INTERVIEW: India's HPCL eyes refining capacity growth, flexible crude sourcing strategy

State-run Hindustan Petroleum Corp. Ltd. is poised to expand refining capacity, strengthen fuel logistics, and widen its fuel retail presence, while progressively diversifying its portfolio into natural gas, biofuels, and renewables in a bid to play a key role in India's energy transformation, its chairman and managing director Vikas Kaushal said in an interview.

With India projected to account for the largest share of incremental global oil demand over the next 10 years, HPCL is aspiring to drive digital transformation across refining and marketing through technology, AI-enabled refining and smart fuel retail networks, he added.

"Our vision is to evolve into a future-ready integrated energy player, balancing growth in conventional energy with accelerated investments in clean and sustainable energy, and aim to make energy consumption more efficient, personalized, and environmentally responsible," Kaushal told Platts, part of S&P Global Energy.

On its oil import strategy, HPCL is moving towards a crude sourcing model which optimizes the term and spot contracts, as refinery technology upgrades and expansions are creating bandwidth to process a wider array of feedstocks and take advantage of a market flush with supplies, he said.

As new shipping and trade flow lanes open, the move is part of a strategy among state-run refiners to rebalance their imports to ensure flexible supplies, optimize refining margins, and cater to upgraded refineries that can handle more of the heavier crudes, he added.

"By gradually increasing the share of spot contracts, it's easier to capture the upside from temporary discounts and arbitrages," Kaushal said.

This buying approach is different from the traditional approach of importing 80% of the crude under term contracts and 20% from the spot market until a few years ago, he added.

"This change towards a more flexible mix ensures that while traditional ties remain robust, India's oil security is strengthened through diversity, resilience, and preparedness for future disruptions," he said. Currently, the HPCL crude basket consists of more than 170 imported crude grades produced in nearly 40 countries across the globe.

Refining landscape

Kaushal said HPCL's overall refining capacity -- including joint venture refineries -- is set to expand to 45 million mt/year from the current 36 million mt/year, with the execution of the HPCL Rajasthan Refinery Ltd. (HRRL) project. The complex is jointly built by state-run Hindustan Petroleum Corp. and the Rajasthan government, with equity stakes of 74% and 26%, respectively.

HRRL, with a capacity of 9 million mt/year, will have a petrochemical intensity of 26% and a Nelson Complexity Index of 17. The refinery is expected to mainly produce Euro 6-grade high-speed diesel, gasoline, and value-added petrochemical products, such as polypropylene, linear low-density polyethylene, high-density polyethylene, benzene, butadiene and toluene, Kaushal said.

"HRRL is in the advanced stage of completion. India's petrochemical demand growth is structurally stronger due to low per capita consumption compared to global averages. HPCL's strategy is to integrate refining with polymers and aromatics so that every barrel yields more margin-accretive molecules," Kaushal added.

Kaushal said HPCL is also investing in bottom-upgradation and integrating refineries with green and low-carbon fuels to reduce emissions and operating costs.

"Our Vizag refinery capacity has been enhanced to 15 million mt/year. The residue upgradation facility is in an advanced stage of completion. This will help to enhance middle-distillate yields and add $2-$3/b to gross refining margins. The secondary units are being brought online -- supporting slate optimization and naphtha/propane balance for petrochemical integration," he said.

HPCL's Mumbai refinery has already been integrated with natural gas, while green hydrogen usage is being planned for the Vizag refinery, Kaushal said.

"We have also deployed AI, advanced process control systems, and digital twins to enhance predictive maintenance, reduce downtime, optimize energy use, and reduce flaring," Kaushal said.

Kaushal said while the global narrative is moving towards decarbonization, India's reality is somewhat unique, as per capita energy consumption is still less than one-third of the global average. Therefore, as India industrializes, oil demand would continue to grow strongly for at least the next two decades.

"Oil will remain vital for transport, aviation, and petrochemicals. But we recognize the shift towards cleaner energy. Recognizing this, HPCL is channeling revenues from these operations to fund growth in biofuels, hydrogen, renewables, and EV infrastructure," he added.

Gas and renewables

On natural gas, HPCL's strategy is guided by the government's vision to raise natural gas's share in India's primary energy mix, Kaushal said. A key enabler will be the 5 million mt/year Chhara LNG import and regasification terminal, strengthening natural gas availability and providing optional sourcing. HPCL is expanding natural gas pipeline infrastructure through a joint venture route. The construction of over 3,800 km of natural gas pipelines is also under various stages.

On city gas distribution, HPCL and JVs hold authorizations in 25 geographical areas across 14 states, accelerating the expansion of piped natural gas for homes and industry and compressed natural gas for transport, Kaushal said.

"We have also started a few LNG dispensing stations for long-haul trucking. HPCL, along with its JVs and subsidiaries, has established more than 800 CNG stations and has over 800,000 PNG connections. In addition, CNG dispensing facilities have been set up at more than 2,000 retail outlets," Kaushal said.

He added that the company was poised to achieve the 20% ethanol blending target. HPCL is also advancing its compressed biogas projects and evaluating sustainable aviation fuel pathways with partners. A 7.4 kiloton/year triglyceride to sustainable aviation fuel plant using used cooking oil is in progress at the Vizag refinery. HPCL is also developing a five kiloton/year green hydrogen plant at its Vizag refinery under the build–own–operate–transfer model.