Indian Oil prioritizes petrochemicals investments, cautious on term Russian crude deals

Indian Oil Corp. is looking to invest up to $11 billion over the next four-five years to expand its petrochemicals capacity as part of a business strategy in a shifting energy landscape, where demand for transport fuels could witness a slowdown, company officials said.

The expansions IOC is pursuing at its refineries would help in raising India's biggest state-run refiner's Petrochemical Intensity Index to as high as 15% by 2030 from 6%, officials added.

"The next phase of expansion, after the current capacity expansion in the refineries gets completed, we will go for, in a very big way, for petrochemicals expansion," Chairperson AS Sahney said April 30 while releasing the company's annual financial results.

IOC recently signed an agreement with the state government in Odisha to set up a petrochemicals complex at Paradip, which would be its largest investment at a single location. This will help expand IOC's existing 15 million mt/year refinery capacity at Paradip.

The complex will have a dual-feed cracker and associated downstream units for producing a range of products, including phenol, polypropylene, isopropyl alcohol, high-density polyethylene, linear low-density polyethylene, polyvinyl chloride and butadiene.

Key priority

Raising the petrochemicals intensity is the top priority for Indian refiners pursuing ambitious expansion strategies, government and refining officials said, as the sector is set to receive nearly $87 billion in investments over the next decade and account for more than 10% of the global petrochemicals sector growth.

A recent parliamentary committee report of the petroleum ministry recommended that India must expand its refining capabilities by diversifying the product mix and increasing focus on petrochemicals, biofuels and sustainable aviation fuel, to help refineries adapt to changing market demand and reduce dependence on traditional petroleum products.

Of the several projects India is pursuing, about 58% of the increase is expected to come from brownfield expansions over the next three years, while the remaining would come from greenfield projects, according to S&P Global Commodity Insights' analysts.

Key projects include IOC's expansion of its Panipat, Paradip, Gujarat and Barauni refineries to raise their capacities and integrate petrochemicals units.

"While Indian refiners are betting high on petrochemicals, the industry is today seeing an oversupplied market. Even Reliance Industries Limited, the largest producer of petrochemicals in India, in their Q4 report, has admitted that significant demand and supply imbalances in downstream chemicals markets have led to multiyear low margins," said Swathi Seshadri, energy specialist, petrochemicals, South Asia, at the Institute for Energy Economics and Financial Analysis.

Lower margins, crude imports

IOC's gross refining margin for the fiscal year ended March 31 fell 60.2% year on year to $4.80/b, company officials said, reflecting lower returns from cracks in Asia's third-largest economy. It had posted a GRM of $12.05/b in the previous fiscal year.

Refinery throughput at nine stand-alone refineries fell 2.4% year on year to 71.56 million mt in 2024-25 (April-March). In 2024-25, IOC's domestic sales rose 3.3% year on year to 95.38 million mt, while exports fell 6.1% on the year to 4.92 million mt in 2024-25.

The company's nine stand-alone refineries have a capacity of 70.25 million mt/year, accounting for 27.36% of India's total refinery capacity. The refiner's product portfolio includes gasoline, diesel, naphtha, jet fuel, petrochemicals and lubricants.

In the fourth quarter, IOC posted a 1.5% rise in refinery throughput to 18.55 million mt while its domestic sales rose 3.6% year on year to 24.6 million mt and exports fell 13% on the year to 1.34 million mt.

Commenting on the crude oil import outlook following recent US sanctions and the emerging tariff scenario, Sahney said the company was treading cautiously before signing term deals for Russian crude.

"We are not in any active negotiations for any deal. But we are open to it. We are waiting and watching because every day things are changing. In these topsy-turvy conditions, I don't think it is prudent to go for a term deal with a new player," he said.