Indian Oil targets textiles in the hunt for margins

Indian Oil Corp IOC.NS will expand its petrochemicals capacity and integrate it with its textile business to help offset the impact of low refining margins, the chairman of India’s largest refiner said on Monday.

“We see petrochemical integration as the way forward…Petrochemicals gives us that ability to de-risk from low cracks (refining margins),” S.M. Vaidya said at the online Asia Pacific Petroleum Conference (APPEC).

India’s per capita consumption of petrochemicals is one of the lowest in the world, but consumption is expected to rise with rising income levels.

“Over the long term, (the) focus will be on capacity augmentation, getting into the areas of niche petrochemicals with further forward integration into textiles,” Vaidya said, describing this as “key for sustaining our competitiveness margins and growth trajectory”.

IOC is expanding its petrochemical capacity by more than 70% from its current 3.2 million tonnes a year.

Asia’s refinery margins are currently negative DUB-SIN-REF, with refiners running at low output to cope with oversupply.

Jet fuel is among the worst hit due to air travel restrictions to curb the spread of the coronavirus.

Vaidya said IOC is working on an oil-to-chemical technology to use cheaper grades for producing petrochemicals.

India, the world’s third-biggest oil importer and consumer, has experienced a sharp decline in fuel demand, mirroring a global trend following the coronavirus outbreak. O/INDIA2

However, Vaidya said a recent uptick in local sales of automobiles, including tractors, and the forthcoming festive season may lift fuel demand towards pre-COVID-19 levels by the end of the year.

“We also expect motor spirit and diesel demand to catch up to the pre-COVID level in the first half of 2021-22 as the pandemic probably should be under control by then,” Vaidya added.

Consultancy Energy Aspects in a recent note lowered its fourth-quarter forecast for oil demand in India by 0.43 million barrels per day.

India has consistently reported more than 1,000 COVID-19 deaths daily this month and has recorded 78,586 in total.

It is second to the United States in its overall number of infections, but it has been adding more daily cases than the United States since mid-August.