Prices don't matter as far as cracks remain in same range: HPCL CMD

M K Surana does not see any adverse impact of OPEC decision to cut output

M K Surana, chairman and managing director, Hindustan Petroleum Corporation ltd (HPCL), does not expect any adverse impact of the recent OPEC decision to cut production. In an interview with Shine Jacob & Amritha Pillay. Surana discusses the company's expansion plans, demonetisation and its delayed Rajasthan refinery project.

At the recent OPEC meet, its members have decided on a production cut. What according to you would be the likely impact on Indian refiners and how do you see prices move in 2017?

As far as the availability is concerned there is no issue. If prices start going up, those who went out of market with production will also start coming back.  The actual impact also depends not just on the OPEC countries but also the non-OPEC countries and how they support. As per analysts no one is expecting it to go exceptionally high.  For refiners, it is not the question of the price of the crude,  there should not be volatility. As far as the cracks, the price difference between the crude and the finished products remain in the same range, the prices do not matter. Nobody is expecting crude prices to touch $100 range now. The only impact higher crude prices have on refiners is the working capital requirements go up and hence interest burden is higher.

With roughly a month behind us on with the demonetisation drive of old 500 and 1,000 notes, what has the impact being on the sales figures?

Cashless transactions have gone up substantially. Earlier it used to be 10%, now it has risen to more than 50%. We have signed up with multiple services providers with various wallet facilities, all the modes which are available we are tying up. We are also trying to experiment with the Aadhaar card system. We have requested all the banks to provide point of sales (POS) machines and more than one at all our outlets. We have 55,000 outlets.

Take us through your plans to expand refining capacities and what kind of investment is likely to go in?

In addition to the planned expansions at Mumbai, Bhatinda and Vizag refineries. Bhatinda refinery expansion will be commissioned sometime next year. For the Mumbai and Vizag refinery expansion likely to be commissioned by 2020, we are also looking at newer green-field options; the West Coast refinery is one such project.

On your planned refinery project at Barmer, news reports suggest there is a cost overrun due to delays. What are the hurdles delaying the project and at what stage is it?

We keep on evaluating various configurations for projects, different configurations would be available at different points of time due to the advent of technology and requirements. We will definitely involve whatever technology that is available at that point of time, there is no question of cost overrun, but that of returns. If we get higher returns out of a higher investment we may consider. There are no hurdles, oil prices have changed, technologies have changed, and requirements of crude quality have changed so we are re-working in the detailed feasibility report (DFR).

Will Cairn also become a partner in the Barmer project? Would HPCL look to bring in a strategic investor?

We are in discussion with the Rajasthan government to finalise the project, a strategic investor can come in later. (On bringing Cairn as a partner) Right now there are no such discussions, there are at present only two partners- HPCL and the Rajasthan government.

What is the status for raising overseas bonds? Will you consider Masala bonds?

We have an approval for one year and we are also looking at options like the Masala bonds.