Dear Indian Oil Investors,
My heartiest greetings to you on my personal behalf and on behalf of Indian Oil People.
It is my pleasant duty once again to present to you the Integrated Annual Report of your Company for the financial year 2018-19, focusing on the performance highlights of the year and the high-growth agenda lined up for the future.
You will notice that, like last year, this year too we have followed the Integrated Reporting format focusing on the Company’s six key capitals -- Financial Capital, Manufactured Capital, Human Capital, Intellectual Capital, Social & Relationship Capital and Natural Capital.
Without an iota of doubt, Indian Oil’s strength as a successful enterprise stems from its rich human capital. With a proud legacy of fuelling the growth of all segments of the economy for the past six decades, the 33,000-strong team of lOCians is gearing to play a leadership role in these exciting times as a new India rises on the global arena. Indian Oil People take pride in being future-ready by continuously upgrading their skills and capabilities.
Your Company has kept its promises to the nation since inception, working for self-sufficiency and security in energy and related areas. Surmounting many challenges, it achieved sustained growth in sync with the nation to become India’s leading Maharatna PSU and one of the largest commercial undertakings.
As the fastest growing economy in the world, India requires access to abundant energy, delivered in new and affordable ways. Indian Oil is fully geared for the challenge. Over 50,000 customer touch points of your Company spread across every nook and corner of the nation provide energy solutions to a billion-plus customers to keep India on the move. And we are further expanding our refining capacity, supply & distribution channels and marketing network in line with the growing domestic demand.
Today, as a low-carbon future beckons on the horizon, Indian Oil is engaged in building a future full of clean and green energy. We are leading the industry in an unprecedented quantum leap from BS-IV fuels to a world-standard BS-VI compliant regime by April 2020. In line with global trends, we are investing in a big way in India’s emerging natural gas economy with new products and offerings for diverse customer groups. We are deeply committed to the sustainability principle and are progressively integrating alternative energy and renewable in our operations as well as in our expanding bouquet of offerings.
The fount of your Company’s future-readiness is its world-class R&D Centre, which gives shape to products and technologies of the future. Its rich repository of intellectual capital has now crossed a major milestone of over a thousand patents.
The hydrocarbons sector has contributed enormously to global economic progress over the last century. Today, however, it is facing competition from new and emerging energy options and technologies. The 21st century is definitely going to witness economies based on clean fuels, and low-carbon options will get progressively entrenched in the energy mix, with policy backing. It is time for the oil & gas corporate to once again reinvent themselves and continue to play a lead role, especially in those parts of the world like India where primary energy consumption continues to register a dramatic rise.
The need of the hour is to integrate new technologies like digitalization, Artificial Intelligence, Internet of Things, etc., in all segments of the industry, together with innovative process technologies, to provide efficient, clean and green energy solutions for all customer segments and businesses to ensure that nation’s economic growth is not hampered in any way.
The domestic refining sector is attempting a very ambitious project of leap-fogging from BS-IV to BS-VI fuels regime. Indian refiners are on track to usher in the cleanest automotive fuels across the country from April 2020. In fact, Indian Oil refineries have completed over 90% of the BS-VI projects and should be ready to supply the upgraded fuels well within the stipulated timeline. The success of this ambitious initiative will further enhance India’s credentials as a world-class refining hub in Asia, with the fourth largest refining capacity (249.4 MMTPA) in the world.
The country has robust supply & distribution channels, a 30,000-km network of oil & gas pipelines, about 24,000 LPG distributors, and over 64,600 fuel stations, with another 55,000 in the offing.
Road to reform: India’s fuels up gradation programme
- BS-IV fuels implementation across India: Completed by April 2017
- BS-VI fuels implementation in NCT: Completed by April 2018
- BS-VI implementation in NCR and Agra: Underway from April to Oct. 2019
- BS-VI fuels implementation across India: To be completed by April 2020
- Estimated investment of OMC refineries on BS-III to BS-VI conversion projects: Rs. 53,500 crore
Global oil & gas scenario
- Global primary energy consumption grew by 2.3% in 2018, as against 1.9% in 2017
- Oil demand grew by 1.2%, with natural gas as the fastest growing fuel, accounting for 44.5% of the increase in total energy demand
- Brent crude oil prices averaged $71.1 per barrel in
2018, registering a significant increase of $16.7 per barrel over 2017
Indian oil & gas scenario
- India’s petroleum products consumption in 2018-19 was 211.6 MMT, with 2.7% growth over 2017-18
- Petrol consumption rose by 8.1%, diesel by 3%, and LPG by 6.8%
- India’s refining capacity stood at 249.4 MMTPA at the end of 2018-19, second largest in Asia
- Crude oil imports rose by 2.8% to 226.6 MMT
- Indian crude oil basket averaged at $69.8/barrel in 2018-19, 23.8% higher than 2017-18 level
INDIAN OIL: STRENGTHENING CORE BUSINESS
Your Company’s performance in the financial year 2018-19 has been exceptional in terms of both operational and financial parameters. Besides posting all-time high records in the three major parameters - sales as well as refineries and pipelines throughputs - the Company crossed the Rs. 6 lakh crore milestone in turnover for the year, with handsome profits. With numero uno position in the downstream petroleum sector, the Company continued with its legacy of putting the nation first and providing viable fuel solutions to diverse customer groups, while at the same time strengthening its new verticals of E&P, Petrochemicals and Gas.
Your Company, which caters to nearly half of India’s petroleum consumption, registered its best ever sales volumes in 201819. In the backdrop of India’s primary energy demand outpacing global demand, rising infrastructure projects and a surge in commercial vehicle sales led to record high diesel consumption in 2018-19. Matching this pace of growth, Indian Oil maintained its place at the top and did well in institutional sales too, registering increase in market share in all products. Similarly, your Company’s time-tested commitment and service to the defence forces and the security eco-system of the nation have won many accolades.
Indian Oil: Fuelling a billion dreams
- Indian Oil’s turnover crossed Rs. 6 lakh crore milestone in 2018-19
- Sales, including exports, in 2018-19: 89.89 MMT
- Exports in 2018-19:5.24 MMT
- Number of customer touch-points crossed the 50,000 mark
- Total No. of fuel stations automated: 27,700
- New heights in aviation fuelling, with 116 AFSs.
As the industry leader in retail sales, Indian Oil completed automation of its countrywide fuel stations network during the year to enhance Q&Q (quality & quantity) assurance to its customers. The ambitious Project Dhruva initiative currently underway encompasses new technologies and services to achieve greater efficiency in operations and a superior buying experience for your Company’s retail customers.
LPG for all: Clean fuel, better life
- Total LPG households in India: 26.5 crore
- PaHaL households receiving subsidy in their bank accounts: 24.5 crore
- PMUY target: Deposit-free LPG connections to 8 crore BPL households by 2020
- PMUY target achieved till now: 7.2 crore households
- LPG penetration achieved: Over 94%
- New Indane connections released in 2018-19: Over 2 crore, highest in a year
- Indian Oil’s LPG sales surpassed 1 million tonnes a month
Over the last five years, your Company has had the privilege of spearheading mega schemes like PaHaL LPG subsidy scheme, #GiveItUp campaign and PMUY (Pradhan Mantri Ujjwala Yojana) that have made clean energy accessible across socioeconomic divides.
Indian Oil has been extending the reach of its Indane Superbrand to more households every year. Leading the push for clean energy, the Company released the highest ever number of new LPG connections in a year in 2018-19.
SERVO, another Indian Oil Superbrand, achieved top position in the retail lubes segment for the first time in recent years, besides registering impressive growth in overall finished lubes. Your Company’s aviation fuelling business too gained higher altitude with addition of nine more Aviation Fuel Stations (AFS) during the year.
Your Company exported 5.24 million tonnes of products in 2018-19. Product exports to Nepal rose from 2.1 to 2.4 million tonnes and export of Indane Nanocut (additised LPG suited for high-temperature industrial applications) to Bangladesh commenced during the year. Indian Oil opened a new representative office in Nepal in addition to existing offices in Myanmar and Bangladesh, and full-fledged subsidiaries operating in Sri Lanka, Mauritius, Singapore and UAE.
Indian Oil refineries excelled in all major physical parameters and achieved a record combined crude oil throughput during 2018-19. The refineries also registered the best ever numbers in Specific Energy Consumption (MBN), Energy Intensity Index (Ell) and Fuel & Loss.
A world-scale Polypropylene (PP) plant was commissioned at Paradip Refinery in Feb. 2019 to act as the mother unit in nurturing the downstream plastics processing industry in the region. Work has also commenced on a Monoethylene Glycol (MEG) plant at Paradip Refinery, which is envisaged as a key driver for the textiles industry in the region, especially for polyester fibre. Two other major projects in progress are: capacity expansion of Indian Oil’s Barauni Refinery and an ATF production unit using the in-house INDJet technology of Indian Oil’s R&D Centre.
The energy for India’s rise
- Refineries throughput in 2018-19: 71.82 MMT
- Major projects commissioned during 2018-19:
- PP plant at Paradip Refinery: 680 KTA
- Major projects commenced during 2018-19:
- MEG plant at Paradip Refinery: 357 KTA
- Barauni Refinery expansion from 6 to 9 MMTPA - ATF production unit using IndJet technology
- 4.6 MMT term contracts concluded for crude oil from USA
For the first time, your Company concluded term contracts for sourcing crude oil from USA during the year, besides enhancing its capabilities to process crude oil grades from a wider and cheaper basket, with flexibility for sourcing additional volumes in term contracts to manage contingencies.
During 2018-19, Indian Oil’s crude oil & product pipelines clocked the highest ever combined throughput, setting a new record for the fifth consecutive year. The countrywide pipelines network provides immense competitive advantage to the Company in the new era of digitally-aided logistics.
Pipelines: Arteries for energy flow
- Pipelines throughput during 2018-19: 88.53 MMT
- Pipelines length commissioned in 2018-19: 950 km
- Major among them:
- Paradip-Haldia-Durgapur LPG pipeline: 516 km - Jaipur-Panipat naphtha pipeline: 344 km
- Total length of pipelines network: 14,231 km
- Combined throughput capacity: 94.2 MMTPA for liquid pipelines and 21.69 MMSCMD for gas pipelines
- Major pipeline projects underway:
- Kandla-Gorakhpur LPG pipeline: 2,757 km - Indradhanush gas grid in the northeast: 1,656 km
Work has commenced on two major pipeline projects with joint venture (JV) partners during the year 2018-19. The Kandla-Gorakhpur LPG Pipeline, on completion, will be the longest LPG pipeline in the world, and will directly feed 22 bottling plants en route. The project will be executed by a JV of Indian Oil, BPCL and HPCL. Indian Oil has also formed a JV, Indradhanush Gas Grid Ltd., with ONGC, OIL, GAIL and NRL to develop a gas pipelines grid connecting all the State capitals of the northeast.
Other than its City Gas Distribution (CGD) projects and those with JV partners, 17 pipeline projects of the Company with a combined capex of about Rs. 24,000 crore are in various stages of implementation. On their completion in the next three years, Indian Oil’s pipelines network will expand to about 21,500 km.
Research & Development
Indian Oil’s R&D Centre is shaping into a game-changer in the ensuing competitive scenario as your Company adds new technologies, products and services to its bouquet of offerings.
The year 2018-19 saw your Company further build upon the confidence reposed by its customers by developing and commercializing products and process technologies that cater to the changing industry needs.
Inventing the future with world-class R&D
- Over four decades of R&D expertise in lubricants formulation, refinery processes, pipeline transportation, catalysts & additives, alternative fuels, etc.
- Over 1,000 patents filed till date; 100 to 120 patents per annum in the last five years
- Over 100 new lubricant formulations developed in 2018-19,
- State-of-the-art Product Applications Development Centre for polymers business
- Support to start-ups in energy and social innovation sectors
Adding to the Company’s intellectual wealth, the R&D Centre crossed a stellar milestone of filing its 1,001st patent recently. Indian Oil’s IP (Intellectual Property) portfolio currently comprises 794 active patents, of which 542 patents were granted abroad and 252 in India. Your Company has a higher commercialization rate for its patents than the global average. Several of the quality up gradation projects implemented at Indian Oil refineries for production of BS-VI fuels are based on deep desulphurization, is omerisation and dimidiation technology patents developed in-house.
The R&D Centre also commissioned a 5 tonnes-per-day plant at Faridabad for converting organic waste to biogas with a methane content of over 80% based on a novel bio-meth nation technology developed in-house. The Centre is also commercializing a 2G ethanol process, together with a novel enzyme, which reduces ethanol production costs by 30%.
Your Company incurred a capital expenditure of Rs. 28,200 crore in 2018-19; the capital outlay for the current fiscal is Rs.25,083 crore.
BUILDING NEW BUSINESSES
Besides making significant investments in upstream assets and petrochemicals, which are making significant additions to the Company’s business in terms of equity oil and profitability, Indian Oil is integrating natural gas and renewables in its energy value chain in a big way to be ready for a low-carbon future.
Exploration & Production
With a balanced portfolio of producing, discovered and exploration assets, your Company achieved significant progress in terms of 2P reserves, production volumes, equity oil and revenues during the year 2018-19.
Indian Oil currently has participating interest (PI) in 10 domestic and 12 overseas E&P assets spread across 10 countries. The year 2018-19 was marked by acquisition of PI in E&P assets in Oman, Abu Dhabi and Israel.
Heading upstream for energy security
- Balanced portfolio of E&P assets; 10 in India and 12 overseas
- Overseas assets spread across 10 countries: Canada,
USA, Russia, Venezuela, Abu Dhabi, Oman, Libya,
Nigeria, Gabon and Israel
- Strategic tie-ups with over 20 reputed national & international energy corporate
- Acquired participating interest in E&P assets in Oman,
Abu Dhabi and Israel in 2018-19
Indian Oil is fast evolving into a petrochemicals major and has registered a robust 11.4% growth in sales in 2018-19. Backed by world-scale plants and world-class technology, Indian Oil’s PROPEL brand petrochemicals cover over 80% of a broad spectrum applications in plastics and are exported to over 70 countries.
Your Company has invested heavily in this vertical over the last two decades, incurring a capex of over Rs. 25,000 crore
Propelling growth with petrochemicals
- Petrochemicals sales in 2018-19: 2.64 MMT
- Production capacity enhanced to 3.15 MMT
- Major ongoing projects:
- MEG plant at Paradip - Expansion of Naphtha Cracker at Panipat
- New projects envisaged till 2023-24
- Acrylic acid/Oxo-alcohol project at Gujarat
- PX/PTA project at Paradip
- Petcoke gasification in Paradip
- Textiles project in Eastern India
- PBR project at Panipat
in major petrochemical projects such as LAB plant at Gujarat, PX/PTA plant and Naphtha Cracker at Panipat, and PP plant at Paradip. Among the major ongoing projects are MEG plant at Paradip and capacity expansion of Naphtha Cracker at Panipat.
Indian Oil has firm plans to invest Rs. 25,000 crore on various ongoing and new petrochemical projects till 202324 to consolidate business. These projects include revamp/ augmentation of existing capacities and new projects as well as equity investment in Hindustan Urvarak & Rasayan Ltd. (HURL).
The Indian Oil Board has also accorded approval for a Plastics Park at Paradip through a JV with Industrial Development Corporation of Odisha. Similarly, Board approval has been obtained for land procurement and finalization of a JV partner for a textiles project at Bhadrak in Odisha. Industrial Promotion & Investment Corporation of Odisha has allotted 60 acres of land for the textiles project.
Natural gas is transforming into a major business line for your Company, and the recent commissioning of the state-of-the-art LNG import terminal at Ennore has given it a big boost.
As the second largest player in this growing segment, Indian Oil is building infrastructure and retail networks to reach out to all user segments: industry-transport-homes-commercial establishments.
Fuelling the future with natural gas
- Natural gas sales in 2018-19: 3.96 MMT
- Capacity of Ennore LNG terminal: 5 MMTPA
- Geographical Areas (GA) won by Indian Oil on its own after 9th and 10th round of CGD bidding: 17
- GA won in partnership with JVs: 23
- Total tally of GAs with Indian Oil: 40
- Investments in CGD over next 8 years, including equity contribution inJVs: Rs. 10,000 crore
With a portfolio of about 60 R-LNG customers, besides supplies to the Company’s own refineries at Mathura, Panipat and Koyali, Indian Oil registered a 2.6% growth in natural gas sales in 2018-19.
Besides being a JV partner in Indradhanush natural gas pipeline grid in the Northeast, your Company is investing in two more joint ventures that are laying three gas pipelines of a combined length of 3,760 km covering nine States.
Your Company is pursuing an ambitious agenda in city gas distribution (CGD) covering 40 Geographical Areas (GA) on its own as well as with reputed joint venture partners. Indian Oil’s investment on development of CGD networks in the next eight years is likely to be about Rs. 10,000 crore.
Your Company is fully aligned to the country’s aspirations to transit to clean energy and has planned Rs. 25,000 crore investment in green energy projects. Besides a target to scale up its solar energy and wind-power portfolio to 260 MW by the year 2020, Indian Oil has initiated diversification into alternative, renewable energy and bio-fuels-2G &3G ethanol, waste-to-energy and compressed bio-gas (CBG).
Your Company is spearheading the Government’s innovative SATAT (Sustainable Alternative Towards Affordable Transportation) initiative launched in 2018 as a waste-to-wealth measure. With similar calorific value and other properties, CBG has the potential to replace CNG as an affordable fuel in automotive, industrial and commercial uses by conversion of biomass, or any kind of organic waste. In fact, the evolving CBG programme will go a long way in reducing India’s dependence on crude oil imports.
Green energy for a green future
- Rs. 25,000 crore investment planned in alternative energy and sustainable development projects
- Solar energy and wind-power portfolio to be scaled up from 212 MW to 260 MW by the year 2020
- LOIs issued for 96 plants to supply 782 tonnes per day of CBG under SATAT initiative
- 5,000 more Company fuel stations converted to run on solar energy in 2018-19
- Cumulative installed capacity of Company’s 14,000 solar-operated fuel stations: 77 MW
Your Company is implementing an ambitious Rs. 2 lakh crore investments plan in the next 5-7 years to evolve into a future-ready corporate that provides comprehensive energy solutions to diverse user groups in an exciting phase of energy transition and technology disruptions.
Besides focus on refinery expansions, new technologies for clean fuels & enhanced outputs, and refinery-petrochemicals integration, Indian Oil is aggressively leveraging its R&D expertise to move into horizon technologies like 2G & 3G ethanol, bio-fuels, coal gasification, H-CNG, Hydrogen fuel cells, battery technologies, etc. These technologies, along with cleaner fuels and higher engine efficiencies, can offer sustainable solutions to today’s energy challenges.
Keeping this in view, your Company is pursuing a number of new technologies and/or pilot studies in the areas of refinery processes, petrochemicals & polymers, alternative energy and bio-energy in collaboration with reputed partners in India and abroad.
Going closer to consumption centres and consumers in an economical and environment-friendly manner has been the philosophy behind Indian Oil’s pipeline network expansion. And, as the Company grows its LPG and LNG verticals rapidly, its gas pipelines network too is set for phenomenal growth.
Your Company aspires to be a major player in natural gas, with leadership in the R-LNG segment, and is taking steps to enhance its share in LNG sourcing, import terminals, cross-country pipelines, city gas distribution networks and bulk supplies by road-tankers.
Your Company is targeting its own equity oil & gas of 7 MMTPA from its upstream portfolio by the year 2023-24 from 4.39 MMTPA currently, and is continuously on the lookout for acquisition of stakes both in E&P companies as well as individual assets.
You may be aware that your Company had incorporated Hindustan Urvarak & Rasayan Ltd. (HURL) in June 2016 as a joint venture with Coal India Ltd. and NTPC for revival of three fertilizer plants at an estimate cost of Rs. 21,000 crore. Work is progressing at a fast pace on the three plants located at Gorakhpur (Uttar Pradesh), Sindri (Jharkhand) & Barauni (Bihar) and commercial production of neem-coated urea from all the three plants is likely to commence in the first half of the year 2021.
In step with the times
Your Company has a remarkable legacy of growing in step with the times. A certified Great Pace to Work, Indian Oil is continuously improving its human eco-system to achieve cross-divisional synergy and a solutions-oriented approach. The human resource capital is being leveraged in a big way to make your Company a truly learning organization with access to both natural and formal developmental opportunities for all. E-learning is being mainstreamed across the organization and lOCians across functions are being actively encouraged to acquire new knowledge and skills to be active partners of a 21st century organization focused on growth opportunities of the future. With the enterprise getting increasingly younger, new and innovative learning models are being deployed to enable lOCians to continuously improve products and processes.
Your Company’s business strategy has always been in tune with technology and innovations. We have installed the best of automation processes and the latest safety systems at our installations. Optimized operations and logistics, smart terminals, automated fuel supply points and a dedicated field force are helping us lead the competition. We have now embarked on digital transformation of the organization to serve and sustain the trust of our billion-plus customers across 50,000 customer touch-points.
Your Company’s 33,000-strong team represents a formidable array of talent and skills, technical and managerial expertise, demographic diversity and a ‘can do’ attitude infused with the core values of Care, Innovation, Passion and Trust. This signifies a very bright future for Indian Oil. The idea is to create an eco-system of growth for all-round excellence in our pursuit to create happy customers through high-quality products and services, delivered efficiently.
Generations of lOCians have had one thing in common - a steadfast commitment to the idea of India, and Indian Oil as ‘The Energy of India.'' As we complete 60 years of our operations, I can confidently say that the best of Indian Oil has just begun.
I look forward to your support and encouragement for the journey ahead.