BPCL plans to invest Rs 75,000-cr in refinery and petrochem expansions in the next five years

Government-owned Bharat Petroleum Corporation Ltd (BPCL) has earmarked Rs 75,000 crore on capacity expansion for the refineries and petrochemical projects to strengthen its presence in the crude oil derivatives market in the next five years. This capital outlay is a part of the company’s overall investment plans to the tune of Rs 170,000 crore by the end of the financial year 2028-29.

BPCL is working towards creeping expansion at the Bina project from the existing refineries, where respective available projects can take up an additional 1-1.5 million tonnes of additional capacity through debottlenecking of the present. BPCL is currently working on this expansion project, which will take up its overall refining capacity from the existing level to 45 million tonnes in the next couple of years. The company clarified that the main capacity expansion would take place at Bina, while other projects would take up another up to 0.5 million tonnes.

Speaking to analysts after announcing the annual financial result 2023-24, G Krishnakumar, Chairman and Managing Director of BPCL, stated, “Overall, we plan to invest approximately Rs 170,000 crore over five years. Of this, approximately Rs 75,000 crore is earmarked for refineries and petrochemical projects. We also plan to undertake strategic pipeline projects with an investment of about Rs 8,000 crore, of which projects worth Rs 5,000 crore have already been identified and the approval process is in place. We will invest more than Rs 20,000 crore for our marketing business.”

BPCL announced two new petrochemical projects in the last year, for which licensors have been onboarded, and the preparation of process packages is underway. These projects will entail an investment of approximately Rs 49,000 crore and another Rs 5,000 crore for various other issues. Additionally, in around 52 CGD licensing areas, a capex of Rs 25,000 crore has been earmarked for the first five years and approximately Rs 45,000 crore for the longer term. To begin with, on the refinery side, BPCL plans to increase capacities amid expectations of the continued increase in fuel demand. Increased capacities will also cater to its diversification strategy into petchem. Accordingly, the company plans to expand its refining capacity to 45 million tonnes per annum by FY 2029, beginning with the brownfield expansion of Bina Refinery.

Plans for FY2024-25
For the financial year (FY) 2024-25, BPCL is estimating a total capital expenditure (capex) outlay of around Rs 15,000 to Rs 16,000 crore, which is expected to go primarily for refinery and petrochemical projects. For the marketing segment, the company is going to allocate around Rs 7,000 crore for various projects, mainly city gas distributions (CGDs) and its existing projects. The company is expecting 2027-28 to scale up the Bina refinery project. The major capex spending will happen for these major projects in FY2027-28 onwards.

Petrochemicals continued to remain the core business of the company. This core business includes refining, marketing of petroleum products, and the upstream. In addition, it is also taking big bets on petrochemicals, gas, green energy, non-fuel retail, and digital segments. The average operating capacity of the petrochemical plants at Kochi Refinery was registered at 60 percent in FY2023-24, which went up to 70 percent so far this year. There is a significant increase in product operating capacity utilization, elevating its gross margin during this year from petrochemicals to around Rs 560 crore as compared to Rs 364 crore registered in the previous year.

In the electrical vehicles (EV) charging business, BPCL plans to reach a total of about 7,000 charging stations by the end of the financial year (FY) 2024-25. As of March 2024, the company has added 2,443 new charging and battery swapping stations, taking its total to 3,135 EV charging stations. Biofuels is another major focus area for BPCL. The company plans to operationalize integrated the First Generation (1G), the Second Generation (2G) ethanol plant in the near term.”

Strengthening marketing infrastructure
To strengthen marketing infrastructure, the government-owned company continues to focus on strengthening infrastructure, which includes augmenting a network of 22,000 outlets with an additional 4,000 new outlets by FY 2029. It will focus on driving profitable growth across aviation, lubes, liquefied petroleum gas (LPG), and I&C segments, along with premiumization across the board. The efforts towards premiumization aim to be centered around non-fuel retail, customer centricity, and digital initiatives. During FY 2023-24 year the company relaunched premium petrol ‘Speed’ to accelerate sales and boost turnover.

Additionally, it will set up about 26 compressed biogas (CBG) plants in the near term. The proposal of setting up a bio-methanation plant of 150 tonnes per day capacity at Kochi by converting biodegradable waste into CBG has been approved by the government of Kerala. The construction is in progress at this project and the company intends to commission it by January 2025. In addition, BPCL is also planning to set up a pilot SAF project.

Increasing focus on gas
In line with the government’s focus to increase gas share in the Indian energy portfolio, from 6 percent to 15 percent, BPCL intends to increase the gas footprint by building optimal City Gas Distribution (CGD) infrastructure and acquiring high-opportunity geographic areas. The company is also exploring enablers like diversification of sourcing, trading capabilities, storage facilities, and also looking at liquefied natural gas (LNG) regasification infrastructure, etc., to support its aspirations.

BPCL’s share of upstream production from its investment in Russia and its stake in Lower Zakum Construction, Abu Dhabi, and Indian blocks was 2.63 million tonnes of oil during FY 2023-24. In exploration block Onshore 1 in Abu Dhabi, activities are progressing as per schedule and the block is expected to move to the development phase shortly. Also, the security situation in Mozambique has been improving progressively and the project is gearing up for a restart. In the Madanam block where BPRL has 40 percent participating interest as non-operator, gas sales have increased from 13,000 SCMD to 53,000 SCMD resulting in reductions of gas flaring from about 70,000 SCMD to 25,000 SCMD. Flaring in the block is expected to be put off in the coming weeks.

The company has also earmarked investments of Rs 32,000 crore for upstream production mainly in Mozambique and Brazil depending on positive developments on grounds. Another, approximately Rs 25,000 crore for the gas business and another Rs 10,000 crore for the green energy business. All these investments will be subject to a positive business case and visibility of returns.

Renewable energy ambition
The strategy aligns with the commitment to Scope-1 and Scope-2 Net Zero emissions by 2040. BPCL has been actively working towards implementing this strategy within the set timelines to fuel its next wave of growth, enabling it to create long-term value for shareholders. As far as green energy is concerned, BPCL aims to build 10 gigawatts of renewable energy portfolio through organic and inorganic acquisition of operating assets by 2040. The company is currently exploring various offers and will shortly be able to zero in on some of them.

“We have strong competencies in the green hydrogen business given our experience in handling and storing hydrogen. We also have significant captive demand in our refineries for hydrogen. We will produce 30 kilotons per annum of green hydrogen in our refineries by 2030 to meet 10 percent of our captive demand. We will also engage in pilots for green hydrogen fuel mobility and other applications,” Krishnakumar added.

The company has an ambition of around 10 gigawatts over the next 15 years. It will significantly help in cost efficiency in terms of the energy consumption at its refinery. Today, in the renewable energy segment, the power generation equalizer, the power generation is coming around Rs. 2.6, Rs. 2.7. Even including the landing, it will be around Rs. 5 or Rs. 5.20. So, with this, there will be significant savings. We have not worked at this point, but when we create this particular portfolio of 10 gigawatts renewable, it will have a significant impact on energy savings for our refinery.


DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com