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IOC raises oil import from Latin America to cut costs

• Economic Times, ET Bureau / Hyderabad
• Created: Mon 31^st AUG 2015

State-owned Indian Oil Corp (IOC) is increasing crude oil imports from as far as Latin America and raising proportion of purchase from spot or cash market to cut costs, said Chairman B Ashok.

IOC, the nation's biggest oil firm, spent Rs 1.65 lakh crore on import of 43.9 million tons of crude oil in 2014-15.

Ashok said oil purchases make up for nearly 92 per cent of IOC's overall costs and the company is "taking a number of steps to reduce the cost of crude-sourcing".

"The crude oil basket is being expanded to include high-value grades and new suppliers -- from Latin American countries, for instance," he said in the company's latest annual report.

IOC, he said, is also optimising the proportion of term and spot crudes to gain price advantage.

Traditionally, state-owned refiners have relied on term imports (annual quantities tied at the beginning of the year with producers mostly in OPEC nation's like Saudi Arabia). This ties the companies and they cannot buy oil available at cheaper rate in spot market or elsewhere.

"Higher volumes of cheaper, heavy crude oil are being processed at our refineries to bring down costs," he said. "Also, new practices are being introduced in crude oil procurement to get better competitive offers."

Ashok said IOC's refining capacity will rise to 80 million tons this fiscal after a 15 million tons per year new refinery is commissioned at Pradip in Odisha.

"Phase-wise commissioning of the mega-project commenced in March, 2015, and shall be completed in the current fiscal. This would greatly enhance your company's competitiveness and operational flexibility in the eastern and southern states," he said.

Also, the company is implementing in-house ideas to enhance profitability and margins, and improve systems and procedures in its refineries.

"In line with capacity expansion, we are also building new pipeline grids and marketing facilities for smooth evacuation of finished products. This is particularly so in case of the states of Odisha, Chattisgarh and Jharkhand, which would be fed by Paradip Refinery," he said.

IOC, he said, shall be focussing more on pipeline transport, which is both economical and environment-friendly compared to other modes.

Its pipelines network currently spans over 11,220 km, and has a throughput capacity of over 80 million tonnes per annum.

"We are implementing projects valued at over Rs 12,000 crore, which would add an additional 22 million tonnes in capacity and about 6,000 km in length to the network," he said.