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India's BPCL looks beyond oil to ensure not all eggs are in one basket


Aiming massive investments to improve efficiency of refineries

Biofuels, petrochemicals, hydrogen areas of strategic focus

Refiners spread the risk despite robust oil outlook: Platts Analytics

India's Bharat Petroleum Corp. Ltd. aims to pump billions of dollars to expand footprint in electric mobility, biofuels, petrochemicals and hydrogen, a move analysts said is an effort to look beyond oil refining and marketing to ensure its product portfolio is well spread out to meet a changing energy landscape.

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The plan by the state refiner -- having a combined refining capacity of 37 million mt/year and a distribution network of over 19,000 retail outlets -- to invest $13.5 billion over the coming years will help the firm shed its image as a refiner and transform itself to become an integrated energy company.

"Although Indian oil demand will continue to grow in coming years, refiners want to increasingly prepare for a future energy scenario to ensure that the risk is evenly spread out and not over-dependent on a particular product or segment," said Kang Wu, head of global demand and Asia analytics at S&P Global Platts.

As part of its future investment plans, the company has pledged a substantial part to improve efficiency of its refineries and boosting fuel marketing infrastructure, a sign company is preparing itself for the future, keeping in mind that demand for both fossil fuels would still continue to grow over the next few decades despite an acceleration of the energy transition process.

According to a recent company statement, BPCL is accelerating its focus in new business segments for sustainable growth, thereby mitigating risk in oil & gas space.

"The investment will help BPCL prepare for the future where conventional fuels and zero-carbon mobility in form of EVs and hydrogen will co-exist, while giving it the option to convert a greater degree of crude oil directly into high-value petrochemicals," said BPCL Chairman Arun Kumar Singh.

As part of the new investments, BPCL is also planning to convert around 7,000 conventional retail outlets into energy stations providing multiple fueling options like petrol, diesel, flexi fuels, EV charging facility, CNG and eventually hydrogen in the medium to long term.

"Globally, capital is fleeing fossil fuels and moving towards more profitable clean energy. Accelerating this trend would allow India to de-carbonize its energy sector and channel investment towards a green recovery to build a more sustainable economy," Vibhuti Garg, lead India energy economist and Saurabh Trivedi, research analyst, at the Institute for Energy Economics and Financial Analysis, said in a recent research report.

Going further downstream

BPCL commissioned a Propylene Derivative Petrochemical Project (PDPP) at Kochi refinery in February 2021 that would help the company make inroads into the production of niche petrochemicals.

"We will increase our presence in petrochemical landscape, integrating with our refining activity to diversify and hedge," the company said.

BPCL is growing a growing list of Indian refiners who are planning to make a big push into petrochemicals.

Indian Oil Corp. Chairman Shrikant Madhav Vaidya said recently that the refiner aims to enhance its petrochemical integration to 15% of petrochemicals intensity index, or PII, by 2030, from less than 5% currently.

Even Alois Virag, CEO of Nayara Energy, said product diversification would be crucial in order to make the company's refinery more resilient to any long-term changes in demand patterns.

With India poised to reduce its greenhouse gas emissions substantially by 2030 by increasing the share of natural gas in overall energy consumption from 6.2% to 15%, BPCL said it was looking to play an active role in India's gas economy.

The company is pushing ahead with its plans for city gas distribution in 37 geographical areas.

"Our presence in CNG stations is going to grow manifold in the next few years. We also have notable presence in LNG business and have extensive plans to scale up this business and set up requisite infrastructure and filling stations. A range of initiatives that will deliver the benefits of natural gas to all Indians," BPCL said.

In addition to refineries and retail fuel stations, BPCL has over 6,100 LPG distributorships, 733 lubes distributorships, 123 POL storage locations, 53 LPG bottling plants,60 aviation service stations, three lube blending plants and four cross-country pipelines.

Near-term outlook

In 2020-21 (April-March), BPCL's refinery throughput fell 17% on the year to 26.6 million mt, while sales dropped 10% on the year to 38.74 million mt, as the pandemic took a toll on domestic demand.

Singh said that India's diesel demand was still 6%-7% below the pre-COVID-19 level, while gasoline demand was 7%-9% higher than the pandemic level.

He expects global crude oil prices to remain in the range of $70-$80/b until the end of the current fiscal in March 2022. The current level of global gas prices was at unprecedented levels, mainly due to strong Chinese appetite for the fuel and expectation of a severely cold winter season.

"High natural gas prices have put pressure on global crude prices," he added.