In conversation with Shrikant Madhav Vaidya, Chairman, Indian Oil Corporation Limited
"We are committed to fuel India’s energy transition"
What is your outlook on the Indian energy sector?
These are exciting times for the Indian economy and its energy sector. We now have global consensus on transitioning to greener energy avenues. Prime Minister Narendra Modi declaring 2070 as the target year to achieve net-zero goal is a watershed moment for India. While the target has to be our guiding star in pursuing the inevitable energy transition, we cannot afford to ignore India’s immediate energy challenges. We are the third-largest energy consumer globally while accounting for a mere 7 per cent of the global energy demand and home to 18 per cent of the worldwide population. Our energy requirements in the coming years are bound to grow exponentially.
According to the International Energy Agency’s projection, India’s energy demand is set to double by 2040 and we will account for 24 per cent of incremental global energy demand by that time. So while accelerating emission reduction and meeting climate goals is crucial, we must recognise that oil and gas will continue to play an essential role in sustaining the growth of developing economies like ours, at least for the next couple of decades. I must add that bio fuels will be a promising avenue as it combines green benefits with economic prudence. Recently, the ethanol blending target of 20 per cent has been advanced to 2025.
And under the Sustainable Alternative Towards Affordable Transportation (SATAT) scheme, India plans to produce 15 MMT (million metric tons) of compressed biogas from 5,000 plants by 2023-24. In the long run, renewable energy, bio fuels and hydrogen are expected to grow fast with strong policy incentives. India aims to set up 500 GW of non-fossil fuel energy capacity and source 50 per cent of its energy requirement from renewable sources by 2030. I strongly feel that hydrogen will be the most promising frontier for clean energy. The recently rolled out Green Hydrogen and Green Ammonia Policy will be a major boost in this direction.
Can you shed some light on how IndianOil is diversifying its product portfolio to offer a basket of clean and green energy solutions?
As the ‘Energy of India’, IndianOil will continue to play a defining role in fulfilling the rising energy demand of the country. Let me tell you that IndianOil also is geared up to lead India’s energy transition. Whether it is in the short term or long term, environmental consciousness has been the driving force for our product strategies. In case of our existing petroleum product platter, we are continuously exploring new avenues of green offerings. In fact, in the last two years we have introduced a range of energy-efficient fuels such as India’s first 100 octane fuel XP 100 and high octane XP 95. We rolled out the cleaner diesel brand Xtra Green and differentiated cooking gas Xtra Tej and Nanocut LPG.
These products are aimed at reducing carbon footprints as well as import dependency. We have introduced specially formulated lubricants like the Servo Raftar and Servo Green Mile for a greener environment. Going forward, we are bullish on leveraging natural gas as a ‘transition fuel’ that can significantly curb air pollutants and greenhouse gas emissions. We are targeting to increase our share in the re-gasified LNG (RLNG) business to 40 per cent by the end of this decade. I am happy to share that IndianOil has established itself as a leading CGD (city gas distribution) player in the country. We now have, on a standalone basis or as a JV partner, 40 CGD geographic areas and in the recent 11th bidding round we bagged nine more high potential GAs.
These products are aimed at reducing carbon footprints as well as import dependency. We have introduced specially formulated lubricants like the Servo Raftar and Servo Green Mile for a greener environment. Going forward, we are bullish on leveraging natural gas as a ‘transition fuel’ that can significantly curb air pollutants and greenhouse gas emissions. We are targeting to increase our share in the re-gasified LNG (RLNG) business to 40 per cent by the end of this decade. I am happy to share that IndianOil has established itself as a leading CGD (city gas distribution) player in the country. We now have, on a standalone basis or as a JV partner, 40 CGD geographic areas and in the recent 11th bidding round we bagged nine more high potential GAs.
In line with India’s goals for net-zero, IndianOil is enhancing its footprint in the renewable energy business. At present, we have 240 MW capacity for renewable energy. We have set a target of 5 GW of renewable assets by 2025. As I said earlier, we are exploring multiple pathways for cleaner mobility. I am happy to share that we have achieved the milestone of installing over 2,000 electric vehicle (EV) charging stations and are well on the way to install 10,000 EV charging stations over the next three years. Going deeper into this area, IndianOil has collaborated with Israeli company Phinergy Limited to form IOC Phinergy Private Limited (IOP), which will commercialise the aluminium-air battery technology in India.
As mentioned earlier, we are betting big on hydrogen fuel. When our prime minister announced the National Hydrogen Mission from the ramparts of Red Fort on August 15 last year, it was evident that the refiners, along with the fertiliser industry, would lead this revolution. As you are aware, IndianOil is India’s largest refiner and is also a partner in Hindustan Urvarak and Rasayan Limited. The JV is putting up three major fertiliser plants in the country. While we know that that green hydrogen’s adoption and scaling up in the mobility sector will take time, it is certain that refineries and fertiliser plants will be the first frontier for the successful and large- scale implementation of green hydrogen.
IndianOil will thus play a defining role in ushering in the hydrogen revolution in the country. As part of this blueprint, we are setting up green hydrogen plants at our refineries in Mathura and Panipat. I am also delighted to share that recently we have teamed up with Larsen and Toubro and ReNew Power to forge a unique green alliance. It will develop green hydrogen assets and pave the way for a flourishing hydrogen economy in India. We are partnering with Larsen and Toubro to make electrolysers – an essential component in green hydrogen production and a major cost determinant.
We will be leveraging our strengths in respective sectors to address a significant gap in the green hydrogen value chain. To strengthen this vision, our world-class research and development centre is undertaking research on all facets of hydrogen, including production, storage and applications like fuel cells. Our teams at the Gujarat refinery are also working on a promising fuel cell mobility project. Our concerted forays in this area have earned global recognition with the induction of IndianOil into the World Hydrogen Council last year.
What is your long-term vision for IndianOil’s portfolio of on-grid and off-grid renewable energy assets?
As an energy major, environmental priority is weaved into our operations. We are pacing ahead to make our operations increasingly green and offering clean energy solutions to our customers, including e-mobility. I mentioned before that we are rapidly expanding our footprint in the renewable space. A very small portion of this capacity installed at remote locations would be off-grid. Plans are underway to establish large-scale renewable energy capacities in a collaboration mode. Let me share that we intend to use green energy to power new projects and refinery expansions. To this end, we are forging collaborations for the generation and storage of renewable and other cleaner forms of energy, including gas-based power. This will primarily cater to the energy requirement of IndianOil refineries and other installations.
IndianOil plans to further enhance its petrochemical integration ratio to 14-15 per cent by 2030. Can you highlight your ongoing capacity expansion plans to achieve this goal?
Today, there is a clear consensus that petrochemical integration is the way forward for the refining sector. Thus, one of our crucial aims is to derive maximum value from every molecule in the hydrocarbon chain. This is reflected in our focus on the crude-to-chemicals pathway. This will unlock the huge potential of petrochemicals’ demand in the country. Another advantage is that it will be a hedge to the cyclical performance and the fluctuations of the energy business with better returns and effective utility management. We thus are aiming to increasing the petrochemical intensity of our refineries to about 15 per cent from the current index of nearly 5 per cent.
Currently, we have a number of projects that are under implementation that would enhance our petrochemical intensity index to over 7 per cent by 2025. I am happy to share that IndianOil is entering the textile value chain in a big way through the Mono Ethylene Glycol (MEG) project, the integrated Para Xylene (PX) and Purified Terephthalic Acid (PTA) projects at our Paradip refinery. These projects would establish IndianOil in the textile value chain given the increasing demand growth. There are other important projects coming up in Gujarat and Panipat refineries. We are planning petrochemical projects of over 8,000 KTA (kilo tonne per annum) across different refinery locations.
Can you elucidate your capex plans for FY23?
For four years in a row, IndianOil’s annual capex has consistently been more than ₹ 28,000 crore. Even in the current fiscal, our capex target is ₹ 28,549 crore. Like I mentioned, refinery capacity augmentation continues to be a primary focus area for us and we have a capex target of over ₹ 13,670 crore this year i.e. 2022-23. We will also be augmenting our pipeline infrastructure and our marketing reach. Moreover, as we march forward to unravel new energy horizons, we will continue intensifying our focus on research and development endeavours. In order to strengthen our future readiness, we are building a second research and development campus focused on alternate energy and green solutions.