Dear IndianOil Investors
My heartiest greetings to you on my personal behalf and on behalf of IndianOilPeople.
It is my pleasant duty once again to present to you the Integrated Annual Report ofyour Company for the financial year 2018-19 focussing on the performance highlights ofthe year and the high-growth agenda lined up for the future.
You will notice that like last year this year too we have followed the IntegratedReporting format focussing on the Companys six key capitals -- Financial CapitalManufactured Capital Human Capital Intellectual Capital Social & RelationshipCapital and Natural Capital.
Without an iota of doubt IndianOils strength as a successful enterprise stemsfrom its rich human capital. With a proud legacy of fuelling the growth of all segments ofthe economy for the past six decades the 33000-strong team of lOCians is gearing to playa leadership role in these exciting times as a new India rises on the global arena.IndianOil People take pride in being future-ready by continuously upgrading their skillsand capabilities.
Your Company has kept its promises to the nation since inception working forself-sufficiency and security in energy and related areas. Surmounting many challenges itachieved sustained growth in sync with the nation to become Indias leading MaharatnaPSU and one of the largest commercial undertakings.
As the fastest growing economy in the world India requires access to abundant energydelivered in new and affordable ways. IndianOil is fully geared for the challenge. Over50000 customer touch points of your Company spread across every nook and corner of thenation provide energy solutions to a billion-plus customers to keep India on the move. Andwe are further expanding our refining capacity supply & distribution channels andmarketing network in line with the growing domestic demand.
Today as a low-carbon future beckons on the horizon IndianOil is engaged in buildinga future full of clean and green energy. We are leading the industry in an unprecedentedquantum leap from BS-IV fuels to a world-standard BS-VI compliant regime by April 2020. Inline with global trends we are investing in a big way in Indias emerging naturalgas economy with new products and offerings for diverse customer groups. We are deeplycommitted to the sustainability principle and are progressively integrating alternativeenergy and renewables in our operations as well as in our expanding bouquet of offerings.
Global and Indian economic scenario
Global economic growth slowed down to 3.6% in 2018 from 3.8% in 2017
Growth in emerging economies also decelerated to 4.5% in 2018 from 4.8% in 2017
Economic deceleration due to rising trade protectionism US-China tradetensions etc.
Indian economy grew by 6.8% in 2018 fastest growing large economy
Growth propelled by private spending industry manufacturing and capitalformation
Retail inflation (CPI) slowed down to 3.41% lowest in last seven years
The fount of your Companys future-readiness is its world-class R&D Centrewhich gives shape to products and technologies of the future. Its rich repository ofintellectual capital has now crossed a major milestone of over a thousand patents.
The hydrocarbons sector has contributed enormously to global economic progress over thelast century. Today however it is facing competition from new and emerging energyoptions and technologies. The 21st century is definitely going to witnesseconomies based on clean fuels and low-carbon options will get progressively entrenchedin the energy mix with policy backing. It is time for the oil & gas corporates toonce again reinvent themselves and continue to play a lead role especially in those partsof the world like India where primary energy consumption continues to register a dramaticrise.
The need of the hour is to integrate new technologies like digitalisation ArtificialIntelligence Internet of Things etc. in all segments of the industry together withinnovative process technologies to provide efficient clean and green energy solutionsfor all customer segments and businesses to ensure that nations economic growth isnot hampered in any way.
The domestic refining sector is attempting a very ambitious project of leap-froggingfrom BS-IV to BS-VI fuels regime. Indian refiners are on track to usher in the cleanestautomotive fuels across the country from April 2020. In fact IndianOil refineries havecompleted over 90% of the BS-VI projects and should be ready to supply the upgraded fuelswell within the stipulated timeline. The success of this ambitious initiative will furtherenhance Indias credentials as a world-class refining hub in Asia with the fourthlargest refining capacity (249.4 MMTPA) in the world.
The country has robust supply & distribution channels a 30000-km network of oil& gas pipelines about 24000 LPG distributors and over 64600 fuel stations withanother 55000 in the offing.
Road to reform: Indias fuels upgradation programme
BS-IV fuels implementation across India: Completed by April 2017
BS-VI fuels implementation in NCT: Completed by April 2018
BS-VI implementation in NCR and Agra: Underway from April to Oct. 2019
BS-VI fuels implementation across India: To be completed by April 2020
Estimated investment of OMC refineries on BS-III to BS-VI conversion projects:Rs. 53500 crore
Global oil & gas scenario
Global primary energy consumption grew by 2.3% in 2018 as against 1.9% in 2017
Oil demand grew by 1.2% with natural gas as the fastest growing fuelaccounting for 44.5% of the increase in total energy demand
Brent crude oil prices averaged $71.1 per barrel in 2018 registering asignificant increase of $16.7 per barrel over 2017
Indian oil & gas scenario
Indias petroleum products consumption in 2018-19 was 211.6 MMT with 2.7%growth over 2017-18
Petrol consumption rose by 8.1% diesel by 3% and LPG by 6.8%
Indias refining capacity stood at 249.4 MMTPA at the end of 2018-19second largest in Asia
Crude oil imports rose by 2.8% to 226.6 MMT
Indian crude oil basket averaged at $69.8/barrel in 2018-19 23.8% higher than2017-18 level
INDIANOIL: STRENGTHENING CORE BUSINESS
Your Companys performance in the financial year 2018-19 has been exceptional interms of both operational and financial parameters. Besides posting all-time high recordsin the three major parameters - sales as well as refineries and pipelines throughputs -the Company crossed the Rs. 6 lakh crore milestone in turnover for the year with handsomeprofits. With numero uno position in the downstream petroleum sector the Companycontinued with its legacy of putting the nation first and providing viable fuel solutionsto diverse customer groups while at the same time strengthening its new verticals ofE&P Petrochemicals and Gas.
Your Company which caters to nearly half of Indias petroleum consumptionregistered its best ever sales volumes in 201819. In the backdrop of Indias primaryenergy demand outpacing global demand rising infrastructure projects and a surge incommercial vehicle sales led to record high diesel consumption in 2018-19. Matching thispace of growth IndianOil maintained its place at the top and did well in institutionalsales too registering increase in market share in all products. Similarly yourCompanys time-tested commitment and service to the defence forces and the securityeco-system of the nation have won many accolades.
IndianOil: Fuelling a billion dreams
IndianOils turnover crossed Rs. 6 lakh crore milestone in 2018-19
Sales including exports in 2018-19: 89.89 MMT
Exports in 2018-19:5.24 MMT
Number of customer touch-points crossed the
Total No. of fuel stations automated: 27700
New heights in aviation fuelling with 116 AFSs.
As the industry leader in retail sales IndianOil completed automation of itscountrywide fuel stations network during the year to enhance Q&Q (quality &quantity) assurance to its customers. The ambitious Project Dhruva initiativecurrently underway encompasses new technologies and services to achieve greater efficiencyin operations and a superior buying experience for your Companys retail customers.
LPG for all: Clean fuel better life
Total LPG households in India: 26.5 crore
PaHaL households receiving subsidy in their bank accounts: 24.5 crore
PMUY target: Deposit-free LPG connections to 8 crore BPL households by 2020
PMUY target achieved till now: 7.2 crore households
LPG penetration achieved: Over 94%
New Indane connections released in 2018-19: Over 2 crore highest in a year
IndianOils LPG sales surpassed 1 million tonnes a month
Over the last five years your Company has had the privilege of spearheading megaschemes like PaHaL LPG subsidy scheme #GiveItUp campaign and PMUY(Pradhan Mantri Ujjwala Yojana) that have made clean energy accessible acrosssocioeconomic divides.
IndianOil has been extending the reach of its Indane Superbrand to morehouseholds every year. Leading the push for clean energy the Company released the highestever number of new LPG connections in a year in 2018-19.
SERVO another IndianOil Superbrand achieved top position in the retail lubessegment for the first time in recent years besides registering impressive growth inoverall finished lubes. Your Companys aviation fuelling business too gained higheraltitude with addition of nine more Aviation Fuel Stations (AFS) during the year.
Your Company exported 5.24 million tonnes of products in 2018-19. Product exports toNepal rose from 2.1 to 2.4
million tonnes and export of Indane Nanocut (additised LPG suited for high-temperatureindustrial applications) to Bangladesh commenced during the year. IndianOil opened a newrepresentative office in Nepal in addition to existing offices in Myanmar and Bangladeshand full-fledged subsidiaries operating in Sri Lanka Mauritius Singapore and UAE.
IndianOil refineries excelled in all major physical parameters and achieved a recordcombined crude oil throughput during 2018-19. The refineries also registered the best evernumbers in Specific Energy Consumption (MBN) Energy Intensity Index (Ell) and Fuel &Loss.
A world-scale Polypropylene (PP) plant was commissioned at Paradip Refinery in Feb.2019 to act as the mother unit in nurturing the downstream plastics processing industry inthe region. Work has also commenced on a Monoethylene Glycol (MEG) plant at ParadipRefinery which is envisaged as a key driver for the textiles industry in the regionespecially for polyester fibre. Two other major projects in progress are: capacityexpansion of IndianOils Barauni Refinery and an ATF production unit using thein-house INDJet technology of IndianOils R&D Centre.
The energy for Indias rise
Refineries throughput in 2018-19: 71.82 MMT
Major projects commissioned during 2018-19:
PP plant at Paradip Refinery: 680 KTA
Major projects commenced during 2018-19:
MEG plant at Paradip Refinery: 357 KTA
Barauni Refinery expansion from 6 to 9 MMTPA
ATF production unit using IndJet technology
4.6 MMT term contracts concluded for crudeoil from USA
For the first time your Company concluded term contracts for sourcing crude oil fromUSA during the year besides enhancing its capabilities to process crude oil grades from awider and cheaper basket with flexibility for sourcing additional volumes in termcontracts to manage contingencies.
During 2018-19 IndianOils crude oil & product pipelines clocked the highestever combined throughput setting a new record for the fifth consecutive year. Thecountrywide pipelines network provides immense competitive advantage to the Company in thenew era of digitally-aided logistics.
Pipelines: Arteries for energy flow
Pipelines throughput during 2018-19: 88.53 MMT
Pipelines length commissioned in 2018-19: 950 km
Major among them:
Paradip-Haldia-Durgapur LPG pipeline: 516 km
Jaipur-Panipat naphtha pipeline: 344 km
Total length of pipelines network: 14231 km
Combined throughput capacity: 94.2 MMTPA for liquid pipelines and 21.69 MMSCMDfor gas pipelines
Major pipeline projects underway:
Kandla-Gorakhpur LPG pipeline: 2757 km
Indradhanush gas grid in the northeast: 1656 km
Work has commenced on two major pipeline projects with joint venture (JV) partnersduring the year 2018-19. The Kandla-Gorakhpur LPG Pipeline on completion will be thelongest LPG pipeline in the world and will directly feed 22 bottling plants en route. Theproject will be executed by a JV of IndianOil BPCL and HPCL. IndianOil has also formed aJV Indradhanush Gas Grid Ltd. with ONGC OIL GAIL and NRL to develop a gas pipelinesgrid connecting all the State capitals of the northeast.
Other than its City Gas Distribution (CGD) projects and those with JV partners 17pipeline projects of the Company with a combined capex of about Rs. 24000 crore are invarious stages of implementation. On their completion in the next three yearsIndianOils pipelines network will expand to about 21500 km.
Research & Development
IndianOils R&D Centre is shaping into a game-changer in the ensuingcompetitive scenario as your Company adds new technologies products and services to itsbouquet of offerings.
The year 2018-19 saw your Company further build upon the confidence reposed by itscustomers by developing and commercialising products and process technologies that caterto the changing industry needs.
Inventing the future with world-class R&D
Over four decades of R&D expertise in lubricants formulation refineryprocesses pipeline transportation catalysts & additives alternative fuels etc.
Over 1000 patents bled till date; 100 to 120 patents per annum in the last fiveyears
Over 100 new lubricant formulations developed in 2018-19 87% commercialised
State-of-the-art Product Applications Development Centre for polymers business
Support to start-ups in energy and social innovation sectors
Adding to the Companys intellectual wealth the R&D Centre crossed a stellarmilestone of filing its 1001st patent recently. IndianOils IP(Intellectual Property) portfolio currently comprises 794 active patents of which 542patents were granted abroad and 252 in India. Your Company has a higher commercialisationrate for its patents than the global average. Several of the quality upgradation projectsimplemented at IndianOil refineries for production of BS-VI fuels are based on deepdesulphurisation isomerisation and dimerisation technology patents developed in-house.
The R&D Centre also commissioned a 5 tonnes-per-day plant at Faridabad forconverting organic waste to biogas with a methane content of over 80% based on a novelbio- methanation technology developed in-house. The Centre is also commercialising a 2Gethanol process together with a novel enzyme which reduces ethanol production costs by30%.
Your Company incurred a capital expenditure of Rs. 28200 crore in 2018-19; the capitaloutlay for the current fiscal is Rs.25083 crore.
BUILDING NEW BUSINESSES
Besides making significant investments in upstream assets and petrochemicals which aremaking significant additions to the Companys business in terms of equity oil andprofitability IndianOil is integrating natural gas and renewables in its energy valuechain in a big way to be ready for a low-carbon future.
Exploration & Production
With a balanced portfolio of producing discovered and exploration assets your Companyachieved significant progress in terms of 2P reserves production volumes equity oil andrevenues during the year 2018-19.
IndianOil currently has participating interest (PI) in 10 domestic and 12 overseasE&P assets spread across 10 countries. The year 2018-19 was marked by acquisition ofPI in E&P assets in Oman Abu Dhabi and Israel.
Heading upstream for energy security
Balanced portfolio of E&P assets; 10 in India and 12 overseas
Overseas assets spread across 10 countries: Canada USA Russia Venezuela AbuDhabi Oman Libya Nigeria Gabon and Israel
Strategic tie-ups with over 20 reputed national & international energycorporates
Acquired participating interest in E&P assets in Oman Abu Dhabi and Israelin 2018-19
IndianOil is fast evolving into a petrochemicals major and has registered a robust11.4% growth in sales in 2018-19. Backed by world-scale plants and world-class technologyIndianOils PROPEL brand petrochemicals cover over 80% of a broad spectrumapplications in plastics and are exported to over 70 countries.
Your Company has invested heavily in this vertical over the last two decades incurringa capex of over Rs. 25000 crore
Propelling growth with petrochemicals
Petrochemicals sales in 2018-19: 2.64 MMT
Production capacity enhanced to 3.15 MMT
Major ongoing projects:
MEG plant at Paradip
Expansion of Naphtha Cracker at Panipat
New projects envisaged till 2023-24
Acrylic acid/Oxo-alcohol project at Gujarat
PX/PTA project at Paradip
Petcoke gassification in Paradip
Textiles project in Eastern India
PBR project at Panipat
in major petrochemical projects such as LAB plant at Gujarat PX/PTA plant and NaphthaCracker at Panipat and PP plant at Paradip. Among the major ongoing projects are MEGplant at Paradip and capacity expansion of Naphtha Cracker at Panipat.
IndianOil has firm plans to invest Rs. 26000 crore on various ongoing and newpetrochemical projects till 202324 to consolidate business. These projects include revamp/augmentation of existing capacities and new projects as well as equity investment in HindustanUrvarak & Rasayan Ltd. (HURL).
The IndianOil Board has also accorded approval for a Plastics Park at Paradip through aJV with Industrial Development Corporation of Odisha. Similarly Board approval has beenobtained for land procurement and finalisation of a JV partner for a textiles project atBhadrak in Odisha. Industrial Promotion & Investment Corporation of Odisha hasallotted 60 acres of land for the textiles project.
Natural gas is transforming into a major businessline for your Company and the recentcommissioning of the state-of-the-art LNG import terminal at Ennore has given it a bigboost.
As the second largest player in this growing segment IndianOil is buildinginfrastructure and retail networks to reach out to all user segments:industry-transport-homes-commercial establishments.
Fuelling the future with natural gas
Natural gas sales in 2018-19: 3.96 MMT
Capacity of Ennore LNG terminal: 5 MMTPA
Geographical Areas (GA) won by IndianOil on its own after 9th and 10thround of CGD bidding: 17
GA won in partnership with JVs: 23
Total tally of GAs with IndianOil: 40
Investments in CGD over next 8 years including equity contribution inJVs: Rs.10000 crore
With a portfolio of about 60 R-LNG customers besides supplies to the Companysown refineries at Mathura Panipat and Koyali IndianOil registered a 2.6% growth innatural gas sales in 2018-19.
Besides being a JV partner in Indradhanush natural gas pipeline grid in the Northeastyour Company is investing in two more joint ventures that are laying three gas pipelinesof a combined length of 3760 km covering nine States.
Your Company is pursuing an ambitious agenda in city gas distribution (CGD) covering 40Geographical Areas (GA) on its own as well as with reputed joint venture partners.IndianOils investment on development of CGD networks in the next eight years islikely to be about Rs. 10000 crore.
Your Company is fully aligned to the countrys aspirations to transit to cleanenergy and has planned Rs. 25000 crore investment in green energy projects. Besides atarget to scale up its solar energy and wind-power portfolio to 260 MW by the year 2020IndianOil has initiated diversification into alternative renewable energy andbio-fuels-2G &3G ethanol waste-to-energy and compressed bio-gas (CBG).
Your Company is spearheading the Governments innovative SATAT (SustainableAlternative Towards Affordable Transportation) initiative launched in 2018 as a waste-to-wealth measure. With similar calorific value and other properties CBG has thepotential to replace CNG as an affordable fuel in automotive industrial and commercialuses by conversion of biomass or any kind of organic waste. In fact the evolving CBGprogramme will go a long way in reducing Indias dependence on crude oil imports.
Green energy for a green future
Rs. 25000 crore investment planned in alternative energy and sustainabledevelopment projects
Solar energy and wind-power portfolio to be scaled up from 212 MW to 260 MW bythe year 2020
LOIs issued for 96 plants to supply 782 tonnes per day of CBG under SATATinitiative
5000 more Company fuel stations converted to run on solar energy in 2018-19
Cumulative installed capacity of Companys 14000+ solar-operated fuelstations: 77 MW
Your Company is implementing an ambitious Rs. 2 lakh crore investments plan in the next5-7 years to evolve into a future- ready corporate that provides comprehensive energysolutions to diverse user groups in an exciting phase of energy transition and technologydisruptions.
Besides focus on refinery expansions new technologies for clean fuels & enhancedoutputs and refinery-petrochemicals integration IndianOil is aggressively leveraging itsR&D expertise to move into horizon technologies like 2G & 3G ethanol bio-fuelscoal gasification H-CNG Hydrogen fuel cells battery technologies etc. Thesetechnologies along with cleaner fuels and higher engine efficiencies can offersustainable solutions to todays energy challenges.
Keeping this in view your Company is pursuing a number of new technologies and/orpilot studies in the areas of refinery processes petrochemicals & polymersalternative energy and bio-energy in collaboration with reputed partners in India andabroad.
Going closer to consumption centres and consumers in an economical andenvironment-friendly manner has been the philosophy behind IndianOils pipelinenetwork expansion. And as the Company grows its LPG and LNG verticals rapidly its gaspipelines network too is set for phenomenal growth.
Your Company aspires to be a major player in natural gas with leadership in the R-LNGsegment and is taking steps to enhance its share in LNG sourcing import terminalscrosscountry pipelines city gas distribution networks and bulk supplies by road-tankers.
Your Company is targeting its own equity oil & gas of 7 MMTPA from its upstreamportfolio by the year 2023-24 from 4.39 MMTPA currently and is continuously on thelookout for acquisition of stakes both in E&P companies as well as individual assets.
You may be aware that your Company had incorporated Hindustan Urvarak & RasayanLtd. (HURL) in June 2016 as a joint venture with Coal India Ltd. and NTPC for revivalof three fertiliser plants at an estimate cost of Rs. 21000 crore. Work is progressing ata fast pace on the three plants located at Gorakhpur (Uttar Pradesh) Sindri (Jharkhand)& Barauni (Bihar) and commercial production of neem-coated urea from all the threeplants is likely to commence in the first half of the year 2021.
In step with the times
Your Company has a remarkable legacy of growing in step with the times. A certified GreatPace to Work IndianOil is continuously improving its human eco-system to achievecross-divisional synergy and a solutions-oriented approach. The human resource capital isbeing leveraged in a big way to
make your Company a truly learning organisation with access to both natural and formaldevelopmental opportunities for all. E-learning is being mainstreamed across theorganisation and lOCians across functions are being actively encouraged to acquire newknowledge and skills to be active partners of a 21st century organisationfocussed on growth opportunities of the future. With the enterprise getting increasinglyyounger new and innovative learning models are being deployed to enable lOCians tocontinuously improve products and processes.
Your Companys business strategy has always been in tune with technology andinnovations. We have installed the best of automation processes and the latest safetysystems at our installations. Optimised operations and logistics smart terminalsautomated fuel supply points and a dedicated held force are helping us lead thecompetition. We have now embarked on digital transformation of the organisation to serveand sustain the trust of our billion-plus customers across 50000+ customer touch-points.
Your Companys 33000-strong team represents a formidable array of talent andskills technical and managerial expertise demographic diversity and a can doattitude infused with the core values of Care Innovation Passion and Trust.This signifies a very bright future for IndianOil. The idea is to create an eco-system ofgrowth for all-round excellence in our pursuit to create happy customers throughhigh-quality products and services delivered efficiently.
Generations of lOCians have had one thing in common - a steadfast commitment to theidea of India and IndianOil as The Energy of India.' As we complete 60 yearsof our operations I can confidently say that the best of IndianOil has just begun.
I look forward to your support and encouragement for the journey ahead.