Indian Oil Corporation chairman B Ashok
believes that crude oil prices
in the range of $45 to $55 a barrel will be comfortable for India, post the production cut by the Opec
(Organization of the Petroleum Exporting Countries). Speaking to Shine Jacob
in an exclusive interview, he also states that the company has so far had the minimal impact of demonetisation
and will sort out its West Coast land hurdles within a quarter.
The recent production cut by Opec has raised concerns for India. Where do you see the prices heading in 2017 and what do you think is a safe zone for India?
The decision taken by Opec
has to be further ratified. There are a couple of things, which we need to bear in mind. Following the announcements, there has been a little bit of spike in prices. This in the normal sense can be considered as quite volatile, but considering the developments in the last couple of years, we don’t think that it is really threatening. Anything in the range of $50 a barrel is reasonable from both the producers as well as the consumers’ point of view.
We also realise that ours is an industry which is extremely capital intensive, whether it is upstream or downstream. Certainly, looking at future energy requirements and the fact that hydrocarbons continue to be available, I will emphasise that everybody should continue to stay invested. Looking at a long-term point of view, I think it is necessary for people to continue investments in this sector.
As far as prices are concerned, for the last one year or so, the prices were in the range of $45-50 a barrel. When we talk of a comfortable range band, anything between $45-55 a barrel always seems to be fine for us. As a refiner, we want to make sure that if the market pricing mechanism continues, the capability of consumers to afford prices should be there. I think we have that capability at the current pricing range.
What is the status of the West Coast refinery that you are planning? Are you still hunting for a strategic investor?
We are still bullish about the project. We are trying to form up things. We have been seeking land in Maharastra, especially coastal region. we are looking for around 15,000 acres of land and are still evaluating two-three plots at present. More or less we are certain that we do not want to put it up on a hill. We are going to finalise the land in the next quarter.
We are certainly open for strategic partnership for the project. It is a very large project and we definitely feel that this is the right time for people to look at India
for investments. While on the one hand, the three public sectors that are planning the project are quite capable of setting up the project, but we would certainly welcome the entry of a new player.
What were the positive and negative impacts of demonetisation on IOC? Was there a rapid increase in sales from your outlets due to the window given to exchange old notes through fuel outlets?
The point is, the government had taken a conscious call. Because at retail outlets, most of the businesses happened by cash and the government had provided the flexibility to customers for exchanging their old notes, there was a period that was defined. The initial reaction of the customer was that they could get into a retail outlet and quickly exchange the notes. That is why there were queues
and the first few days were crowded. In terms of a sales impact, though it jacked up initially but now it has come to normal growth. These sort of spikes the industry has been facing even when there were talks of a price hike.
In terms of our business transactions, I don’t think demonetisation
has made any significant impact. There was some impact in petrochemicals, because of the commodities, but there too it was marginal.
You have shown your interest in the current bidding round of small and marginal fields. How effective would be a small block be for you?
As a huge downstream player, we want to have some presence in our upstream and wanted to be an integrated company. Consciously, we have made efforts at integration in terms of both upstream as well as downstream. We have been scouting for opportunities and we have made some big investments as well. In all these investments made, we have been more of a passive partner.
We had made attempts to become an operator and try to think marginal fields as an opportunity to become an operator and hence we went ahead with the bids. Keeping in line with our vision, we want to have at least 10 per cent of our refining capacity using our oil.
What will be your strategy to take the lead in the retail sector, where market rivals, including RIL, Essar and BP are adopting an aggressive policy?
There is going to be more competition and I believe that competition is in the interest of the country at large. This competition will help us raise our own bar. Today we are at par with any player around the world in terms of the features, facilities and expansion of existing networks. People always make comparisons to what happened when the private sector came in the 21st century, we have come a long way from that. We have positioned ourselves in the rural market, though in the urban region all competitors are equally strong. But in highways, we have an edge. We have a strategy in place and are confident that we will continue to be a strong leader in retail in the comning years as well.