IndianOilXpress :: Meetings

The Quarterly Communication Meeting was held at Corporate Office Building, Sadiq Nagar, on April 1, 2005. Presided over by the Chairman, Mr. Sarthak Behuria, the meeting was attended by Functional Directors, Advisor (Security), CVO, Departmental Heads in Divisional Headquarters, unit heads of Refineries, Marketing, Pipelines and R&D Centre, and State Office Heads of Marketing Division.

The meeting began with the Director (HR), Mr. P.K.Agarwal, introducing the two new members on the IndianOil Board, Mr. S. Behuria, Chairman, and Mr. B.M.Bansal, Director (R&D).

The following are excerpts from the observations made by the participants at the meeting:

Chairman:

I thank you all for being here today, which is a very important day when we take stock of how we have done in the past year (2004-05). I have completed one month in this organisation today. During this one month, I had attended quite a few meetings and tried to meet as many colleagues as I could face to face. I thank all of you – one and all – who have received me with tremendous warmth. Everywhere I had been to, I had received tremendous welcome.

On this first day of the new financial year, I compliment and congratulate all of you for yet another year of excellent performance in 2004-05. However, the soaring crude oil price is a matter of serious concern, especially since we have not been able to convert it into consumer prices. This is an issue we all need to address seriously, especially since it is unlikely that subsidies would go down and consumer prices would go up in the near future. We need to get more people and organisations into the net, especially ONGC, OIL, OMCs and MRPL from whom we purchase crude oil and products; we should also bring in some kind of sharing of the financial burden with our corporate consumers.

Our refineries performance for 2004-05 has been quite good with an anticipated gross margin of $ 6.25 against $ 5.30 in the previous year. Our pipelines have registered a throughput of 41.92 million tonnes. We need to complete our product quality upgradation projects at the earliest. With the setback in Koyali, the Supplies and Finance-IT groups deserve compliments for arranging imports of Euro-norm fuels in very short time.

I am happy that the Marketing Division did very well against some very stiff competition in 2004-05. In spite of a tough year, we have been able to register a volume growth of 2.6% and maintain our market share at last year’s levels. We have a tougher year ahead, with aggressive retail expansion plans by OMCs and private players. Our consumer business is also under tremendous threat, particularly in HSD. In 2005-06, we not only need to maintain our market share but also ensure profitability. We have to do this balancing act continuously.

There is no immediate answer, no one prescription for all these issues. With your rich experience, I am sure we will be able to restructure our marketing efforts with something more to offer to our customers always – this is something we should look into continuously. There is tremendous pressure on the field staff. You are aware that private sector is getting into the STU business; they have all our former colleagues and they know our strategies.

There has been continuous innovation in our marketing strategy, whether it is the new retail visual identity programme, Operation Everest, Swagat highway outlets, rural marketing, etc. However, we seem to do our pilots very well but losing steam thereafter. We, therefore, need a good execution strategy. We should focus on good execution – there is no point in taking on new strategies. Continuous innovation in customer service offerings and creating and maintaining first-mover advantage is the key to success in retail marketing.

There have been some complaints on dealer selection, which we should deal with seriously since they cast serious aspersions on the organisation and its people.

Strengthening the new marketing infrastructure is another challenge. So is the case with marketing of our petrochemical products. With the PX/PTA plant and Naphtha Cracker likely to come up soon, we need to identify people with good competencies in marketing so that we get full advantage of the upswing in petrochemical prices.

Coming to HR initiatives, at present there seems to be no other motivation other than promotion, which needs a re-look. We should reward and drive better performance through a structured Performance Incentive Scheme. We also need to give opportunities to 20 to 30% of our people to take on inter-divisional transfers. All of us are capable of doing all kinds of jobs. There should be a common cadre at DGM and F levels because opportunities for growth are different in different divisions. I don’t want to change legacies or history, but at the same time we should move towards more flexibility.

The IndianOil Board has approved the PIS scheme in principle, the details of which shall be shared with you separately.

I am happy to share with you that the IOBL merger is in the final stages. In the case of IBP, the CCEA note has been cleared by the Law Ministry. We should also start looking at issues relating to the merger of BRPL and CPCL too.

I once again compliment all IndianOilPeople for bagging the SCOPE Award for Excellence in the Institutional Category – the President of India shall give away the award in June this year. We have also maintained our ranking as the No.1 Company in oil trading among national oil companies in the Asia-Pacific for the second year in 2004. Our SERVO and IndianOil brands have also won several awards. Such awards have high motivational value.

We are the biggest and the #1 Company. We should now strive to be the best, and the #1 Company in the minds of the people.

VAT has been implemented in 11 States and is to be implemented in more. The Manthan group worked the whole night on March 31, 2005 to ensure that the prices are reflected in SAP the next day. Our subsidiary, BRPL, has also gone live on SAP the same day, and we shall be taking up IBP’s case in the current year. BRPL shall have a disaster recovery site at the refinery site itself. Incidentally, IndianOil’s disaster recovery site for SAP was commissioned at Jaipur last month.

We have signed off product exchange agreements with BPC and HPC. With the quality improvement schemes delayed, we had to bring in huge imports of BS-I, BS-II and BS-III products.

The Panipat-Rewari pipeline was commissioned during the year to facilitate delivery of petroleum products at Rewari. For the first time, reverse pumping from Panipat Refinery was carried out in the Panipat-Bijwasan pipeline section to meet the POL demand ex-Bijwasan during the extended shutdown of Mathura refinery.

We have also pumped heavy crude (DJENO) for the first time through HBCPL. We have been able to successfully pump Euro-norm products, having worked out the sequence of batches with the right interfaces.

Trial run of Instrumented PIG developed in collaboration with BARC was conducted during Dec. 2004. It is now going for final trials next week and we do not expect any more delay in the implementation of this project.

Coming to projects, the Government of India has asked IndianOil to go ahead with the Dadri-Panipat gas pipeline, which shall give us a good entry into gas pipelines. The Mundra-Kandla crude oil pipeline and conversion of Kandla-Panipat section of KBPL to crude oil service is ready with the completion of laying of mainline and crude oil tankage. We are also making satisfactory progress on the Chennai-Trichy-Madurai pipeline in spite of unseasonal rains and hope to complete the project by July 2005. Similarly, the Paradip-Haldia pipeline shall be much ahead of the March 2006 deadline. We have also rolled out 67 km of pipeline for the Koyali-Dahej pipeline.

The information about strike notice served by IOOA & OSOA was shared in the last Communication meeting held on 23.2.2005. Further developments on this issue are:

On the issue of arrears of PIS for 1997-98, 1998-99 & 1999-2000, it was left to the downstream oil companies to decide on the future course of action. Accordingly, a number of meetings were held among Directors (HR) of downstream oil PSUs for a common approach. In fact, the IndianOil Board has agreed, in principle, to give 50% of the amount as recoverable/adjustable advance. Meanwhile, the management will discuss certain issues with the collectives and go back to the Board with a final proposal. The soonest we close this, the better for all of us.

The re-introduced Voluntary Retirement Scheme would be operative up to 30th June 2005.

The first phase of the Access Control System has been completed in March 2005, except for four locations. The second phase covering 392 locations will be completed by the end of Sept. 2005. We need the support of all Divisions and locations to complete this phase in time.

Corporate Office has completed the campus recruitment of 15 Chartered Accountants. The details of selected candidates have been sent to the Divisions for issuing appointment orders.

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Fiscal 2004-05 has been a historic year for the BD Group, beginning with a major milestone - IndianOil’s successful entry into Gas business. For the year 2005-06 too, all the contracts for sale of IndianOil’s share of 5.26 mmscmd of LNG have been executed. The first year of Gas business is expected to add a turnover close to Rs.700 crore and for the coming year close to Rs.1,500 crore.

Another significant thrust in Gas business was the signing of an MOU with Petropars of Iran for development of an integrated LNG project in Iran. Subsequently, a comprehensive proposal for gas field development and setting up LNG liquefaction facilities in Iran for production of 9 mmtpa LNG was submitted to NIOC on Feb. 28, 2005 for in-principle approval.

Progress is also being made in setting-up an LNG import terminal at Ennore, with DFR to be ready by August 2005.

CNG : We are setting up a JV with GAIL for CNG retailing in Agra and Lucknow. We have also conducted market studies for CNG retailing in Chennai and Bengaluru and expect to feed these markets from Ennore terminal.

We had earlier drawn up a plan to source and market 50-mmscmd natural gas by 2011-12. Considering the opportunities emerging in the market, the plan has now been revised to 70 mmscmd, which will be about 30% of the overall gas market in India.

Petrochemicals marketing

LAB : Our current market share in Linear Alky Benzene (LAB) is 35%. An upcountry LAB depot was commissioned at Pondicherry on Nov. 27, 2004, achieving a market share of 40% at Pondicherry.

PTA : The PX-PTA plant is expected to be completed within the next few months. Out of a total expected production of 5,50,000 MTPA, around 3,30,000 MTPA (60 %) of quantity has already been tied-up. We are also exploring the opportunity of exporting PTA to other countries, particularly to Pakistan.

Petrochemicals projects

Naphtha Cracker : With selection of technology for MEG unit in Jan. 05, technology selection for all 5 units has been completed for Naphtha Cracker at Panipat.

Paradip Refinery : As regards to integration of petrochemicals with refinery at Paradip, the detailed feasibility study is currently in progress in association with EIL with back-up support from M/s. Shell Global Solution, Netherlands.

E&P : Pursuant to signing of an MOU on 8.12.04, the IndianOil-OIL consortium made its first venture overseas by participating in the Libya bid round and won an onshore block located in the highly prospective Sirte Basin. The Exploration and Production Sharing Agreement in this regard has been just signed.

LIOC : Another landmark of fiscal 04-05 has been listing of IndianOil’s subsidiary LIOC in the Colombo Stock Exchange - being our first listing outside India and also by an Indian PSU. LIOC’s IPO was oversubscribed by 11.6 times and was closed on the very first day. Shares were allotted at the highest level of the price band, i.e., SLR 27. The stock opened in Colombo Stock Exchange at SLR 50 plus.

Lubes : Local blending of SERVO lubricants in Dubai has commenced w.e.f. June 04. Between June 2004 and Feb. 2005, about 1300 kl of lubricants were blended at Dubai. IOC is in the process of setting up of another Lube Hub in Malaysia shortly. SERVO Lubes shall be blended at Malaysia and marketed in SE Asia countries.

Exports : On bulk exports front- during the fiscal (Apr-Feb) 12 % growth has been recorded.

Fiscal 04 also saw a major thrust on project exports initiatives. An MoU was signed with Edo State for development of a refinery and for collaborating in the upstream and downstream petroleum sector in Nigeria.

IndianOil is actively pursuing with the National Oil Company of Libya to become a joint venture partner in the revamping and modernisation of Ras Lanuf Refinery. We are also pursuing the product-upgrading project of Tehran & Tebriz refineries in Iran. PMO, Yemen has sent an invitation to IndianOil to look into investment opportunity in Yemen’s oil & gas sector. IndianOil will shortly depute its technical team to Yemen.

Four of our refineries – at Guwahati, Barauni, Haldia and Digboi – have surpassed the stretched targets for crude throughput for the year 2004-05. Guwahati, Barauni, Haldia and Panipat refineries also achieved the highest crude intake. Barauni and Digboi refineries surpassed the distillate yield targets also. However we could not achieve the combined stretched targets due to FCC shutdown at Gujarat and extended revamp shutdown at Mathura.

The Gross Refinery Margin in 2004-05 is expected to be highest at $ 6.25/bbl against previous best of $ 5.30/bbl in 2003-04.

Supply of BS-II/EURO-III MS/HSD started from all refineries, except Mathura which shall commence supplies in April 2005.

Internal MOU targets for the year 2005-06 between Refinery HQ and Units were signed off on 31.03.05. Strategic initiatives have also been listed in the MOUs.

On the safety front, a number of initiatives were taken at the beginning of the year 2004, and these were beginning to show positive results, with the number of incidents falling considerably vis-à-vis the previous 3 years, except for the unfortunate incident at Koyali Refinery. A thorough brainstorming session was held in Dec. ’04 to strengthen the operating systems, and actions emanating thereof are being implemented and closely monitored. Apart from review and update of plant wise operating manuals, training/re-training and revisit of Hazop in refineries, skill development programme and adoption of best practices, comprehensive checklists have been prepared for plant start-up & shutdown, handing over and taking over of critical equipment, and furnace start-up, etc.

The first batch of 55 newly inducted Chemical Engineers are undergoing a 10-week training module at IIP, Dehradun.

Several projects are in crucial stages of completion. Among product quality upgradation projects, for instance, the DHDT at Mathura is under commissioning, while MS quality upgradation projects at Mathura, Haldia and Koyali are scheduled for completion in April ’05, July ’05 and June ’06 respectively. Panipat Refinery expansion from 6 to 12 MMTPA is scheduled for Oct. ’05 while the integrated PX/PTA unit at Panipat is due for commissioning by Aug. ’05.

IndianOil has been nominated to pick up Rajasthan crude produced by Cairn Energy from October 2007. EIL has been asked to do the feasibility study for a refinery in Rajasthan, perhaps together with ONGC and HPC. The report is expected to be ready in ten weeks’ time. Based on this, a final decision will be taken by MOP&NG by the end June ’05.

The Marketing Division is fully geared to meet any kind of challenge on the business front, having the best of the people, best of infrastructure and best of cooperation from collectives.

For the last quarter of 2004-05, our overall market share has increased by 0.02%, the volumes went up by 1,318 TMTs (3.1%) as against OMC growth of 1,200 TMT (3%). The top five State Offices in terms of MOU scores are UPSO, OSO, DSO, KASO and GSO. Our market share has gone up in 5 State Office areas: KESO, WBSO, UPSO, MPSO and DSO. The market share of IBP has also gone up. Twelve State Offices gained in volumes, the top five among them being UPSO, WBSO, DSO, MPSO and MSO.

The overall QC index of marketing units has gone up from 97.7 to 98.6 and the safety index from 96.8 to 97. The number of units with QC index of 100 has gone up from 41 to 63; in the case of safety index, the number has gone up from 65 to 85.

IndianOil coordinated relief work in J&K in the wake of unprecedented snowfall this winter, and our efforts came in for praise from all quarters.

We had observed 2004 as “Customer Care Year.” We shall be observing 2005 as “Customer Delight Year.”

In terms of retail expansion, IndianOil has put up 1,096 ROs during 2004-05 crossing the historic 10,000 mark. BPC has put up 667, HPC 1,004, IBP 420, RIL 328, EOL 240, NRL 4 and Shell 1.

Coming to retail branding, we have unveiled 463 ROs as XTRACARE ROs with additional, value-added features during the year, commissioned 57 Swagat (large format) brand outlets on the highways. The new Retail Visual Identity programme has been extended to 120 ROs.

Under customer loyalty programme on highways, we have issued 3.8 lakh fleet cards with a monthly purchased on Rs. 150 crore per month covering 1,630 ROs. The Citibank co-branded card for urban areas has reached a new high of over five lakh users. XTRAPREMIUM petrol now has a market share of 34.9% and XTRAMILE diesel 65.4%. We hope to have 1,500 Kisan Seva Kendras for rural markets by March 2006.

The concept of key account management has been rolled out for 74 major customers covering 61% of our total customer base.

The R&D Centre has received US patent for the deep DHDS catalyst formulation for production of ultra low-sulphur diesel. It is planned to use the idle wax hydrofinishing unit of Barauni refinery for demonstration of the capability and stability of the catalyst.

IOC-R&D and M/s Zeolyst International have jointly developed a VGO hydrocracking catalyst to maximise diesel and LPG yield, and the same has been selected for the hydrocracker of Koyali Refinery.

The R&D Centre is providing optimisation studies and revamp/modification of HPCL’s flexi-cracker in Mumbai in two phases, generating revenues of Rs 36.5 lakh and Rs 75 lakh respectively. Similarly, Rs. 117 lakh has been received so far from M/s Sud-Chemie as 20% royalty on the I-Max process technology developed by the Centre for LPG maximisation.
Instrumented Pig developed in association with BARC-Mumbai has been tested successfully in the 162-km Mughalsarai-Allahabad section of BKPL during Nov/ Dec. ‘04.

Trials of Servo Marine Oil K 5540 have been completed on Wartsila DG Set at KIOCL, Mangalore and a final approval is expected from Wartsila, Finland, shortly. Approval for system oil has already been received earlier this month. A task force has been constituted for commercialisation of IndianOil’s marine oil technology capabilities.

On Biodiesel front, trials of 10% biodiesel-diesel blends on employees’ buses of Tata Motors at Pune have been launched in March ‘05. Trials on 5% biodiesel on four buses of GSRTC have also been launched.

The R&D subsidiary, IndianOil Technologies Ltd., hopes to earn profits, which may not be substantial but significant, during first complete year of operations. Several technology proposals are in advanced stage of decision, including LPG sweetening unit at Pertamina, Indonesia, Bioremediation technology for ADNOC, UAE, etc. IndeTreat/Inde Sweet technology has been accepted by a number of refineries. ITL provided quality FCC optimisation services for the first time to a non-IOC refinery (HPC) and similar offers have also been made to BPC.

During the last quarter of 2004-05, the R&D Centre filed three patents in India and five abroad. It has also been granted four US patents and one European patent.

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CVO:

The Vigilance group has conducted 13 vigilance workshops covering 217 officers during the last quarter of 2004-05. A compendium of CVC/CTE guidelines was published and circulated among all units. Round the year, the Vigilance group worked to replace mistrust with a healthy respect for rules and regulations. Valuable suggestions were received from officers to change our system. They were happy having being given their due, to explain their views. Vigilance is not here to find faults, shortcomings but to streamline and strengthen the system.

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Advisor (Security):

It is not enough to display rules and regulations on handling suspicious objects. Isolation of such objects for handling by experts must come as a tutored response.