 "H Shankar")
H Shankar took charge as managing director (MD) of Chennai Petroleum Corporation Ltd (CPCL) in April this year. Shankar's elevation comes amid the Indian Oil Corporation (IOCL) arm's plan to foray into the fuel retail business and line up expansion plans. Shankar talks with Shine Jacob in Chennai about CPCL's roadmap. Edited excerpts:
Your parent, IOCL, is already strong in the marketing segment with the largest number of fuel outlets. Then why are you foraying into the retail business?
CPCL is a standalone refinery, and hence, the crude price uncertainties impact profitability, leading to a drastic up-and-down scenario. We have to insulate ourselves against crude uncertainties, and are looking to foray into the marketing domain. This will be risk mitigation for companies like us. Secondly, any company's visibility comes when it is in the public domain. When we are in our diamond jubilee this year, we need a kind of visibility also. We have taken a licence for around 300 outlets, and the outlets will be spread pan-Indian. To start with, it will be across Tamil Nadu, Kerala, Pondicherry, Karnataka, Maharashtra, Uttar Pradesh, Telangana, Goa, Gujarat, Haryana, and Andhra Pradesh. Every oil marketing company has a hospitality agreement to source fuel; we will also do the same in other parts. We want to kickstart everything before December-end.
How much investment are you planning for this?
We will be investing around ₹400 crore for this. We will have our own brand, our own logo, and our own service concept also to build a flavour of Chennai Petroleum. We want to project ourselves as the jewel of Tamil Nadu and the pride of the nation. With this budget, dealer-owned dealer-operated outlets will be significant in number. In key locations, company-owned company-operated outlets will be available at strategic locations. We will reveal the retail brand name very soon.
What are your expansion plans?
Our capacity has been at 10.5 million tonnes per annum (MTPA) for quite some time now. The refinery configuration has been planned right from the beginning by incorporating lube oil base stocks and wax in addition to fuels. Within the existing configuration, we are looking for expansions like lube oil base stocks, propylene, and microcrystalline wax. Simultaneously, we are working on plans to increase the capacity of the refinery to 14 MTPA. A consultant will look at the potential available for this, as upstream augmentation may also be required. Now, we are venturing into higher grade lube oil base stocks (Groups 2 and 3), mostly imported now. We will be adding around 200–250 kilo tonnes per annum (KTPA) of these, as an import substitution, at an investment of ₹1,600 crore. This has already got approval from the parent company. We will be seeking the final clearance from the government. After clearance, we will float tenders and complete the project in 31 months.
There were concerns for insurance companies regarding the participation of National Iran Oil Company (NIOC) in CPCL. How are you seeing this?
NIOC is the founding member of our company and has a 15 per cent stake. During the last year, we sorted out all the issues with regard to higher insurance premiums. In fact, now our premium is less than our peers. This was achieved by creating awareness about all our promoters among the stakeholders.
What is the status of the planned Nagapattinam refinery?
This project is envisaged as a JV with CPCL having a 25 per cent interest in the project, while the remaining will be with IOCL. We wanted to come up with a 9 MMTPA refinery and petrochemical project. We are now reviewing the configuration and will do some additional petrochemicals in the beginning phase itself. Then we should be able to make it much more viable. We are trying to work around the initially planned investment numbers of ₹36,000 crore. We have close to 1,300 acres of land in Nagapattinam. We are discussing the new plans with the Ministry of Petroleum and the Tamil Nadu government as well.
Your gross refining margin (GRM) was low at $3.22 per barrel in Q1. How are you planning to bring it back on track?
During Q1, we performed exceptionally on physical parameters with over 110 per cent capacity utilisation, lowest fuel and loss, and highest distillate yield. However, due to crude fluctuation, our overall GRM was low. As a standalone refiner, the crude and product prices impact the bottom line during this huge fluctuation which was visible in the first quarter. However, the situation has improved in the second quarter and we are constantly doing well on physical performance. With this, we have set our expectations high. We are targeting ₹1 trillion revenue in the next few years.
What are your plans regarding green hydrogen and used cooking oil?
We are doing projects on green hydrogen. According to the government roadmap, 10 per cent of our hydrogen will be substituted by green hydrogen by 2030. In phase I, we have initiated action for 2 per cent to be commissioned by 2027. In 2024, we did a trial run on sustainable aviation fuel (SAF) using used cooking oil. Then samples were shared with agencies and got certified. We are waiting for the final clearance. We have 90 per cent hardware in place and will be ready with the plant by next year to produce SAF on a consistent basis. We are trying to do carbon dioxide capturing through a 400 tonnes per day (TPD) plant.
