Expect Q2 net GRMs to be better than Q1; don’t expect much inventory loss: HPCL

As far as the core GRMs are concerned, whether that will be better than previous year and by how much, that we need to see as the end of the quarter there is still a full month remaining, how the crude prices stacks up that time. However, I am quite certain that the Cracks on gas oil and gasoline will be upside for the remaining part of the quarter and so we should be able to see good GRMs in Q2 as compared to Q1.

Reema: What about inventory losses, should we expect no further inventory losses in the current quarter?

A: Crude oil so far had been stable, but we need to see for the remaining period of the month how it goes. At the end of the quarter how the crude prices are compared to the previous weeks. That will decide whether there are inventory losses or not, but we are not expecting much losses of inventory in this quarter.

Anuj: What are the sustainable GRMs going forward?

A: I think for us we should be able to see a GRM of around USD 6 on a sustainable basis till we are completing our expansion, then there will be a certain jump.

Reema: The impact of Hurricane Harvey has lifted the GRMs across the region; particularly for refining companies in India can you quantify the impact Hurricane Harvey has had?

A: In view of Harvey, there is a shortage of gasoline and gas oil in some part of the world and that has led to strengthening the Cracks on gasoline and gas oil. You might be knowing that the gas oil Cracks are running at around USD 15 per barrel and even gas oil Cracks are somewhere in the range of USD 15-16 per barrel. These I am talking of 92 octane gasoline, Singapore Cracks. These are quite good Cracks and it will take some time for the refineries to start up there.

So in the meantime, it will soak up some of the inventories which they may have and there may be some shortages to that extent in those parts of the world. Therefore, we expect that at least for one month or two month, the North American Free Trade Act (NAFTA) Cracks should be continuing or gasoline or gas oil Cracks should continue to be strong.

Anuj: When is this expansion likely to show up in the numbers?

A: Our both the refinery expansions are going to be completed by 2020. At that time we expect our GRMs to add another USD 3 minimum to the GRMs which we are getting. However, in the meantime we also keep on doing certain operational efficiencies, some smaller projects, which keeps on improving the margins by incremental values and that is how you see some of the impact of that in our margins on a regular basis as increase. As far as Bhatinda refinery is concerned, there expansion is completed from 9 million tonne to 11.3 million tonne and the refinery is back to stream after completion of that expansion.

Reema: How have the volumes trended in the months of July as well August; just to get a sense of what kind of volumes you are likely to post in Q2?

A: July month was good in terms of both, motor spirit (MS) and diesel. Motor spirit grew up, April to July figure if we see, the gasoline has moved by around 11 percent, even diesel was moved by 7 percent, LPG was around 11-12 percent. August I see a little bit subdued. So maybe because there were extraordinary up in the July month, and a little bit of impact of that maybe there in the dampening on that and some extraordinary rains in some part of the country, that also may have some impact on that.

Anuj: Last word then on HPCL-ONGC, what is happening there, any valuation which has been decided, details on this one?

A: The government has appointed the advisors for various activities as far as the transaction advisor, valuation advisor, and legal advisors are concerned and they will do their job and then the buyers and the sellers have to decide about the valuation, timing, etc.