S Varadarajan, Chairman & MD, BPCL says the company's gross refining margins (GRMs) will be fairly steady and the company will increase its Bina refinery's capacity to 7.8 million tonne in the near-future and targets 15 MT refining capacity for each of its units.
Below is the transcript of S Varadarajan’s interview with Priya Sheth on CNBC-TV18.
Q: Your views on your gross refining margins (GRMs).
A: I think the gross refining margins (GRMs), for the first quarter has been really high. There were lot of factors which went into this particular phase. Clearly, these are not going to be sustainable for the long run but the GRMs has stabilised. Q2 probably will reflect some drop in the crude and certain amount of inventory losses which will be there. However, the overall margins have been fairly steady going forward.
I don’t think there are going to be too many shifts as far GRMs are concerned. Yes, we have taken our positions that the GRMs based on our current complexity at Mumbai and Cochin should be in the region of USD 4-6 per barrel. So, that should be the space in which you should be operating. After a Cochin expansion we should have much higher margins in Cochin because the complexity goes up from 6 plus to 9 plus.
Q: I also wanted to talk you about Bina Refinery, a lot of robust expansion plans that you have in terms of capacity. Can you run us through what is the kind of expansion you are looking at and what are the timeline for the same?
A: Bina is currently stabilised at 6 million tonne. It is operating at full capacity. In fact the first quarter of the current financial year they have already turned in profits. We have approved a low cost expansion and de-bottlenecking for Bina.
This will take up the capacity from the current 6 million tonne to 7.8 million tonne, so operating closed to around 8 million tonne. The cost of this, low cost expansion is going to be about Rs 3,000 crore. We have sought the government approvals for making fresh investments into the Bina expansion.
Our partner- Omani’s are not going to participate as far as this round of expansion is concerned. Going forward sometime next year we may look at a public issue or bring in a strategic partner as part of the larger equity correction. We do have plans to take up Bina ultimately to 15 million tonne.
The demand in that belt and in the central and the northern part is very attractive. We need to meet these products from moving from the coast. Hence Bina fits in into the larger process of expansion so we will look at taking up Bina from 8 to 15 at different points in time.
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