IOC plans 33% rise in annual capex

Company confirms its participation in reviving 3 fertilizer units

Indian Oil Corporation (IOC) said it would increase its yearly investment from the current Rs 14,000-15,000 crore to about Rs 20,000 crore over the next five to seven years.

This would cover new projects and expansion of existing ones. It also confirmed participation in two projects, an Rs 80,000-crore mega refinery in Maharashtra and revival of three fertiliser units, with other state enteprises, at a cost of Rs 15,000 crore.Director (Finance) A K Sharma said over the next five to seven years, the company would invest around Rs 1.2 lakh crore, of which Rs 30,000-35,000 crore would be in petrochemicals. The latter now contributes nearly 30 per cent of their Ebitda (earnings before interest, taxes, depreciation and amortisation), he said.

It was one of the areas IOC is betting on to address cyclical risks.

The other area, on which it is also betting highly, is liquefied natural gas (LNG). IOC’s new Rs 5,000-crore LNG terminal at Ennore, near here, would go on stream by 2018 and the company is still looking for a strategic partner, said Sharma.

He was optimistic on performance during the coming quarters. Inventory loss was Rs 15,000 crore in 2014-15 and Rs 9,000 crore in 2015-16. In the current quarter, the company is not expecting any loss. IOC and other oil public sector units are looking at setting up a mega refinery with 60 million tonnes per annum capacity.

Sharma said the Maharastra Government had offered land and IOC was evaluating it. The refinery would require around 5,000 acres and the state has offered the land on the Konkan coast. The project will be implemented as a joint venture and a broad understanding on ownership has been put in place among the companies. IOC will have a major chunk. The initial capacity would be 40 mtpa and cost Rs 70,000-80,000 crore.

“Such a 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 an adjoining business. IOC was asked by the Centre to participate in reviving three fertiliser units. It is to do so with NTPC, Coal India and Fertilizer Corporation of India and Hindustan Fertilizer. It is about Hindustan Fertilizer’s three defunct units at Gorakhpur, Sindri and Barauni. A Rs 15,000-crore project and the equity portion from these PSUs would be around Rs 5,000 crore.

“Yes, it is not our area but the government wants us to help revive the plant for the sake of the country’s economy and want to capitalise IOC’s management skills,” said Sharma.

The investments would be funded through debt and internal accrual, mainly, said Sharma. Adding that the company had Rs 10,000 crore worth of bonds and the value of its investments was around Rs 30,000 crore.

IOC is open to acquisitions. It,  Oil India and Bharat Petro Resources, a subsidiary of Bharat Petroleum, are to acquire up to 23.9 per cent of shares from Rosneft Oil Company in Russia, for two Siberian oilfields.

Sharma said the company had reported asset valuation losses in Canada and Venezuela.