Chairman:
- In the wake of spiralling crude oil prices, the under-realisation on the sale of the four major products has risen significantly. The projections for the year 2007-08 have, therefore, been revised from Rs. 53,000 crore earlier to about Rs.75,000 crore now. This would mean that IndianOil would have to bear almost Rs. 10,000 crore, as against Rs. 2,190 crore last year.
- Sustained under-realisation has resulted in the Department of Public Enterprises bringing down IndianOil's rating in its MOU for the year 2006-07 to 'Good' citing low profits, under the assumption that we are being fully compensated by the Government. Our administrative Ministry therefore has taken up our case strongly with the Cabinet Secretary for a review. In addition, receipt of compensation towards under-realisation in the form of low-liquidity Oil Bonds is pushing our borrowings to alarming levels. This in turn has resulted in the international credit rating agency, Moody's, downgrading IndianOil's outlook from stable to negative. The domestic credit rating agency, ICRA, has also brought down our credit rating for long-term borrowings.
- However, some encouraging developments are:
1. The Board of Directors of IndianOil and BRPL have accorded approval to the Scheme of Amalgamation. The merger process is in progress and action for convening the EGMs of both the companies has been initiated.
2. The IndianOil Board has approved acquiring a 5 per cent stake in the upstream major, Oil India, from the Government as part of an IPO slated for the first quarter of 2008. The Government is divesting 10 per cent of its equity to the general public and a similar quantum to IndianOil, BPCL and HPCL together.
3. On the E&P front, in addition to the 12 domestic blocks, including CBM and farm-in blocks, and 7 overseas blocks, wherein we have participating interest, our consortium with Oil India and Sonatrach of Algeria bagged 4 more blocks in Libya.
4. To promote Bio-diesel, we have entered into an MoU with the Government of Chhattisgarh. As part of the MoU, we shall form a joint venture with Chhattisgarh State Renewable Energy Development Authority to facilitate plantation of Jatropha on one-lakh hectares of wasteland, production of Bio-diesel and marketing through our retail outlets.
5. At the behest of MoP&NG, we have recently taken an initiative for selling SKO in 1 litre bottles. The bottling is being undertaken at the Rewari terminal.
6. IndianOil's branded fuels - XtraPremium petrol and XtraMile diesel - continue to be market leaders in the highly competitive business segment, with a market share of about 47% and 59% respectively.
7. After the success of Indmax technology, the Needle Coke technology developed by R&D has been licensed to Numaligarh Refinery. In addition, the Diesel MFA additive developed by R&D has shown excellent results in the Peugeot engine tests at UK. It is now being introduced for market seeding in Madhya Pradesh and Chhattisgarh.
8. IndianOil Technologies Ltd. bagged the prestigious order from Kuwait National Petroleum Company for consultancy services for FCC shutdown management at Mina Al-Ahmadi refinery. IndianOil was also awarded a consultancy assignment by Ceylon Petroleum Storage Terminals Ltd. (CPSTL), a joint venture company of Lanka IOC, Ceylon Petroleum Corporation and the Govt. of Sri Lanka for implementation of SAP for CPSTL, CPC and LIOC.
9. Our overseas subsidiaries have also been doing well. Lanka IOC's Lube blending Plant at Trincomalee has commenced commercial production. Meanwhile, IndianOil (Mauritius) Ltd. has bagged the prestigious annual contract of Air France for supply of full volume of Jet A1 at Mauritius.
Area of concern:
- We recently suffered a setback due to quality issues of PTA. Since PTA is a very quality sensitive product, we need to exercise utmost vigil and caution in its handling.
- Product quality issues are a cause of major concern. Adulteration, pilferage and diversion of subsidised fuels continue to be the scourge today.
- In the light of pipeline-driven economies of scale for our refining and marketing business, we need to expedite commissioning of Paradip-Haldia Crude Oil Pipeline, and examine the feasibility of setting up more pipelines and integration of our facilities for crude oil handling.
- Our pipeline networks face the challenge of pilferage. In Western region alone, over 30 such attempts took place during 2006-07 and, this year, the figure has already reached 20.
- Before submitting a business development bid for domestic / overseas assets, we should scale up our capabilities to undertake proper due diligence. We need to develop our capabilities and infrastructure in the natural gas business quickly by tying up with gas producers and leveraging their expertise to enhance our presence in this fast-growing segment.
- Safety needs to be accorded topmost priority always. Despite our best efforts, fatal accidents are still taking place. Accidents occur due to human error and due to the fact that we do not follow stipulated practices.
- Growing concerns about emission of Green House Gases are demanding concrete steps on use of efficient and non-polluting technologies. We all need to capitalise on this issue for generating carbon credits.
TOP
Director (Planning & Business Development)
- Products Exports - During April - November 2007, a total of 32.7 TMT Bulk Bitumen was exported from Haldia, of which, 30.1 TMT was exported to Bangladesh and the balance 2.6 TMT to IRCON, Nepal. The possibility of HSD supply from Haldia to Bangladesh Petroleum Corporation by barge at Mongla Port, Khulna, is being explored. In addition, the possibility of LOBS export to Bangladesh is also being pursued.
- In Turkey, negotiations are underway with Calik Enerji to set up a grassroots refinery at Ceyhan. The Energy Market Regulatory Authority (EMRA) of Turkey has granted the final licence in December 2007 to DAPRAS, a special purpose vehicle formed by Calik for setting up the proposed refinery. In November 2007, they had invited Eni of Italy, KMG of Kazakhstan and IndianOil for discussions on the roles & responsibilities of the participating companies.
- Training of Libyan officials is planned during this year to build relationships and explore opportunities.
E&P
- As mentioned by Chairman, IndianOil, in consortium with OIL and Sonatrach (Algeria), has won the onland exploration Area 95-96 in Libya under the Exploration & Production Sharing Agreement (EPSA) IV. IndianOil and OIL have 25% participating interest (PI) each in this Area. Sonatrach has 50% PI and is also the operator.
- The IndianOil Board has recently approved our participation with OIL in the Timor-Leste offshore block that is currently held by Reliance. IndianOil and OIL would jointly hold 25% Participating Interest and would enter into farm-in agreement shortly.
- The NELP-VII round has been announced by the Govt on 13th Dec'07, under which 57 exploration blocks - 19 deepwater, 9 shallow water & 29 onland - are on offer. The last date for submission of bids is 11th April 2008. IndianOil is looking for partnerships with interested domestic and/or foreign E&P companies for participating in this round.
Progress of work in E&P Blocks
1. Gas has been discovered in the domestic exploration block of Mahanadi offshore. 3D seismic survey has been carried out to find out the extent of the gas-bearing structure as well as to identify other structures present in the area. The IndianOil-ONGC-OIL-GAIL consortium is in the process of submitting the appraisal plan for this discovery to the Directorate General of Hydrocarbons (DGH).
2. In the exploration block Shakthi in Gabon, where OIL is the operator, aeromagnetic survey over the entire block has been completed. 2D seismic data acquisition is expected to start from Jan. 2008.
3. The IndianOil-OIL combine had farmed-in an onland exploration block in Nigeria by acquiring stakes in one of the companies holding Participating Interest in the block. Exploration work is progressing as per the committed work programme.
4. In consortium with other companies, IndianOil was awarded two onland exploration blocks under the 3rd International Bid Round in Yemen. The Production Sharing Agreements are likely to be signed after approval of the same by Yemeni Govt. / Parliament.
5. In the two onland Exploration Blocks awarded to IndianOil-OIL consortium in Libya earlier, 2D seismic data acquisition has been completed. The consortium will also be acquiring 3D seismic, besides drilling a total of three wells in the two blocks.
Gas
- During Apr-Dec. 2007, a total quantity of 1.45 MMT gas has been sold, which includes 0.19 MMT sourced from 9 spot cargoes.
- Iran-Pakistan-India Gas Pipeline Project is not progressing due to unresolved issues with Pakistan on transit fee / transportation tariff and with Iran on the Gas Sales Purchase Agreement, and also due to political disturbances. The MOU with Petropars Limited of Iran for the integrated LNG Project in their country has been extended for one more year up to 31st October 2008.
- IndianOil has finalised an MOU with Petronet LNG Limited (PLL) for jointly developing the proposed Ennore LNG import terminal.
A few positive developments on gas sourcing -
- IndianOil has finalised an agreement with M/s Deep Industries Limited, who have three marginal fields in Jaisalmer district of Rajasthan and 2 CBM blocks (Godavari in Andhra Pradesh and Singrauli in Madhya Pradesh) for joint development and monetisation of gas produced therein. IndianOil is also holding discussions for a term sheet with M/s Focus Energy for purchase of 2 MMSCMD gas from their gas fields in Rajasthan. Discussions are also being held with ONGC for joint development of some marginal gas fields in Rajasthan. IndianOil has signed an MOU with the Great Eastern Energy Corporation Limited (GEECL) to set up city gas distribution network in Asansol, Durgapur and Raniganj by sourcing gas from their Coal Bed Methane Blocks.
- IndianOil has finalised a franchise agreement with SITI Energy Limited for CNG Retailing at Moradabad. Green Gas Ltd., the JV of IndianOil and GAIL for city gas distribution (CGD) in Lucknow and Agra has been given permission by the UP government for going ahead with the CGD network in Lucknow.
- IndianOil has successfully commissioned the technology innovation "LNG at Doorstep" project for reaching LNG directly to the consumers through cryogenic tankers for industrial / captive power applications. Supplies to two pilot project customers located in Maharashtra and Gujarat have begun. Based on demand from potential customers, business expansion is being planned in a phased manner, depending on the availability of LNG, additional loading facilities and joint collaboration/participation of technology partners.
Petrochemicals Marketing:
- LAB sales continue to show healthy growth. During the period Apr-Dec 2007, LAB sales clocked 99,089 MT, a growth of over 14% over the same period last year. This includes exports of 30,193 MT, higher by over 50% compared to last year. LAB was exported to two new countries, Pakistan and Philippines. This brings the number of countries where we are exporting LAB to eight.
- We completed the first year of PTA sales in Sept 2007 in the domestic market. Sales in Apr-Dec 2007 are expected to reach 256,500 MT. Most of the customers reported quality-related problems in PTA in Sept-Oct 2007 resulting in stock build-up at our warehouses. Efforts are on to evacuate these stocks with additional discounts/credits, etc. December witnessed the first export of Paraxylene. A 6,000 MT parcel was exported to Indonesia with some more parcels to follow.
- Preparations are on course for Polymer marketing. Detailing on marketing infrastructure, logistics and operations is in progress. Positioning adequate and suitable manpower for Petrochemicals group is the need of the hour. HR is taking necessary action towards fresh recruitment or mid level induction.
Petrochemicals Projects
- The proposals for setting up PX units at Gujarat Refinery (capacity - 370 TMTPA) and at Haldia Refinery (capacity - 610 TMTPA) were deliberated in the meeting of the Project Evaluation Committee of the Board in October and December 2007. While the proposal for a PX unit at Haldia has been kept on hold, detailed feasibility study and other associated pre-project activities for the proposed PX project at Gujarat Refinery have been recommended.
- IndianOil is currently pursuing with the Ministry of Coal for allocation of Chaturdhara coal block in Orissa under PSU dispensation. The proposed JV project of coal-based power plant at Naraj Marthapur is being pursued jointly by IndianOil and Tata Power based on coal linkage / import of coal to start with, which will be supplemented by captive coal block after allocation of the same by the Ministry of Coal.
- The feasibility study for Styrene Butadiene Rubber (SBR) unit at Panipat has been initiated in association with Taiwan Synthetic Rubber Corporation (TSRC) and Marubeni Corporation, Japan. TSRC is a technology provider and manufacturer for SBR.
Biofuels
- As mentioned by Chairman, an MOU was signed on 19th November 2007 with Govt. of Chhattisgarh for undertaking Biodiesel related activity in the entire state. This project has been envisaged to be taken up as JV with 74:26 equity participation by IndianOil and Government of Chhatisgarh respectively. Currently, CEO for the JV is under finalisation. Talks are on with Governments of Chattisgarh and MP for land allotment.
- Expressions of Interest were invited from all organisations with expertise in extensive biocrop plantation for selection as a strategic partner in various parts of country. 31 applications have been received and are being shortlisted after initial evaluation.
MOU
- DPE has rated IndianOil's performance as 'Good' for the year 2006-07 despite our consistent rating of "Outstanding" in past. IndianOil is pursuing the matter through MOP&NG at various levels.
Chairman's observation - Despite the current rating as given by DPE, the IndianOil Board has approved distribution of PIS at the 'Excellent' rating levels.
TOP
Director (Finance)
- IndianOil posted excellent results in the first and second quarter, which were a result of a combination of excellent physical performance, foreign exchange gains and robust gross refining margins. We have been reaping the benefit of currency appreciation, which came to the levels of 39.7 per dollar.
- Our forex borrowings touched a level of USD 3 billion (as on 31st Dec 2007). While GRMs continue to be good, our concern is the huge increase in the crude oil prices in the international market. Our under-recoveries are rising. On a gross basis, IndianOil is losing approximately Rs. 140 crore per day.
- Accordingly to the current burden-sharing mechanism, 42% of the under-recoveries is being borne by the Government and paid to the OMCs in the form of oil bonds, and the balance is shared by the upstream companies and OMCs. The portion that is borne by the OMCs should be met by effecting a price revision.
- The current distorted pricing mechanism means a strain on our working capital and liquidity position as well as rising borrowing rates. As mentioned by Chairman earlier, the international credit rating agency, Moody's has downgraded IndianOil's outlook from stable to negative. The domestic credit rating agency, ICRA, has also brought down our credit rating for long-term borrowings. DPE has also pulled down IndianOil rating to 'Good' from a consistent 'Outstanding' so far. MoP&NG is sympathetic to our cause and have taken up the issue at the appropriate levels.
- As I said earlier, refining margins are good currently. However, fallout could be the duty cuts, which could impact refining margins. If refining margins fall in future, it could be problematic for us in future given the situation of under-realisation.
- Due to our expenditure on ongoing projects, our borrowings could go up by Rs. 2500 crore every month. At the moment, we are able to truncate our borrowings due to good GRMs and accruals from product sales. On forex borrowings, we have had the benefit of currency appreciation. Now, the Govt. has put in place a condition that foreign currency loans cannot be brought to India. Earlier, when there was no such condition, we brought the money raised from USPP (US Private Placement). Now, we have requested the RBI to waive this condition.
- We have yet not received the oil bonds though we have factored them in our books of accounts. We hope to get them after the mandatory Parliament approval. Currently, we get low-liquidity oil bonds for which market has no appetite as it is already flush with bonds, including the FCI Bonds. Therefore, we are requesting the Government to compensate us by cash and not Oil Bonds.
- We have not decided how much dividend the IndianOil Board will declare for the shareholders. Given our current fund situation, we are not sure how we would be able to service bonus shares. There is no decision on the bonus shares. The IndianOil scrip has an intrinsic strength that is hitherto unlocked due to the current pricing regime.
- Compliments to the Taxation group for successfully obtaining exemption on supplies to Navy and coastal areas.
- Currently, Naphtha demand in the domestic market is quite high. So we can cancel exports and sell our product here.
- As Chairman said earlier, IndianOil has bagged a consultancy assignment by Ceylon Petroleum Storage Terminals Ltd. (CPSTL) for implementation of SAP for CPSTL, CPC and LIOC. It is commendable that our IS group is able to offer technology services to outsiders.
- Litigation and Arbitration MIS Package (LAMP) has been launched by the Corporate Affairs group to facilitate review of legal cases that are over 10 years old.
- Lanka IOC has registered a profit of USD 10 million. In view of the high international prices of crude oil, we are taking up with the Government of Sri Lanka for a hike in the prices of the products.
TOP
Director (HR)
I would take this opportunity to congratulate our Chairman, Mr. Sarthak Behuria, for having been chosen to receive the prestigious 'SCOPE Award for Excellence and Outstanding Contribution to Public Sector Management - Individual Category for 2006-07.'
HR Highlights for the period are as follows:
Meetings held with IOOA
During and post All-India Strike by IOOA along with all other petroleum companies on 21.8.07, certain actions taken by IOOA and Management led to some difference of opinion. A meeting was held with All India CEC of IOOA on 20th December 2007 at Mumbai. Various issues raised by IOOA pursuant to the officers' strike on 21.8.07 were discussed and clarified. The meeting was very cordial and ended with satisfaction on both the sides.
In continuation, another meeting was held by Director (F) and Director (HR) with the LTS sub-committee of IOOA on 21st December 2007 at Mumbai itself to discuss the revision of work-related allowances as per their charter of demands. All the issues were discussed in detail and a consensus was reached as per which, an MOU would be signed with the AICEC members soon after which, orders pertaining to revision of these allowances shall be issued. It may be added that it is for the first time that negotiations with the collectives have concluded in the first meeting after preliminary round at Jaipur on 28.7.07.
Recoverable advance
Pending wage revision of officers and non-officers, which is due from 1.1.07, the Management has approved payment of one time lump-sum recoverable advance in the range of Rs.60,000 to Rs.1.2 lakh to officers and in the range of Rs.25,000 to Rs.43,000 to non-officers. The lump-sum advance is for the period from January to December 2007. The advance will not be counted for any consequential whatsoever for any payment or any other recoveries. The recoverable advance will be fully adjusted against the arrears due to the employees upon revision of pay, pay scales and other pay related allowances effective from 1.1.07.
Payment of perquisite tax
At its meeting held on 28.11.2007, the IndianOil Board has approved the payment of perquisite tax on Company-owned/leased housing accommodation (excluding self-lease) by the Corporation on behalf of the employees. This will be effective from the Financial Year 2007-08.
Lump-sum LFA
In partial modification of the LFA scheme, it has been decided that in cases where full or part of LTC entitlement has been availed or encashed by an employee, he/she would be allowed to opt for LFA scheme from the block year 2003-2004 onwards. Thereafter, his entitlement would be under LFA scheme only. The payment made earlier in respect of full / part LTC availed (including on local conveyance and DA on hiring accommodation) or encashed would be adjusted from the LFA claim of that block. The option in all the cases should be exercised by 31.1.08 (extended to 29.02.2008 thereafter), and pay for computing LFA would be as per the pay of Nov. 2007.
It has also been clarified that Officers at the level of GMs & above, and DGMs on specific approval, who have opted for LFA in lieu of LTC during service would be allowed to claim their unutilised LFA within one year of their superannuation.
Medical Facilities - Revision of Charges
In the last week of December 2007, the ceilings prescribed under Medical Rules on various items have been revised. The last revision of the same was done in May 2001.
e-PMS implementation
The deadlines for completing performance appraisals for the year 2006-07 are overdue. Appraisal for the year 2006-07 at Reviewer level is nearly complete (99.4%). However, 3181 appraisals (30%) are still pending for countersigning. All the appraisals are to be completed by this weekend. The performance plans for the year 2007-08 have also not yet been completed. All plans for the year 2007-08 are to be completed by 10th Jan.
PIS & PLI payments
The Team PIS payments have been released to the officers in mid-October 2007, and the first lot of individual-based PIS for the year 2006-07 has been released to all those officers whose reviewer-rated ePMS scores were available in e-PMS system by end November 2007. The advice with reviewer-rated scores for the balance officers has been sent to the respective Divisions on 28th December 2007. With this, till date, 99.4% officers have been covered under individual-based PIS for 2006-07.
PLI for the year 2006-07 @ 14.23% has been released in Sept. 2007.
Workmen have already been paid 100% of the PIS based on team performance.
Recruitment of officers through open advertisement and from Campus
We recruited about 500 officers during 2007 - 301 through open advertisement, 115 through campus and 82 CAs. During 2008, we plan to recruit about 900 officers. Out of this, 335 have already been selected through campus and would join sometime in June/July 2008.
Exercise of revisiting the Corporate Vision
As you are aware, two phases of the exercise have been completed. In the first phase, feedback from employees was collected through web-based survey and one-on-one interviews at senior level. The data so collected was used in the second phase as input in the workshop held on 17-18 Oct. 2007 at IIPM.
In the third phase, which would start now, deliberations held in the IIPM workshop would be shared with a larger number of employees through various forums and workshops. Some of the participants of the IIPM Workshop would be facilitators in these workshops. Suggestions/feedback from these forums/workshops would be used in finalising the Corporate Vision.
Voluntary Retirement Scheme (VRS)
The Scheme was operated twice (1/4-31/7/07 & 12/11-11/12/07) during the year and 120 applications have been accepted, which includes 44 officers and 76 non-officers.
IiPM
As a follow-up action of Development Centres conducted through E&Y, Competency Building programs were conducted in the areas of Leadership / Impact and influence, Finance, and Customer Focus. The third programme on "Leadership, Impact & Influence" was conducted from 19-22 Nov. 2007, through faculty assistance from TWP, Singapore. The second programme on Customer Focus was conducted from 13-15 Nov. 2007 in association with MDI, Gurgaon. The programme on Financial Management Skills for Top Management was conducted from 3 -7 December 2007, with lead faculty from IIM, Ahmedabad.
IBP
Integration of the Petroleum business of IBP with IndianOil's Marketing Division is fully completed by closing down all the four Regional offices of IBP on 31st October. All 30 Divisional Offices had already stopped working w.e.f. 01.08.07. This integration process was very smooth and seamless and would effect savings of about Rs.110 crore per annum. As regards the two smaller businesses of erstwhile IBP, i.e. Explosives and Cryogenics, work is currently on to assess their long term viability in the overall framework of IndianOil's business plan and strategy.
Safety, Health and Environment
Analysis of that last 5 years' data on fatal accidents has revealed that "work at height" and "road accidents" are the two major causes accounting for 76.5% of the total fatal accidents. I request all Unit Heads, Region and State Heads present here to sensitise the HODs and Location Heads on this.
PETROTECH-2009
As you are aware, the next PETROTECH Conference & Exhibition would be organised by IndianOil in January 2009. Various nodal Committees headed by Functional Directors have been constituted and have already started functioning. The first brochure of the event and its website were released on 17th January by the Hon'ble Minister of Petroleum & Natural Gas. Mr. V Damodaran, former GM (SR), IBP Division, has been posted full-time as Convenor, PETROTECH-2009
Director (Marketing)
- The 'Car in a Tank' sales promotion campaign on branded fuels received an overwhelming response with over 1.3 million SMSs. This campaign and the title sponsorship of the India-Pakistan series yielded significant visibility for IndianOil.
- IndianOil has bagged the 'Most Admired Retailer Award' of the year under the Rural Marketing Category at the India Retail Forum in Sept. 2007.
- On branded fuels, Rewari-II sales zone (comprising 35 ROs) under the Delhi State Office has become the first sales zone to achieve 100% conversion to XtraPremium with all ROs selling only branded MS.
- Marketing Division has taken some major policy initiatives such as new approach to transportation tender so as to get quality transporters and eliminate bad practices; improvement of Retail Visual Identity of erstwhile IBP marketing network; opportunity pricing of various products; payment of transporters' bills suo moto by SAP without them having to raise bills, etc.
- Sales Performance: During April - Nov. 2007, industry sales rose by 4.5 MMT (6.3%), out of which, IndianOil achieved a growth of 2.8 MMT (8.2%). Our market share grew by 0.8% (at 48.7%, including private players). Growth was primarily driven by HSD wherein, IndianOil's sales have grown by 9.6% (1.4 MMT) during the period. In MS (R), IndianOil grew at par with industry at 12% and retained the market share at 42.1%. With IBP in our fold, we can now consolidate sales from IBP ROs too. In HSD (R), IndianOil grew by 10.7% as compared to industry's growth rate of 10.6% and increased the market share by 0.1% (at 46.5%).
- In consumer sales, our market share grew by 2.7% (including private players) and is currently at 49.3%. IndianOil Aviation business grew by 15.3% and raised our market share by 0.1%. During the period April - Nov. 2007, growth in domestic LPG sales has been restricted to 5.4%. During the same period, a growth of 4% was recorded in finished lube sales whereas a growth of 10.1% was registered in base oil sales.
- On the operating indices, all locations have done well. The All-India QC Index has improved from 98.85 as on 1st April 2007 to 98.88 as on 1st December 2007. As Director (HR) mentioned, we need to be careful to ensure a zero accident rate.
- Several business initiatives were undertaken during the period April-Nov. 2007, which include:
- 588 new ROs, including 350 KSK stations, were commissioned. The KSK network is now 1673 strong and contributes 2.1% of MS sales and 4% of HSD (R) sales. The average per pump throughput of KSK stations is 50 kl per month against a target of 25 kl per month.
- XtraPremium has emerged as the largest selling brand pf petrol in India with a market share of 46.8% during Nov. 2007, and is currently sold out of 6,109 ROs. XtraMile diesel retained its leadership status with a market share of 59.1% in Nov. 2007 and is sold out of 9600 ROs. The XtraCare RO network is 1573 strong with 521 ROs added during the current year so far. The usage of XtraPower fleet card has grown by 26.8% to Rs. 6,015 crore during April-Nov. 2007.
- Sale of bottled SKO from Rewari TOP has started in the districts of Haryana from Oct. 2007 and a total of 124 kl has been lifted since inception.
- A Retail Advisory Council has been constituted to add value to the Retail Brand Building process and deliberated on strategic issues such as highway strategy, managing dealer network and measures for improving IBP dealer network, etc.
- Using the tactic of opportunity pricing, the Consumer Sales group has generated an additional revenue of Rs. 640 crore by reducing discounts on HSD, FO, LDO and effecting an increase in the prices of LSHS, LVFO, Bitumen, Petcoke and Naphtha.
- During the period, 19 lakh new domestic LPG consumers were enrolled. In the ongoing campaign to plug diversion, over 27 lakh multiple domestic LPG connections were detected and over 4 lakh such connections were blocked. This is a good beginning but we need to do more. TNSO and RSO have done well on this count. Other State Offices also need to focus on this thrust area.
- AutoLPG continues to be a high growth area and its sales have grown by 61% during this period. Bulk LPG sales have grown by 34% and NDNE (Non-Domestic Non-Exempted) packed sales touched 127 TMT with a growth of 50%. We have signed an agreement with GAIL for ensuring pipeline connectivity to Gurgaon Bottling Plant from Jamnagar-Loni Pipeline. This would effect savings of Rs. 1 crore per annum.
- IndianOil earned Rs. 21 crore as non-fuel revenue through the distributor network during this period as against NFR of Rs. 19 crore during the full financial year 2006-07.
- New aviation business of Continental Airlines, Sri Lankan Airlines, Air Arabia, etc. was secured.
- 58 SERVO Xpress Centres were commissioned. A quantity of 6 TMT of base oil was exported through our subsidiary IOC Middle East, Dubai.
- Supplies Group carried out Advanced Winter Stocking well ahead of time, and the same has been appreciated ASC, Northern Command.
- Operation at the Udaipur and Kota depots were closed from Nov. 07 - expected savings are Rs. 13 crore per annum.
- The performance of subsidiaries has overall been good. IOML reported a 15% growth in sales at 114 TKl. With four new ROs commissioned, we now have 13 ROs in Mauritius. The direct sales of IPPL increased by 277% as compared to the same period last year.
- During this year, our focus areas would be to check adulteration and short delivery of products, inspection by multi-disciplinary teams, third-party certification of our ROs, putting in place vapour recovery systems, etc.
Director (Refineries)
- I wish to begin by complimenting our unheard heroes, Shri Prashant Patel and Shri Girish Joshi, who have done us proud by winning gold medals in the Commonwealth Games.
- Recently, demand for petroleum products has consistently increased. This is a good opportunity to stretch refinery operations. Our refineries achieved the highest ever crude throughput of 12.06 MMT in Q3 of 2007-08, which is 0.37 MMT higher than MOU target. With this, the refinery capacity utilisation was 101.3% in the third quarter of 2007-08. We could have done better during this period but for the flash strike by port workers at Haldia Port from 7.12.2007 to 11.12.2007 coupled with cyclonic weather from 14.12.2007 to 17.12.2007. These factors adversely affected crude availability and consequently crude throughput at Barauni and Haldia Refineries.
- The crude throughput for April-Dec'07 period is 35.12 MMT, equivalent to 99% capacity utilization during this period despite of major shut-downs in Mathura and Gujarat Refineries. Such good operation helped in meeting the increased product demand and also tiding over the situation arising out of many planned shutdowns of the refineries, as I just mentioned. Gujarat Refinery did a wonderful job in shutdown management and completed the FCC shut-down 7 days ahead of schedule. My compliments to Gujarat team.
- I am happy to say that the Gross Refining Margins (GRMs) during the third quarter of 2006-07 continued to be good at USD 10.00 per barrel due to several new initiatives such as use of new crude grades, higher capacity utilization of secondary units etc. High sulphur crude processing at Refineries increased to 48.6% during the period Apr-Dec'07 against 43.7% in 2006-07. Also, heavy crude processing was also enhanced. Favourable crude and product prices also contributed to the increased GRM. Panipat and Mathura Refineries are clocking GRMs in the range of USD 11-12 per barrel. In the current situation of high product demand, we need to exploit the full potential. Small modifications need to be done quickly. Now the bottleneck is the availability of crude limited by the crude pipeline capacity. Pipelines Division may need to effect minor changes quickly to improve the crude supply.
- Since about last one month, shipping freight market is showing an upward trend across all sectors with sharp spikes at times from 100 world scale level to 320 world scale level (WSL). Such an increase in freight rates has been attributed to product shortages in China and consequently sharp increase in refinery throughputs, 20 year low inventories in Japan and other OECD countries, detention of tankers due to bad weather in the Mediterranean region etc. Despite the crunch on availability of Suezmax and VLCC tankers, it is commendable that the Shipping chartering team has been able to charter liners at costs cheaper than the market rates.
- The draft at Haldia port during December was very low as compared to the corresponding period in the last year. The average draft at Haldia during Dec.2007 remained low at 7.08 m as against 7.62 m in Dec. 2005 and 7.35 m in Dec. 2006. This is resulting in increased lighterage operation, ocean loss and demurrage. A close coordination between Marketing and Refineries is to be maintained for priority berthing of tankers to minimise demurrage at Haldia Port keeping all aspects in view such as crude inventory, product situation, etc.
- Seven Clean Development Mechanism projects are under various stages of validation. This is an initiative against global warming and host country approval has been obtained for four projects, one each at Guwahati, Haldia, Digboi and Panipat Refineries. Application for registration of CDM project at Digboi is expected in Jan'08.
- On customs duty claims, at SMPL Vadinar, a refund of Rs.46.93 crore has been received for 107 bill of entries during the year 2007-08 so far. Further, Assessment of 144 bill of entries involving refund of Rs.91.08 crore has been completed. Refund claim for the same is being lodged. In Haldia Port, out of 3566 bill of entries, assessment by Customs Department is over for 1378 bill of entries and the assessment order is awaited. A Writ Petition challenging the Ordinance for introduction of Entry Tax on crude oil for Mathura Refinery w.e.f. 01.01.1999 by UP Govt was filed by IndianOil in Allahabad High Court. Hearing of the case by Allahabad High Court is over and judgment is awaited.
- A Process Design & Engineering group at Refs. Hqrs. has been constituted for small modification jobs. They have recently completed the revamp of Vacuum Distillation Unit at Panipat resulting in monetary savings of Rs. 8.50 crore as well as time.
- The projects are facing severe constraints posed by the prevailing market condition due to concurrent execution of several mega projects in the petroleum & energy sectors in the country as well as overseas. Participation by the reputed bidders as consultants or as contractors is becoming scarce. Lesser competition is often resulting in either higher quotes and/or enhanced time for execution. However, major projects are on schedule as on date and we hope to complete them on time without any time / cost overruns.
- With great difficulty, the dredging & reclamation job of Paradip Refinery Project (PDRP) and Project Management Consultants (PMCs) for MS Quality Improvement projects at Barauni, Guwahati & Digboi have been lined up in Oct'07 & Dec'07 respectively. To overcome the problem, serious thoughts are being given to acquire some Engineering Company and form long-term alliance with PMCs. The saving in PMC job for Barauni, Digboi and Guwahati by lining up two PMC against single bid of EIL was about Rs.80 crore. Besides this, the execution mode of a number of packages of different projects has been converted from LSTK mode to conventional mode (DHDT, HGU & VGO-HDT of RESID-J, SRU of OHCU-H) to keep the risk of cost overrun under control. These immediate timely actions were also necessary to avoid time overrun risk.
- Focused efforts are being put in for completion of MS Quality Improvement Projects (MSQIP) at Panipat, Mathura, Barauni, Guwahati & Digboi to meet the timeline of Apr. 2010 set by GOI for supply of Euro-III/IV quality fuel. To achieve the schedule, actions like proactively procuring Reactors & Compressors of these projects, which are long delivery critical equipment, has been taken even before PMC is appointed.
Area of concern:
- The PX-PTA operations continue to be an area of concern. A committee constituted for the same by Chairman has suggested some measures. After the planned shutdown of PTA and PX units in Jan'08, we hope to have fully stabilised operation. Improvement will happen by replacement of catalyst in the Isomerisation Unit. Meanwhile, 17,000 tonnes of PX has been moved to Mundra for export.
- In addition to paucity of reputed consultants / contractors for undertaking construction jobs, the non-availability of skilled manpower like carpenters, bar-benders, fitters, high pressure welders, experienced supervisory staff of contractors as well as PMCs, etc. is also a major cause of concern for all the ongoing projects, specially in the northern sector like Panipat.
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Director (R&D)
- R&D plans to incur a capital expenditure of over Rs. 600 crore in the next four years in consolidating the ongoing initiatives and carrying out R&D in the frontier areas, viz., catalysts, nano-sciences, bio-sciences, biofuels, Hydrogen, petrochemicals and polymer research.
- Along with CPCL engineers, our team has developed a configuration for revamp of Cauvery Basin Refinery (CBR) using indigenously developed technologies. It envisages setting up demonstration units for Indalin, INDAdeptG, INDAdeptD, etc. as R&D expenditure at CBR for showcasing these technologies for commercialisation. The configuration also includes Indmax to upgrade the bottom of the barrel and enhance the GRM of this simple distillation refinery.
- An agreement has been signed with NRL for licencing of Needle Coke Technology to NRL. This will generate significant licensing fee and royalty on sale of needle coke.
- Our JV - Indo Cat Private Limited - is progressing well. The plant is expected to be commissioned by Jan. 2009 and novel catalysts and additives should be available in the market from March 2009 onwards.
- Our novel DHDT catalyst is slated for demonstration in CPCL. We have entered into an agreement with M/S Sud-Chemie India Limited for manufacturing the catalyst. It would be available in April 2008 and would be charged into the DHDT of CPCL in June 2008 for trial.
- An agreement was signed with the National Centre for Catalysis Research, IIT Madras, for development of a special grade alumina with specific properties for use in catalyst formulations.
- A new combi-distillation facility has been procured to enhance crude assay generation capability from 10-12 samples per year presently to 18-20 samples.
- In the area of Lube Technology, M/s. MAN B&W has accorded base oil inter-changeability clearance to marine shipboard oils, which will enable us to use base oils available globally.
- Studies have been conducted on production of second-generation bio-fuels by co-processing vegetable oil using Diesel hydroprocessing assets in refineries. Initial experiments conducted with 10% vegetable oil have shown cetane improvement of 3-4 units compared to 1-2 units in DHDS. Further work is in progress.
- Discussions were held with NREL, USA, for conducting joint studies on the lifecycle emissions of bio-diesel from Jatropha, and production of ethanol and bio-butanol from ligno-cellulose sources.
- Though the project of H-CNG dispensing station at Delhi is delayed by a few months, we are hopeful that the station will be commissioned by December 2008. It is planned to put up 2 more stations in Delhi before the Commonwealth Games in 2010.
- Petrochemicals and Polymers research: R&D in Polyolefins is being taken up on top priority, which includes setting up state-of-the-art polyolefin R&D infrastructure by 2009.
- During his visit to the R&D Centre, Chairman inaugurated an Air Quality Monitoring Van designed for monitoring CO, NOx, SO2, BTX, Hydrocarbons, Ozone and SPM in the vicinity of fuel retail outlets and at other locations in and around the city of Delhi.
- IndianOil would host the prestigious World Hydrogen Technology Convention (WHTC) - 2009 in Delhi, jointly with SIAM, IIT-Delhi and BHU.
- The very purpose of R&D activities is to work for continual improvement. All work and initiatives by IndianOil's R&D Centre are directed towards improving performance of the assets, products and services of our Corporation. With the fast changing product specifications, ever-increasing customer demand and environmental pressure, it is required to re-align our R&D strategies. While we work on the 11th Five Year Plan, we have to prepare ourselves for the year 2050. I propose to hold an exclusive R&D Strategy Meet involving all our business and operations leaders and thinkers.
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Director (Pipelines)
- Chairman had formally inaugurated the 150 km long Lasariya-Chittaurgrah Branch Pipeline and the Marketing terminal at Chittaurgarh on 13th October 2007. Product delivery to Chittaurgarh has commenced and is being further distributed in 10 districts of Rajasthan.
- IndianOil's petroleum product pipelines have registered a cumulative increase in throughput of more than 12% at 15.44 MMTPA up to the end of the third quarter of this financial year, compared to that in the corresponding period in the previous year. The crude oil pipelines have achieved a throughput of 26.40 MMTPA in the first nine months of the current financial year, which is 11% higher compared to that in the corresponding period of the previous year. The Refineries Division has sought more crude for Panipat and Gujarat Refineries and Pipelines Division has been pumping beyond the designed capacity.
- The crude oil terminal at Vadinar has handled 109 crude oil tankers, including 52 VLCCs, till the end of the third quarter of this financial year. At Mundra, 32 tankers have been handled at the SPM facilities in the first nine months of the financial year.
- At Vadinar crude oil tank farm, the Tank No.SS-07 was commissioned after M&I on 27th September 2007. M&I activities in Tank No. SS-12A are currently in progress and scheduled to be completed in May 2008. At Viramgam crude oil tank farm, Tank No. VT-03 is under scheduled maintenance. The work would be completed in July 2008.
- There has been no incidence of fire or accident in Pipelines Division till the third quarter of this financial year.
- To combat pilferage attempts on petroleum pipelines, especially in the Western Region, the arrangements for physical patrolling of the ROW are being revised to ensure that each location of the ROW is physically seen by the patrolman at least once every day. In addition, night patrolling with armed guards is also being arranged. Both these would in position by the end of this month.
- The Pipelines Division is currently preparing the manuals for operation, maintenance and inspection of the pipeline system of Greater Nile Petroleum Operating Company (GNPOC), Sudan. This one-year contract with a total value of US $ 839,000 would be completed by April 2008.
- During October and November 2007, three training programmes have been conducted for a batch of four engineers each of GNPOC, Sudan. In September 2007, the Pipelines Division has imparted training to senior executives of Oil India Ltd. on petroleum product pipeline operations through a specially designed programme.
- Commissioned in 1982, the Mathura-Jalandhar Pipeline completed 25 glorious years of service in December 2007. My congratulations to NRPL on this occasion.
Projects
- Work is progressing well on our first LPG pipeline from Panipat to Jalandhar and the first gas pipeline from Dadri to Panipat. We are also laying two ATF pipelines - one up to the Chennai airport from CPCL and the other to the international airport at Bengaluru from our Devangonthi terminal. Work on Chennai-Bengaluru pipeline and the Mathura-Bharatpur pipeline is also progressing well.
- The white oil dockline from the marketing installation at Narimanam to CPCL's Cauvery Basin Refinery Oil Jetty at Nagapattinam (Tamil Nadu) has been commissioned.
- As regards Koyali-Ratlam pipeline and the associated marketing terminal facilities at Ratlam, work is currently progressing in full swing, and we are hopeful of commissioning the pipeline and the terminal facilities in the last quarter of 2008.
Areas of concern:
- 15 incidents of pilferage from pipelines were reported in Gujarat and Rajasthan. The matter has been taken up at the highest levels. Rajasthan police, in coordination with our officers, have seized oil tankers involved in pilferage of oil on the Lasariya-Chittaurgarh branch pipeline. The police have also raided some specific locations at Delhi and Rajasthan where the stolen oil was used.
- There are a few concerns pertaining to land acquisition in the case of Koyali-Ratlam pipeline.
- The balance offshore work related to the installation of the SPM facilities and the associated transfer pipeline at Paradip is pending. Work is relatively slower than what was originally planned on account of severely adverse sea conditions.
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