IOC refining margins soar

Differential in crude prices and petroleum products led to better margins: Ramachandran.

Indian Oil Corporation (IOC), the country's largest oil refining and marketing company, expects its gross refining margins to increase from $6.50 a barrel in the April-June quarter to $8 in July-September.

MS Ramachandran, chairman and managing director of IOC, told shareholders at the company's 45th annual general meeting (AGM) in Mumbai today: "The high differential in the prices of crude oil and of petroleum products (the finished product) during 2003-04 ensured good margins for Indian refiners. IOC's refining margins continue to be well above $8 per barrel."

Officials at the other two state-owned refining companies, HPCL and BPCL, told Business Standard that they were still computing the refining margins for the current quarter. Last quarter (April-June), their gross refining margins were close to $5.50 per barrel.

The world over, refineries are stretching their capacity utilisation as there has been an increase in oil demand. Demand is expected to be higher by 2.6 million barrels per day in 2004 over levels in 2003. Of this incremental demand, 0.6 million barrels comes from the Organisation for Economic Cooperation and Development countries and China accounts for 0.8 million barrels a day.

"The refining margins, therefore, are expected to remain robust in the remaining part of the year as well. In India too, this trend is expected to continue despite the recent reduction in excise and customs duties which have brought down refining margins by almost $2 per barrel," pointed out Ramachandran.

In 2003-04, India's total consumption of petroleum products was about 107.7 million tonnes, registering a growth of over 3 per cent for the second year in succession after a flat year in 2001-02.