Minutes
of
Communication
Meeting held on 27.12.2005(For the period October-December 2005) |
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The Quarterly Communication Meeting
was held at the Corporate Office on 27th Dec 2005. Presided
over by the Chairman, the meeting was attended by Functional Directors,
Advisor (Security), CVO, Departmental Heads in Divisional Headquarters,
unit heads of Refineries, Marketing, Pipelines and R&D Centre,
and State Office Heads of Marketing Division.
Chairman: There have been some changes at the Board level. Mr. B.M.Bansal has taken over as Director (Planning & Business Development) and I have assumed additional charge of R&D till the appointment of a new Director. I have also taken over as Chairman of LIOC, which will now report to Marketing Division as a full-fledged marketing subsidiary. We have created a Corporate Affairs department which shall follow up on major developments in our joint ventures, subsidiaries, establishment of new JVs, shareholder agreements, arbitration, new companies(like city gas cos.) and special purpose vehicles to be set up, etc. It will report to Director (Finance).He will also be Member-Secretary of the EC. Among the many highs of the year 2005 was our becoming
the first corporate to breach the 150,000 crore turnover mark. We also
crossed 50 million tonnes in product sales and our retail outlets expanded
beyond 10,000. We have moved up a good 19 places in the Fortune ranking
and reached the 21st position in Platts’ Top Global Energy
Company rankings.We also had a few lows in terms of losses in the first
quarter, which of course was beyond our control, negative publicity
from some unfortunate events as a result of improper administrative
procedures and lack of supervision at locations.
So also is the unfortunate and brutal murder of our young colleague, Shri S.Manjunath. We are leaving no stone unturned to bring to book the murderers. The Management is fully alive to the challenges and issues facing our employees, particularly in the field, and is fully committed to providing adequate protection wherever and whenever required so that such gruesome incidents do not recur. MOP&NG has taken up with the State Governments at the highest level for providing safety and security to our officers in the discharge of their duties. Our endeavour to serve our customers with quality, quantity and service should nevertheless continue undeterred. With regard to the third quarter results, while I am confident of achieving significant growth in all operational parameters, our financial performance may not be to our expectations thanks to continued under-realisation of over Rs. 10,500 crore on product prices. The delay in upward revision of prices of the four main products continues to affect our finances adversely. In the New Year 2006, several of our major projects are being unveiled, including world scale petrochemical projects.Our E&P initiatives have also received a boost with the Government approving a special purpose vehicle to be floated by the IndianOil-OIL consortium. I feel that acquisitions alone can provide the critical mass in E&P. Among the major challenges in 2006, the retailing business is passing through an extremely tough phase. Despite our ambitious plans for network expansion and consolidation, new entrants have garnered reasonable market share in a very short time by delivering the overall perception of value for money. We had good discussions with select dealers and distributors yesterday on ways to retain our consumer business share in Defence, Railways and transport sectors, particularly in diesel, naphtha, fuel oil, etc. Reliance, MRPL and Essar are offering huge discounts to lure customers. Among the major projects planned, the Detailed Feasibility Reports for Naphtha Cracker and Paradip Refinery shall be going for Board approval soon. That way, 2006 will prove to be a very challenging year for all of us. Director (Pipelines):
Dec. 13, 2005, was a significant day for Pipelines Division. On this day, we commissioned the crude oil terminal at Mundra, Sankari terminal and Asanur-Sankari branch line of Chennai-Trichy-Madurai pipeline.Ministry of Environment & Forests has also given its final clearance to the Paradip-Haldia crude oil pipeline. Among the major areas of concern are product failures from our Mathura and Gujarat refineries. We will have to come out with a permanent solution on this account. There were a number of pilferage attempts in Rajasthan and Gujarat. While we have taken up the matter with the local police authorities, we also need to improve our surveillance system further. The Pipelines Division will be able to surpass the MoU targets for the year in both crude and products but stretch targets could pose problems due to shortage of crude. Vadinar handled the 3,500th tanker on Nov.2, ’05. The pipelines team there has done a remarkable job in the past 27 years, with no pipeline oil spill. In fact, our entire pipelines network had safe operations in 2005. M/s Solomon Associates have done a study to benchmark our pipelines (SMPL & BKPL) with the best internationally. While we have scored high on performance, our scores have been low in manpower and even on cost of manpower basis. This is an area of concern. The mainline work on the Paradip-Haldia crude oil pipeline has begun again.Work is also in progress on Koyali-Dahej, Koyali-Ratlam, Dadri-Panipat (R-LNG), CPCL-Chennai AFS (ATF) and other branch pipelines. As part of a contract signed with Greater Nile Petroleum Operating Company, we have commenced training of their engineers at Sudan. One of their officers is currently on a visit to our Division for exposure on various pipelines activities. Another Sudanese company – M/s. Petrodar - has requested us for sending commissioning advisors for a new pipeline being laid by them. TOP Director (Planning &
Business Development) :
The Business Development group achieved significant progress in various BD initiatives in the last quarter. GAS Iran-Pakistan-India Pipeline:A Pakistani delegation visited New Delhi on Dec. 16/17 ‘05 to discuss various issues relating to the project. Construction of the pipeline is likely to begin from mid-2007 and supplies from 2010. India is likely to get approximately 90 MMSCMD of gas from this project. Trilateral meetings are expected to commence from April 2006. CNG:A JVC named Green Gas has been incorporated for supply of CNG and city gas distribution in Agra and Lucknow. IOC and GAIL each have 25% equity in the company; the balance equity is being tied up. We are working on a similar JVC for Kolkata. Libya: The IOC-OIL consortium has bagged block 102/4 in the Sirte basin in the second round of bidding, which is adjacent to block 86 bagged in the first round earlier. Registration formalities for IOC’s branch office in Libya have been completed. LAB: Till Nov. ’05, we have sold 67 TMTs of LAB. Besides Thailand and Indonesia, we have also exported our product to Norway. PTA: Actions are in progress for out-sourcing various logistics activities related to evacuation of PTA from Panipat. PTA exports to Pakistan is also being explored. Market continues to show concern on availability of PTA from IOC. Delay beyond Mar. ’06 can significantly impact our marketing plans, as our competitor is likely to commission additional capacity of our size in Apr-May ’06. Petrochemical Hub at Panipat: In line with the MOU signed by us with the Government of Haryana (GoH) for creation of a Petrochemical Hub at Panipat, an incentive package for downstream industries setting up their plants in the hub has been notified by GoH. GoH has also agreed to issue a comfort letter for the rest of the incentives applicable at the time of the commissioning of the Naphtha Cracker. HSIDC has suggested creation of a SPV with equity participation from IOCL, HSIDC and private party(s) to meet the fund requirements for creation of the hub. Product Exports:Product exports during April-Nov. ’05 were 1305 TMT as compared to 1109.7 TMT during the same period last year, a growth of 17.6%. We intend to supply about 150 TMT MS and 350 TMT HSD to LIOC during 2006-07. We are also hopeful of supplying 200 TMT HSD to Bangladesh Petroleum Corporation during 2006. Lube Exports:We have taken Board approval for converting our Regional Office at Dubai to a wholly-owned subsidiary, so as to carry out all commercial activities. This way, we would have more flexibility for blending & marketing of SERVO Lubricants in the Middle East. Project Exports.IOC has executed an MoU with Calik Enerji, Turkey, in Nov. ‘05 for cooperation in downstream hydrocarbon sector in Turkey or in any other third country. IOCL has also been pre-qualified as a JV partner by Sonatrach, Algeria, for a new grassroots refinery at Algiers. It had earlier submitted its Expression of Interest to National Oil Corporation, Libya, for participation as a JV partner for revamping & upgradation projects of Ras Lanuf & Azzawiya refineries. IOC,
along with UOP, is pursuing a business opportunity for joint bidding
for Training and O&M jobs of Dung Quat Refinery of Petro Vietnam.
This 6.5 MMTPA refinery is to be commissioned in 2008. We propose a
floating manpower of around 100 officers for commissioning, training,
de-bottlenecking, maintenance, turnaround kind of arrangements etc.
Director (Refineries) : IndianOil
refineries achieved a crude processing of 25.4 MMT during the first
three quarters of 2005-06. For the full year, it is expected to be around
38.5 MMT as against MOU target of 39.2 MMT. Based on product demand
projections, including exports and refinery shutdown plans, the planned
crude processing level for 2006-07 is 44 MMT. A concerted effort is
needed from all concerned, i.e., Refineries, Marketing, Pipelines and
Optimisation Group, to meet the target. Insurance
Savings: A package Insurance policy to
cover plant & machinery, inventory and loss of profit has been taken
w.e.f. 01.10.2005 for a period of one year for Refineries Division,
including Digboi. Extension
of the tender to private sector insurers enabled us to get lower rates,
whereby we could achieve a savings of Rs.33 crore on yearly basis. Continuous
follow-up with Excise & Customs Department has resulted in receipt
of customs duty refunds amounting to Rs.10 crore at Gujarat Refinery
and Rs.9 crore at Mathura Refinery.
PX/-PTA: PTA
plant has been mechanically completed on Nov 16, ’05. PX-1
& PX-2 mechanical completion is expected by Jan. ’06. Haldia team successfully commissioned all facilities
under MS quality upgradation project on Oct. 18, ’05. The
Board has approved the Hydrocracker project at Haldia at a cost of Rs.
1,876 crore with commissioning schedule of Apr. ’09. This will also
enhance the crude processing capability of Haldia refinery to 7.5 MMTPA
from 6 MMTPA currently. There have been two cases of product quality
failures after certification at the refinery end, which tarnish our
corporate image besides financial loss and operational problems. Refineries
need to look-up their systems critically for quality assurance and take
immediate corrective actions.
Director (Marketing) : The Marketing Division posted many landmarks and milestones in 2005. Only 10 days ago, we crossed the one millionth mark in XtraPower fleet cards. In terms of overall MOU targets, the five best State Offices are NESO, OSO, TNSO, BSO and KASO. The number of State Offices earning 'Very Good' rating has increased from 2 last year to 12 this year. With increased competition from other players (Reliance gained 10%
market share with 3% ROs), our market share is down by 1% in MS (Retail),
2.6% in HSD (R) and 2.1% in HSD (D). Overall industry sales went down
by 3% while ours by 3.2%. However, excluding Naphtha, our market share
has gone up by 0.4%. While 8 State Offices registered increased market
share, TNSO, KASO, NESO, BSO and OSO reported volume gains also. Our
ATF market share is on a recovery path. NITC AFS volume has gone up
by 45% as compared to last year. Nov.'05 was the first month in the
last two years when we have recorded Nil The overall Safety Index of Marketing locations has gone up from 97.5 to 97.8 while the Quality Index has gone up from 97.7 to 98.8. We have learnt many lessons from Shri S. Manjunath's death. We shall be perpetuating his memory and ideals by constituting an award for the best retail sales officer in his name. We shall be recommending his name for the highest civilian award for bravery. We have taken up several morale-boosting measures with focus on sensitivity to the security of our employees, especially in the field. The Chairman's panel of dealers and distributors was launched on November 26, 2005. It is an excellent platform for involving good, hands-on dealers and distributors in policy-making and reality check. IndianOil commissioned 762 ROs during April-Nov. '05 as against 547 by Reliance, 460 by BPC and 301 by HPC. Marketing Division has signed an agreement with IOML (IndianOil Mauritius Ltd.) for bunker supplies to IOML nominated vessels. This will add to our bunkering business. The LPG Group deserves to be complimented for its excellent handling
of the LPG crisis. With the second LPG stocking point commissioned at
Rajnandgaon (Chattisgarh), we hope to accrue annual savings of Rs 0.6
crores. We have also tied up Lubes sales with several major original
equipment manufacturers.
Director (R&D):
IndianOil is making vigorous attempts to commercialize the in-house developed process technologies. A 50:50 JV agreement has been signed with Intercat for setting up a 10,000 MT per annum FCC catalyst and additive plant near Ankleswar. The plant will be ready within the next 2 years. IndianOil has approved ABB Lummus for selling the INDMAX technology worldwide as per a revenue sharing agreement. If the technology is sold in India, IndianOil will get 60% of the royalty, whereas if the buyer is foreign, ABB will earn 60% of the royalty. IndianOil recently joined the select group of Marine Oil producers when it launched the SERVO marine K series oils for DG sets and SERVO Marine Oils for shipboard application. R&D Scientists conducted a 4-day workshop at the Research Institute of Petroleum Industry (RIPI), Iran and this is expected to lead to further R&D collaboration between IndianOil and RIPI. TOP Director (Finance) :
Even though the operating performance for the third quarter is good, we anticipate thatpoor refining margins and high cost of crude processing would pull down our profits. On the positive side, the Government has approved release of 50% of the oil bonds, which would work out to Rs. 3,200 crore for IndianOil. Coupled with Rs. 340 crore interim dividend (250%) from ONGC, this should help us tide over the financial crunch. The Government has constituted a high-power committee headed by Dr. R.Rangarajan to go over the pricing & taxation issues in the oil sector, which are currently being handled in an ad hoc manner. IndianOil has recommended to the committee that import parity pricing and duty subsidies should continue and that there should be a proper subsidy transfer mechanism so that oil-marketing companies do not suffer the financial burden.Now that the LPG crisis is behind us, we should build inventory levels to restore normalcy. Our borrowings have gone up from Rs. 16,000 crore to Rs. 25,000 crore now. Most of the bankers have exhausted their limits. We are currently borrowing money on call markets based on (old) oil bonds. Recently, we have raised US$ 300 million loan facility, where banks from Taiwan entered the loan facility for the first time. Now that SAP implementation is complete, we have taken up security and systems audit to ensure that we get the best out of the system. In optimisation, the first phase of the Add-on software solution packages has been completed and we shall now move on to Phase-2.As per the SEBI requirement, there is a need for 22 Directors on the Board of IndianOil instead of the current 17. While MOP&NG shall nominate the Directors, we shall be calling an Extraordinary General Meeting to amend the articles. TOP Director (HR) :
The HR group continued with its initiatives to simplify, streamline and extend the scope of the various rules and policies governing the employees. Starting with writing Probation Reports by exception in case of promotions of officers, the simplification of procedures was extended to reimbursement of cost of spectacles on self-certification basis, and validity extension of LTC entitlement for a block unto the next block of two years. CDA (Conduct, Discipline and Appeal) Rules have been modified by redefining the lists of major and minor penalties, and introduction of a specific clause regarding sexual harassment.Reimbursement of maintenance expenses along with HRA has been allowed for employees entitled for self-lease accommodation.In terms of progress of the e-PMS initiative, 94% officers have submitted their plans and 52% of them have been approved. Simultaneously, performance plans are being audited to monitor their quality. We have received good feedback on inter-divisional transfers in 2005. It is planned to undertake inter-divisional transfers more systematically in 2006. An internal committee was constituted to examine the recruitment and induction process. We have received recommendations, which are being looked into. In addition to the corporate contribution, IndianOil employees donated over Rs. 1 crore to the PM’s National Relief Fund for Jammu & Kashmir earthquake.Delay in handling vigilance and disciplinary cases continues to be an area of concern. Another issue to be focused in this area is awarding punishment commensurate with the misconduct proved. TOP ED (R & D) Besides providing assistance in technical solutions and trouble-shooting to various refineries, marketing activities and SERVO customers, IOC-R&D has taken several initiatives for commercialisation of in-house developed technologies. An agreement has been signed with ABB Lummus Global for joint marketing and commercialisation of INDMAX Technology worldwide and revamp of existing FCC/RFCC units. It is planned to offer the technology to several upcoming units at BRPL, Paradip, etc.A plant for manufacturing 10,000 TPA of FCC catalyst/additive developed by R&D is being set up in India in JV partnership with Intercat, USA. Suitable land has been identified at Panoli, near Ankleshwar. Technology for DHDT unit of 1.2 MMTPA capacity at BRPL is licensed along with EIL. Offers of the DHDT and VGO-Hydrotreater technology for the upcoming units at Paradip, along with Shell Global and EIL have been submitted. IOC R&D along with EIL has submitted bids for coker units at Gujarat and Paradip refineries respectively for joint licencing of delayed coking technology. The jointly developed hydro-processing catalysts manufactured by Criterion Catalysts, are being marketed through Zeolyst International and IndianOil Technologies Ltd. Bio-diesel: IOC-R&D successfully organised a Biodiesel Conclave at New Delhi on Nov. 5, ‘05, in which about 300 delegates took part. As per Biodiesel Purchase Policy, MOP&NG has desired that IOC-R&D should continue trials using biodiesel blends of up to 20%.Accordingly, IOC-R&D has initiated projects in collaboration with Mahindra & Mahindra and Lubrizol. Hydrogen Research: IOC-R&D is planning to take up a demonstration project for use of 10-30% Hydrogen with CNG. For this purpose, India’s first Hydrogen-CNG dispensing station has been set up by IOC-R&D and the same was inaugurated by our Hon’ble Minister on Oct. 9 ’05. Trials using 5% H2 blend in CNG are in progress on select vehicles. Collaboration: During the recent Round Table of Asian Oil Ministers, IOC-R&D signed MOUs with two Korean Institutes, namely Korea Institute of Science & Technology and Korea Gas Corp, in the field of CNG-Hydrogen projects. An MOU has been signed with Axens/IFP, France on R&D collaboration for processing of high asphaltene feeds in existing Hydrocracking units and Nitrogen removal from diesel stream. An MOU on the development of instrumented pigs and caliper pigs for 14, 18, 24 inch sizes has been signed with BARC, Mumbai. TOP There is a perceived terrorist threat from intelligence
agencies for our refineries and major installations; hence the need
for continued vigilance and security. We have given specifications of
the bomb blankets to Marketing Division and the same have been posted
on the net. The choice of explosives detectors depends on the threat
perceived for each unit.
TOP CVO: 15 vigilance workshops were organised at various units during Sept-Nov. 2005 in which 173 executives participated. A Vigilance Conference was held at Corporate Office on Sept. 29, 2005, for sharing new initiatives, developments and improvements. Vigilance awareness week was observed in the Corporation from Nov. 7-11, 2005. TOP Chairman’s concluding remarks: 1.ePMS: We should stick to schedules of DPC, promotions and transfers drawn up. Maintain prescribed levels of consultation 2. PIS scheme: We shall introduce this for the current year – with divisional, unit and individual performance parameters. 3. Disciplinary cases need constant review 4. Complaints on dealers selection: Rotate people form different places for selection committees 5. On IBP merger, issues on HR, Finance to be addressed along with attendant issues. List all items 6 .Legal setup at Marketing State Offices should be optimised 7. Disposal of vacant accommodation is an important issue 8 .We need lots of people in sales, lubes, LPG, projects, etc. post-SAP, most of it has to come from Marketing Division. Have a cross-divisional team to enerate at least 50-60 people. 9 .ATF – Supplies/Optimisation groups to look at demand for 2006-07 and 2007-08 10. Post-delayed coker, there will be no bitumen availability at Panipat. Measures to meet existing demand to be worked out11.Marketing to tie-up LPG imports for winter months in 2006 TOP |