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IOC to increase its capex to Rs 200 billion a year over next 5-7 years
Public sector oil major Indian Oil Corporation (IOC) said that it would increase its investment every year from the current Rs 140-150 billion to around Rs 200 billion over the next 5-7 years. The proposed investment would be towards brown and greenfield expansions. IOC also confirmed its participation in two key projects including a Rs 800 billion mega refinery in Maharastra and revival of three fertiliser plants in the country along with other PSUs at a cost of around Rs 150 billion.
IOC’s Director (Finance) A K Sharma said that over the next 5-7 years the company would invest around Rs 1200 billion, of which around Rs 300-350 billion would be in petrochemical. Petrochemical is doing well and now contributes nearly 30% of IOC’s EBITDA (Earnings before interest, taxes, depreciation and amortisation), he noted. This is one of the areas IOC has been betting big to address cyclical risks. The other area, which IOC is betting big is LNG. IOC’s new Rs 50 billion LNG terminal at Ennore, near Chennai would go on stream by 2018 and the company is still looking for strategic partner, said Sharma.
He was bullish about company’s performance during the upcoming quarters since the crude oil price has established. Inventory loss came down from around Rs 150 billion in 2014-15 to Rs 90 billion in 2015-16 and during the current quarter company is not expecting any loss. While the company is going for brown field expansions, IOC also confirmed that along with other oil PSUs it is looking at setting up a mega project with 60 million tonnes capacity. Sharma said the Maharastra Government has offered land and IOC is evaluating it. The refinery would require around 5,000 acres of land and the state government has offered the land in the Konkan coast.
The project will be implemented through a JV and broad understanding on ownership has been put in place among the oil companies. IOC will have major chunk on the project, which will have initial capacity of 40 MTPA and would cost around Rs 700-800 billion. “Such project is required in the country to meet the future demand,” said Sharma. The oil company is also getting into fertiliser, though it is not its core area or adjoining business, IOC was asked by the Centre to participate in reviving three fertiliser plants in the country.
IOC along with NTPC, Coal India, Fertiliser Corporation of India (FCI) and HFL is planning to revive the three defunct fertiliser units at Gorakhpur, Sindri and Barauni. Total project is estimated to be around Rs 150 billion and equity portion from these PSUs would be around Rs 50 billion. “Yes it is not our area, but Government wants us to help to revive the plant for the sake of country’s economy and want to capitalise IOC’s management skills,” said Sharma. Their will not be a major pressure because of equity commitment for IOC, since it is would be very minimal.
All the investments would be funded through debt and internal accruals mainly, said Sharma adding that the company also got over Rs 100 billion worth of bonds and value of its investment is around Rs 300 billion.
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IOC also said that it is open for acquisitions and it is also right time to look for assets. The company to invest $1.2 billion as its shares to acquire Rosneft Oil Company (Rosneft). IOC along with Oil India (OIL) and Bharat Petro Resources (BPRL), a 100% subsidiary of Bharat Petroleum Corporation (BPCL), have signed definitive agreement to acquire upto 23.9% shares from Rosneft Oil Company (Rosneft), NOC of Russia in JSC
Vankorneft, a company organised under the law of Russian Federation which is the owner of Vankor and North Vankor Field licenses. Sharma said the company has reported asset valuation loss in Canada (writes off around Rs 6 billion and Venezuela since they are trapped in oil price. Brett Hundley Jersey
