project has taken into account our growth strategy for 2016-2021.
As part of this, BPCL will invest Rs 1,00,000 crore in the next five years.
In the upstream segment, we will invest up to Rs 20,000-25,000 crore. The refining segment will see investments of Rs 35,000-40,000 crore, wherein we aspire to reach a capacity of one million barrels per day in the next four to five years. The balance investment goes into marketing and city gas distribution. We also have plans to go to countries, including Nepal and Bangladesh, and some African nations, where, in addition to marketing lubricants, we would look at options to get into the downstream segment.
How do you plan to reach refining capacity of one million barrels per day?
Bina and Numaligarh refineries can help us achieve this. We are planning to take Numaligarh capacity from three million tonnes to nine million tonnes per annum and a proposal in this regard has been approved by the board. We have submitted a proposal to the government seeking capital subsidy for the same. Since crude availability is a problem in the northeast, we need to move it from the east coast to Numaligarh. There is an integrated plan for Numaligarh of Rs 20,000 crore.
As for Bina, the first quarter of this financial year turned profitable. Bina is currently stabilised at six million tonnes. It is operating at full capacity. We have approved a low-cost expansion and de-bottlenecking for it. This will take up the capacity from six million tonne to 7.8 million tonnes, operating close to around eight million tonnes. The cost is going to be about Rs 3,000 crore.
We have sought approvals for making fresh investments into Bina. Our partner—Oman Oil Company—is not going to participate as in this round of expansion. Sometime next year, we might look at a public issue or bring in a strategic partner as part of the larger equity correction. We do have plans to take up Bina ultimately to 15 million tonnes. Demand in that belt and in the central and northern part is very attractive. We need to meet these products from moving from the coast.
Considering the decline in crude oil prices, have you reviewed the returns on the assets held by your upstream arm, Bharat Petro Resources?
Yes, returns have to be reviewed in the light of the current drop in crude oil and product prices. Fortunately for us, most investments are in the initial stage. However, a good aspect of the drop is that service cost has come down and, thus, contracting for the field will also happen at a lesser price.
We should get into a final investment decision with regard to our Mozambique field at the end of this year. By the time our projects come on stream, that is in four years, crude oil and product prices would have stabilised, providing us reasonable rate of returns. Besides, due to the size of discovery in Mozambique, we are not worried about it as of now.