IOC to invest Rs 17,825 cr in Gujarat refinery expansion, petchem project

IOCL net profit fell 47% annually to Rs 1,910.8 crore in the quarter ended June 30, mainly due to inventory losses stemming from fluctuations in global oil prices

Indian Oil Corporation (IOC), the nation's top oil firm, on Tuesday said it will invest Rs 17,825 crore in raising the capacity of its Gujarat refinery as well as setting up a petrochemical plant at the unit as part of plans for upscaling petchem business to protect margins.

In a regulatory filing, IOC said its board at a meeting on September 21 "accorded approval for implementation of petrochemical and lube integration project at Gujarat refinery at an estimated cost of Rs 17,825 crore".

The project envisages raising the capacity of the Vadodara refinery in Gujarat from 13.7 million tonnes per annum to 18 million tonnes and building a 0.5 million tonnes a year polypropylene (PP) plant and a 2,35,000 tonne a year Lube Oil Base Stock (LOBS) unit.

"The project would be a building block for the production of niche chemicals in future with a potential to increase petrochemical and speciality products integration index on incremental crude oil throughput which would enhance the corporate margins of IOC," it said.

After the company's annual general meeting on Monday, IOC Chairman Shrikant Madhav Vaidya told reporters that IOC is planning to raise petrochemical manufacturing capacity and is looking at diversifying into the textile business.

The Gujarat refinery project is part of IOC's plans to boost petrochemical capacity by more than 70 per cent over the next decade, from 3.2 million tonnes a year currently, Vaidya said.

"Petrochemical production is a lucrative opportunity for energy companies in India as the per-capita consumption still remains very low," he had said adding that it will raise margins and hedge volatility in the oil market.

IOC is currently implementing an ethylene glycol project at its Paradip refinery in Odisha, as well as a paraxylene/purified terephthalic acid (PX/PTA) plant at the site. An acrylics/oxo-alcohol project at the Gujarat refinery and capacity expansion of the naphtha cracker and PX/PTA plant at its Panipat complex in Haryana are also being implemented.

The firm is investingRs 28,869 crore on these projects, he had said.

IOC, which owns a third of India's 249.9 million tonnes per annum refining capacity and 29,831 petrol pumps out of 71,046 retail outlets in the country, also plans to leverage its petrochemical operations to expand into textiles as it looks to diversify operations, Vaidya said.

The company, he said, is already the second-largest player in petrochemicals in the country and in the future, it would focus on entry into new segments like polyester filament yarn, polyester staple fibre, and polybutadiene rubber.

The firm plans to build a Rs 1,970-crore textile manufacturing project at Bhadrak in Odisha.

The project is expected to have units producing 1,08,000 tonnes a year of polyester staple fibre (PSF), 1,80,000 tonnes of drawn texture yarn (DTY) and 36,000 tonnes of full drawn yarn (FDY).

An 8 lakh tonne a year PX line, a 1.2-million tonne PTA unit and a 3,57,000-tonne mono ethylene glycol (MEG) plant at the Paradip complex would provide a ready source of feedstock for the textile plant.

"As part of expansion across the crude oil-to-chemicals (COTC) value chain, we plan to commission PX-PTA plant at Paradip and capacity expansion of the naphtha cracker and PX-PTA plant at Panipat complex.

"The refineries at Panipat and Paradip would achieve a Petrochemical Intensity Index (PII) of 15-20 per cent with the completion of the ongoing projects," he said.

Similarly, the integration of polypropylene and LOBS units will enhance the petrochemical and speciality products integration index of Gujarat refinery to 20.7 per cent on incremental throughput, he said.

"As a long-term strategy, we plan to enhance our petrochemicals integration to about 14 to 15 per cent of PII by the year 2030," he said.

Currently, IOC is the second petrochemical maker in the country, with production capabilities in LAB, glycols, butadiene, PX-PTA and a wide range of polymer grades.

"For the future, we are focussing on entry into new segments like polyester filament yarn, polyester staple fibre, and polybutadiene rubber along the COTC value-chain," he said.