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India's IOC lifts run rates above 100% in Nov-Dec as demand shows signs of revival


IOC keeps run rates above 100% for two consecutive months

Refiners domestic sales up 10.5% on year in Q3, exports down

India's overall runs to grow 141,000 b/d in 2023: S&P Global

  • Author
  • Ratnajyoti Dutta    Sambit Mohanty
  • Editor
  • Adithya Ram
  • Commodity
  • Natural Gas Oil Petrochemicals

Indian Oil Corp. kept its crude runs above 100% in November and December 2022, helping the state-run refiner post a 4.6% year-on-year rise in throughput over October-December, a trend that could continue in the current quarter due to an uptrend in domestic demand post the pandemic.

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IOC said Jan. 31 that its total throughput over October-December was at 18.2 million mt, or 1.45 million b/d. Pipeline throughput also rose 6.3% on the year to 23.8 million mt, or 1.89 million b/d.

As domestic demand showed signs of steady growth, IOC recorded an average combined run of 104% for all its nine standalone refineries in December, compared with 101% in November and 99% a year earlier.

India's oil products demand rose 8.4% year on year to 219.2 million mt, or 4.7 million b/d, according to data from the Petroleum Planning and Analysis Cell of the oil ministry. Demand for diesel and gasoline rose 10.2% and 13.8% over January-December, respectively.

"Indian refineries are preparing for a strong revival in demand. There is a strong case for keeping run rates high," said an industry source who tracks the Indian oil market.

According to S&P Global Commodity Insights, India's average refinery runs stood at around 5.16 million b/d in 2022 but are expected to rise to 5.3 million b/d in 2023 on higher available capacity and healthy margins.

Domestic sales, exports

IOC's domestic sales rose 10.5% year on year to 23.2 million mt in Q3 (October-December 2022)as overall demand for transportation fuels increased after the summer rainy season.

However, overseas sales fell 31.3% on the year to 1.1 million mt in the third quarter of the current fiscal year (2022-23) as India restricted overseas sales of oil products through export duties on diesel, gasoline and jet fuels.

For the April-December period, IOC posted a 7.7% rise in its total refined throughput year on year to 53.2 million mt, while its pipeline throughput rose 14.4% on the year to 72.1 million mt.

Domestic sales rose 15.3% on the year to 67.7 million mt in April-December, while its overseas sales fell 15.9% to 3.7 million mt during the first nine months of the current fiscal year.

Its gross refining margin for the April-December period was $21/b, compared with $8.50/b in the same period the previous year. The core GRM for the nine-month period stood at $20.60/b. In Q3, IOC recorded a GRM of $12.93/b compared to $12.03/b a year earlier.

Lack of retail price revision

IOC reported a net loss of Rupee 18.17 billion ($222 million) over April-December, compared to a net profit of Rupee 181.62 billion ($2.22 billion) during the corresponding period in the previous year, mainly on account of lower marketing margins and higher exchange losses during current period.

India's state-owned refiners have stayed away from revising prices of gasoline, diesel and cooking gas since April 2022 despite a rise in costs due to high crude oil prices in an effort to keep inflation under control.

"Our key worry is the inability of the oil marketing companies to revise retail fuel prices in line with international product prices," said Sumit Pokharna, vice president at Kotak Securities Ltd.

IOC currently has a share of approximately 28% of India's refining capacity and operates nine refineries with a total capacity of 70.05 million mt/year.

With increasing demand for petroleum products, IOC is planning to expand the annual refining capacity to 107 million mt by 2025 with capacity expansion under implementation at Guwahati, Barauni, Gujarat, Panipat, Digboi and Cauvery Basin (CPCL) refineries.

IOC is also stepping up efforts to expand its petrochemicals portfolio as it prepares for a changing energy landscape. Company officials said diversifying into more downstream products would provide the company some kind of cushion in the foreseeable future if demand for transport fuels slows down.

According to company officials, IOC plans to invest Rupee 350 billion ($4.3 billion) towards projects that will utilize product streams from its existing refineries, thereby achieving better exploitation of the hydrocarbon value chain. PX-PTA and ethylene glycol projects at Paradip and an oxo alcohol project at Gujarat are the three major petrochemical projects under execution. The ethylene glycol project is scheduled for commissioning in 2022-23.