Page 155 - CW E-Magazine (21-1-2025)

Hydrocarbons

OUTLOOK
‘Rising domestic fuel demand to offset compressed

GRMs in FY2025-26’

Rising domestic demand for refi ned stable retail prices, the ratings agency said. ever, the impact of low crude oil price is
petroleum products such as petrol and “Indian oil and gas demand is expected expected to be offset by the removal of
diesel on the back of an expanding eco- to remain strong in FY26, leading to an special excise on the production of crude
nomy is expected to off-set the compressed expansion in the refi nery and petrochemi- and an increase in production expected
gross refi nery margins (GRMs) of oil cal capacities. India’s refi nery capacity from new discoveries.
marketing companies in FY2025-26, as is expected to increase by 22 percent in
per India Ratings and Research (Ind-Ra). the next 2-3 years. Ind-Ra expects strong Upstream companies will continue to
demand to be driving oil and gas investments earn healthy margins, despite the current
GRMs would remain subdued during decisions in India,” said Ms. Bhanu Patni, decline in crude oil prices, as they would
FY26, similar to H1 FY25, on account of Associate Director (Corporates) at Ind-Ra. remain above $65 per barrel, Ind-Ra said.
slowing global consumer and industrial Maintaining a neutral outlook on the oil This would keep suffi cient cushion in
demand, particularly in China. Besides, and gas sector for FY26, Ind-Ra expects margin, with estimated break-even cost of
additional supply fl owing from refi nery credit profi le of downstream companies to production at $40-45 per barrel, leaving
capacity additions seen globally is also remain stable during the year. Credit pro- EBITDA of $20-30, it added. Oil prices
putting pressure on margins, it opined. fi le may see an addition of debt on account averaged $78.7 a barrel during Q2 FY25
of under construction refi nery expansion and declined to $75.2 during October
Rising demand projects for all the major OMCs. 2024 and $73.02 during November 2024.
However, demand for petroleum pro- “Crude prices will remain dependent on
ducts in India is expected to remain strong Upstream global geopolitical developments, includ-
during FY26, with bulk demand coming The credit profi le of upstream oil ing demand pickup and production tar-
from diesel, petrol and LPG. EBITDA companies shall remain dependent on gets announced by the OPEC+. However,
for Indian integrated OMCs was suppor- crude oil prices. EBITDA generation for domestic producers, Ind-Ra expects
ted by healthy marketing margins during for upstream companies may fall with a some relief from the impact of decline in
H1 FY25 on account of declining crude moderation in oil prices and a reduction oil prices on account of the removal of
oil prices, subdued crack spreads and in production from legacy fi elds. How- windfall profi t tax on crude,” it opined.
PREPARING FOR EMERGENCIES
ISPRL plans oil reserve in Madhya Pradesh

State-owned Indian Strategic Petro- 5.3-million tonnes (mt). The second phase north or northeast India, away from the
leum Reserves (ISPRL) is reportedly of SPRs totalling 6.5-mt is planned at coast. An emergency crude stockpile at
mulling the establishment of a new stra- Karnataka’s Padur and Odisha’s Chandikhol, Bina can supply to Bharat Petroleum
tegic reserve in Madhya Pradesh (MP) to which, when built, will again be best suited Corporation Ltd.’s Bina refi nery as well
serve refi neries in the northern part of the for refi neries closer to the coast. as Indian Oil’s and HPCL’s refi neries in
country during supply emergencies. neighbouring states. ISPRL is also said to
SPRs are crucial to India’s strategy have started a “feasibility study” for build-
ISPRL has mandated Engineers India of managing smooth crude supplies to ing about 5-mt of SPR at Bikaner, which
(EIL) to conduct a “pre-feasibility study” refi neries during emergencies at a time would make it the country’s fi rst salt cavern
for a strategic crude oil reserve at Bina in when domestic consumption of petroleum reserve. Currently, all the operational SPRs
MP. The study is likely to be completed in products is rapidly rising. India’s strategic are rock caverns. ISPRL is also evaluating
3-4 months. According to experts, the loca- reserves are currently limited, making the feasibility of setting up a natural gas re-
tion is strategic as it can serve inland refi ne- capacity expansion vital for meeting emer- serve in the same area. ISPRL is planning
ries in case of a supply emergency. All other gency needs. SPRs in the US and China to further expand SPRs in Mangaluru. It
strategic petroleum reserves (SPRs) are are manifold larger than those in India. has prepared a “detailed feasibility report”
close to the coast. India’s operational SPRs Nearly a fi fth of India’s refi ning capacity, and acquired land from Mangalore Special
are currently located at Visakhapatnam in including the soon-to-be ready refi nery Economic Zone (MSEZL) for building
Andhra Pradesh, and Mangaluru and Padur of Hindustan Petroleum Corporation Ltd. another 1.5-mt capacity storage facility
in Karnataka, with a combined capacity of (HPCL) at Barmer, Rajasthan, is in central, near the operational SPR in the area.

Chemical Weekly January 21, 2025 155

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