Plans to expand Visakhapatnam, Mumbai refineries: HPCL

Surana says there are plans to expand the Mumbai Refinery too from 7.5 mt to 9.5 mt.Below is the verbatim transcript of MK Surana’s interview to Reema Tendulkar and Nigel D'Souza on CNBC-TV18. Nigel: I was just looking at it and regional gross refining margins (GRMs) they are trading at 8-month highs. They have really shot up in last month or so. Post quarter one you expected that quarter two GRMs are likely to be a tad bit weakish. But post the surge would your outlook change with regard to quarter two GRMs? A: What I mentioned after quarter one was that normally quarter two is subdued compared to quarter one and that we have seen in July month where the cracks were substantially down. In September it has picked it up and right now the cracks are in the range of USD 12 for gasoline and around USD 11 for High Speed Diesel (HSD). So, that is a good build up. So, if you see average of quarter two it is likely to be lesser than quarter one. Now, normally what happens is after the end of the shut down season and as the end of the winter season when it starts it again the demand picks up. While after quarter one the driving season ends and the demands are lower and so the GRMs become slower. So, that goes in that pattern. Now the current pick up in September is slightly steeper than the July end. Had it gone slowly gradually quarter two would have been much lower than quarter one but a September pick up is good overall. Reema: So, what you are trying to say is that Q2 GRMs will be better than Q1? A: Overall average GRM I don't expect to be more than June quarter. September month GRMs are better but average overall quarter wise I don't expect to be better than Q1. Nigel: Could you tell us what is your outlook clearly on crude, it has been moving up gradually and it is close to its two month highs? A: There has been recent decisions by the Organization of the Petroleum Exporting Countries (OPEC) to maintain the crude production in the range of 32.3 to 33. There is an expectation that probably there may be a cut of around 700,000 barrels a day production. Based on that input there is some pick up in crude prices. But still crude prices are hovering in the range of 50. Lot of analysts believe that actually this decision is subject to the finality in the month of November and even if after taken then the implantation of how quickly it happens based on that many analysts are still predicting that in the next six months the prices may hover in this range. Reema: How is the demand scenario shaping up right now? A: If you see India the growth in the fuel market, let us say, petrol was in the range of 11-12 percent for the April to August months. Similarly for HSD it was around 3-3.2 percent or so. Liquefied Petroleum Gas (LPG) was in the range of 11-12 percent. So, the normal demand in India for petroleum products is likely to be double digit overall. Nigel: Give us an update as well on your refinery output? A: The refinery throughput is more than we have planned for but we had a plant shutdown in the units which we have budgeted for. As far as market sales are concerned we are maintaining our market sales. We had by April to August if you see we had a growth of around of around 11.7 percent in MS, around 3.2 percent in HSD. Around 10.5 percent in LPG. Reema: Any inventory gains we can expect in coming quarter? A: See the September month's crude prices are better than August. So, there is a likelihood of inventory gains.