Interview

Anuj Jain
Director (Finance), Indian Oil Corporation Ltd

Can you shed some light on your Q1FY25 results? What

factors have contributed to the company's performance?
The company reported a net profit of `2,643 crore for Q1FY25.
The reduction in profit vis-a- vis Q4FY24 is primarily on
account of lower refining margins as well as the suppressed
marketing margins. On the physical performance front, during
Q1FY25, the company has registered a growth of 1.4 per cent in
domestic sales volume, led by around 7.3 per cent growth in
auto fuels and 8.8 per cent growth in the gas sales volume over
the last quarter. The throughput of countrywide pipelines
network has increased by 5 per cent but due to shutdowns at
some of the refineries the crude throughput and petrochemical
production are lower as compared to last quarter.

The refinery margins are dependent upon cracks of petroleum

and petrochemical products in the international market and as
there was a sharp decline in the cracks IndianOil has reported a
lower GRM in Q1FY25 as compared to the earlier quarters.
Supported by the improved physical performance, IndianOil
was able to report profits despite lower margins. The company
also maintained the same levels of borrowing in Q1FY25 and
the debt-equity ratio of 0.64 times as on June 30, 2024 which is
around the same level as in the previous financial year.

How is IOCL mitigating risks from Red Sea disruptions to

crude oil supply? What steps are being taken to diversify
import sources and routes?
IndianOil has a broad spectrum of grades in its crude oil basket.

Keeping In Step With

We import crude oil from across the globe. While a major chunk
of the oil comes from the Arab Gulf region, sizeable volume
comes from the West Africa, Mediterranean, Southeast Asia and

Growing Energy Demand the US Gulf regions. Our refineries are capable of processing
several types of crude grades and accordingly we are not
dependent on any one particular grade of crude oil. Further,
Indian Oil Corporation Limited (IOCL), trading as IndianOil has access to several oil majors, traders and national
IndianOil, an Indian multinational energy major, is a oil companies, which helps the company to mitigate the risks
Central Public Sector Undertaking. IndianOil is ranked associated with geopolitical disruptions.
116th on the Fortune Global 500 list of the world’s
We also have a very strong presence in the shipping markets
largest companies as of 2023. It is the largest wherein we successfully manage to secure tonnage as per our
government-owned oil refining and marketing requirement and at the most competitive freight rates.
company in the country both in terms of capacity and Considering the availability of a wide pool of ship owners who
revenue. In this interview, Anuj Jain, Director are willing to work with us, we have access to both clubs of ship
(Finance), IndianOil Corporation, explains the owners; owners willing to transit Red Sea as well as those not
performance of the company, challenges posed by willing to transit the region. Based on risk perception, IndianOil
Red Sea disruptions, state of readiness for Hydrogen actively engages with its business partners to optimally route the
supplies. We are keenly observing how the Red Sea scenario
transportation and LNG sourcing unfolds.

30 DALAL STREET INVESTMENT JOURNAL I AUG 12 - 25, 2024 dsij.in

Can you give some guidance on
your future earnings outlook?
The profitability of the company
largely depends upon the crude
prices and product cracks. Our focus
remains on physical performance of
our refineries, pipelines and
marketing installations.

What investments are being made

to upgrade the existing natural gas
pipeline infrastructure to accommo-
date hydrogen transportation? How
will the company ensure the safety
and reliability of hydrogen trans-
portation through these pipelines?
We have already commenced pilot
study for one of our natural gas
pipelines. A hydrogen readiness assessment is being carried out consumption. India already imports 45-55 per cent of its natural
by one of the leading pipeline transporter companies in Europe. gas requirement, which is expected to substantially rise
Based on the same, the modifications required for transporting considering the country’s target for increasing the share of
up to 10 per cent hydrogen blended natural gas in our system, natural gas up to 15 per cent in its energy basket. Reliance on
shall be finalised. Global industry and safety standards have imported natural gas exposes the market to supply fluctuations
been adopted in the study and the same are being followed to and geopolitical risks.
ensure safety and reliability of hydrogen transportation through
these pipelines. Through such pilot projects, IndianOil envisages In 2022, the global LNG industry witnessed the unprecedented
to get first-hand experience in safe and reliable operation of challenges, marked by volatility in the spot LNG market that
hydrogen transportation through existing natural gas pipeline exposed emerging economies in Asia to significant risks. The
infrastructure. Platts Japan-Korea Marker (JKM) benchmark, which reflects
cargoes delivered into Northeast Asia, averaged USD 33.98/
The long-term LNG contracts with ADNOC and Total Energies, mmBtu in 2022, reaching an annual daily low of USD 18.94/
mmBtu IN January 2022 and hitting an annual high at USD
along with the renewal with Qatar Energy, significantly 84.76/mmBtu on Mar 2022. This sharp and unexpected increase
strengthen your supply position. Could you elaborate on the had far-reaching effects on various sectors in Indian economy.
strategic rationale behind these deals and their impact on Due to price sensitivity of Indian consumers, there was a drop of
14 per cent LNG imports in India in FY23 as compared to the
overall cost competitiveness? previous year due to high spot LNG prices. Long-term LNG
It is pertinent to note that India’s GDP grew at a rate of 8.2 per contracts help in mitigating such fluctuations.
cent in FY24, beating all the estimates, and is projected to grow at
a rate of more than ~7 per cent this year. India is on a robust IndianOil, being the leading energy company of India, has
growth trajectory marked by significant urbanisation coupled remained steadfast in its commitment to fostering a clean
with demographic dividend for driving economic productivity. energy landscape. The company has strategically initiated
India's per capita energy consumption, currently at one-third of discussions with global LNG suppliers for securing long-term
the global average, is having significant potential for growth. With LNG contracts. Last year, we forged two long-term deals, which
India aiming to become a USD 30 trillion economy by 2047, the was a strategic shift from the spot market for meeting our
energy demand is expected to grow in the coming years. demand. These long-term deals with ADNOC and Total
Energies are cost competitive for meeting our growing demand.
Moreover, considering the country’s commitment to achieving Such long-term deals would ensure uninterrupted and
net zero emissions by 2070, natural gas is the fitting choice today affordable supply to Indian customers thereby reducing
for playing the pivotal role of one of the transition fuels. Further, vulnerabilities of a volatile spot market. Moreover, these deals
IndianOil is also augmenting its refining capacity, which will have also enhanced the confidence of other Indian players for
also enhance our demand of natural gas for captive concluding affordable long term LNG deals. DS

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