Expect throughput to be better in FY17: Chennai Petro

Strengthening of the gross refining margin (GRM) to USD 5.27 per barrel from USD 1.97 was one of the primary reason for a strong performance in FY16, said B Ashok, Chairman of Indian Oil Corporation, in an interview to CNBC-TV18 on subsidiary Chennai Petroleum Corp's (CPCL’s) quarterly results

Chennai Petroleum (CPCL) reported net profit of Rs 266 crore in the fourth quarter of FY16 compared to Rs 34 crore in the third quarter. The operating margin more than doubled quarter-on-quarter (QoQ) to 6.8 percent from 3.0 percent.

Ashok said throughput during FY16 was lower YoY at 9.644 million tonne from 10.782 million tonne due to scheduled plant shut-downs and floods in Chennai. However, the throughput is expected to improve in FY17, he said.

He expects Chennai Petro’s Ennore plant to become operational by mid-2018 and Indian Oil's LNG re-gasification plant at Dhamra to be operational by end of 2018.Below is the verbatim transcript of B Ashok’s interview with CNBC-TV18's Latha Venkatesh.Q: Can you give us some more details about how you notched up such a good profit number. What was the utilisation and what was the inventory gain or loss?A: The quarterly performance in terms of throughput in terms of Chennai Petroleum Corporation Limited (CPCL) was 2.832 million tonnes as compared to 2.716 million tonnes for the corresponding period of the previous year which was an increase of 4.3 percent. However actually for the whole year the throughput was slightly lower at 9.644 million tonnes as compared to 10.782 million tonnes for the corresponding period. This reduction was consequence of plant shut down as well as floods which impacted Chennai in November and December. But I must say that probably CPCL was one of the first units to come out of the floods, immediately on receding of water. So, that has helped them. The distillate yield was highest ever at 72.5 percent as compared to 72.1 percent for year. Turnover was slightly lower at 34,953 against 47,878 which is of course due to the fall in prices.Q: Primarily because of that I had more of an eye on inventory. In Q4 itself was it an inventory loss or did you actually book an inventory gain?A: No, I would say that in terms of overall - I can\\'t remember the figure for Q4 but overall there has been an inventory loss during the current year, but it has not been as substantial as last year. So, in that sense there has been a gain. But where gains have been I can bring it to your attention. The gains have been because the gross refinery margins (GRM) have been better within the current year.Q: How much were the GRMS?A: We earned GRM of Rs 1,498 crore which translates to USD 5.27 per barrel as compared to USD 1.97 per barrel during the last year. So, this is one of the major implications.Q: I just wanted to know how would you look at both throughput and margins in FY17?A: In terms of throughput we hope to continue with good throughputs but we also need to factor in some of the shutdowns which are bound to happen during the current year. But if you are able to keep your plants shutdown to within the plant period our throughput should be good for FY17 because you must appreciate the fact that these areas the BS-IV has still not kicked off except for Chennai as a city. So, only part of the production of CPCL is on BS-IV and from April next year the entire supplies will have to be BS-IV. So, a lot of projects are going on in the refinery. Probably the project spending in the refinery has been one of the highest ever during the last one year. So, that has been one thing. CPCL has also forecast in terms of certain other factors, especially reducing the Central Sales tax (CST) under-recovery which has happened about Rs 100 crore benefit has been there during the current year because the incidence of CST has been reduced. That means more of product has been sold within the state of Tamil Nadu and not moved out of the state.Q: Your update on the Ennore plant as well as the pipelines. What is the timetable, by when will the Liquefied Natural Gas (LNG) terminal be up and by when will all the pipelines be laid?A: At the moment I can tell you that the project is in full steam. There were three major contracts involved in the project. Basically one was the liquid storage. The second one was the re-gasification facility and the third one is the marine facility. All the three contracts are already in place and works are on in terms of fabrication of the storage tanks and at the site also works are going on in terms of installation of various facilities and so on. So, we expect that by mid 2018 this project should be up and doing and by that time as you know Indian Oil also has won the bid for construction of the pipelines. We do expect that we should be making sufficient progress but what we are quite confident of is that the significant demand area is very close to the project site. Within a radius of about 30-50 kilometres more than 60 percent of the demand is there. So, we think we should be able to cater to that demand at least to start with and the anchor customers obviously is our own refinery of CPCL as well as the nearby fertiliser unit which we should be able to supply as soon as we commission the project.Q: What 2018, mid 2018, end , beginning?A: Mid 2018.Q: What about the Dhamara Port gas facility? I am asking you this on behalf of a whole lot of gas based power units which are hoping that there will be something on the eastern front that will come up sooner or later. Can you give us some update on when your gas units in Dhamara come up?A: Dhamara the project is partnership project between private and public sector and we are also planning a 5 million to start with which is expandable up to 10 million tonnes capacity. We have already booked a capacity of 3 million tonnes in the 5 million tonnes project and obviously Dhamara is extremely close to Paradip refinery which is already commissioned and is in the stabilisation phase and the anchor customer is very close and we also have our other refineries namely Haldia which is also quite close from this project. So we are making good progress along with our partners. We should be in a position to firm up the terms very shortly. We also believe that somewhere towards the end of 2018 this project should be there. We still need to make a lot of progress on the details.Latha: This is a gas terminal?A: Yes, this is a LNG re-gasification terminal and Dhamara Port is the location where this re-gasification terminal is going to be set up.Latha: And you all are making progress on pipelines as well where this re-gasification terminal is going to be set up?A: No, we are making progress as far as the LNG re-gasification facility is concerned. The pipeline is an independent project which has been separately bid out. But we are quite confident by the time the project is ready these things also should be in place.