For the CEO of India's Nayara Energy, B. Anand, there are three key immediate priorities -- accelerating expansion of its retail fuel network, boosting presence in petrochemicals and crafting a crude strategy to ensure plentiful supplies of ultra heavy grades to its refinery.
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Register NowThe company is confident that the government's investor-friendly policies, New Delhi's strong relations with crude oil suppliers and a series of energy reforms in recent years will provide the required impetus to push growth in one of Asia's fastest growing energy markets, Anand told S&P Global Platts in an exclusive interview.
"Our retail push is quite exciting. We have grown our retail fuel stations to 5,300, making us by far the biggest in the private retail fuel space. We have a robust pipeline for future growth. We see ourselves reaching 7,000 outlets by the end of 2020 or early 2021," Anand said.
"But at the same time, we are going to look at the entire box. What was earlier perceived as retail fuel stations might change to retail energy stations to embrace the changing behavior of our customers," he added.
In 2017, Nayara, which was then called Essar Oil, closed a $12.9 billion takeover deal by Rosneft, Trafigura and United Capital Partners. As part of the deal, the consortium took over the 20 million mt/year Vadinar refinery, which has a complexity index of 11.8.
ROBUST OUTLOOK FOR PETROCHEMICALS
Earlier this year, Nayara spelled out its first big expansion strategy since the takeover by announcing its foray into petrochemicals. The company has signed agreements with the state government in the western state of Gujarat as part of its expansion plan to set up petrochemical units.
The proposed plan for the first phase of asset development for the Vadinar refinery entailed an investment of $850 million for setting up a 450,000 mt a year polypropylene plant and a 200,000 mt/year MTBE plant. The petrochemical units are expected to be completed by end-2022.
The proposed investment would contribute significantly toward the development of the Devbhumi Dwarka district, where the existing refinery at Vadinar is located.
"We are keen to go for more value addition. So petrochemicals is a big area of focus. How we get more into cracking -- that will be the first phase of growth for us -- recovering the polypropylene and setting up an initial base for the petrochemicals story. We want to grow our refining site to an integrated site," Anand said.
Already the third-largest polymer market in the world, India's petrochemicals demand is growing at about 10% a year, a rate expected to be sustained over the next decade on the back of growing urbanization and improving purchasing power, according to S&P Global Platts Analytics.
Combined polyethylene and polypropylene demand is expected to rise to 21.5 million mt by 2026 from about 10 million mt, and polyolefins consumption growth is expected to more than double to 15 kg/person per year by 2026, according to Platts Analytics.
Commenting on plans to expand the refining capacity, Anand said that Nayara would eventually look at doubling its refining capacity in the longer term, although no concrete plans had been firmed up yet.
"Our aspiration is to grow our refining site to a world benchmark site given the emerging demand patterns," Anand said. "India's energy requirements and GDP growth are something that go together. There is no reason why we should not leverage on this and increase our capacity."
Commenting on his vision of Nayara playing a bigger role in pushing cleaner forms of energy in the future, Anand said solar energy and biogas were some of the options.
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INSATIABLE APPETITE FOR ULTRA HEAVY CRUDES
Anand said mounting geopolitical and trade tensions had influenced the crude landscape, but the company was not facing any problems as far as crude sourcing is concerned.
"Ultra heavy crudes are something that we like and desire -- for example supplies from West Africa, Latin America and Canada. But at the same time, we have an asset that is robust enough and has the ability to digest several forms of crude. But the economics has to make sense," Anand said.
He added that Nayara was in a strong position to source plentiful crude as it had the ability to leverage on the strengths and the global footprint of its shareholders -- Rosneft and Trafigura.
"We are in discussions with many countries. We are in discussions with American suppliers on how we can get Canadian crude. We are in discussions with many Latin American countries, we are in discussions with SOMO and other Middle Eastern partners. We are trying to develop term contracts that would be mutually beneficial," Anand said.
He said that the recent economic slowdown in the country had not impacted the company's domestic oil product sales.
"Our product lifting has not slowed down because of an economic slowdown. Yes, we saw some impact because of the unprecedented rains during the monsoon season. But we expect sales to bounce back in the last quarter of 2019," Anand said.
-- Sambit Mohanty, sambit.mohanty@spglobal.com
-- Edited by Norazlina Jumaat, norazlina.jumaat@spglobal.com