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Minutes
of
Communication Meeting held on 30.06.2006 (For the period April – June 2006) |
| The Quarterly Communication Meeting was held at Hotel Grand Hyatt,
Mumbai, on 30th June 2006. Mr. Sarthak Behuria, Chairman, IndianOil,
presided over the meeting, which was attended by Functional Directors,
Departmental Heads in Divisional Headquarters, unit heads of Refineries,
Marketing, Pipelines and R&D Centre, and State Office Heads of
Marketing Division.
Chairman: The prices of petrol and diesel were partially increased on 5th June 2006, leading to a furore in some quarters. This was handled tactically by the MoP&NG with IndianOil’s assistance. Personal efforts by the Petroleum Minister and Secretary convinced various State Governments to forego sales tax on the increased portion of the price, to partially alleviate the burden on the consumers. The Panipat Refinery Expansion Project was commissioned in end-May, resulting in doubling of crude processing capacity to 12 MMTPA and making Panipat Refinery the second largest in IndianOil. The share of IndianOil Group in the national refining capacity rose from 41% to 43.5%. Commercial production commenced at India’s largest PTA plant at Panipat. Recently, CTMPL - IndianOil’s maiden pipeline foray in Southern India – was dedicated to the nation by the Chief Minister of Tamil Nadu in the presence of a galaxy of Union Ministers. I compliment all those who were engaged in the execution of PREP, PX/PTA and CTMPL projects. The under-realisation on sale of MS, HSD, LPG and SKO during the first quarter is anticipated to be Rs. 8250 crore. While our refinery and pipeline operations are satisfactory, our market share continues to be under threat due to new players. RIL have priced their products higher than PSU OMCs. It may be noted that while the private players have been aggressive in retail expansion, they are not able to withstand loss due to increased crude oil prices. They are now seeking a share in the subsidy sharing formula, a move that IndianOil has resisted. On the subsidiaries’ merger front, IOBL has been formally merged with IndianOil on 12th May 2006. IBP and IndianOil shareholders, in their respective EGMs, have formally approved the proposed merger. The actual merger process is likely to be completed by Sept. this year. IndianOil and BRPL have appointed Independent Valuers and Merchant Bankers to recommend a fair exchange ratio, and to furnish Fairness Opinion Certificate on the recommended swap ratio respectively. Lanka IOC is running a huge outstanding of SLR 9.3 billion (USD 100 million) as subsidy due from the Govt. of Sri Lanka (GoSL). This is due to the difference in interpretation of the Share Sale and Purchase Agreement between Lanka IOC and GoSL and is being contested by GoSL. Due to persistent efforts from our side, GoSL has now offered a compromise formula, which is yet to be approved by the IndianOil Board. We are now in the process of legally revising the Agreement to recover old dues and to place adequate safeguards for future outstandings. The final hearing of the Company Law Board on the HPL (Haldia Petrochemicals Ltd.) case between the Govt. of West Bengal (GoWB) and TCG group is scheduled in July 2006. The GoWB has invited IndianOil to take over HPL immediately after the settlement of the case and obtain the entire stake of GoWB as well as the Tata group. GoWB has also suggested that IndianOil shold be the ‘lead investor’ in setting up a mega petrochemicals hub in Haldia, West Bengal. On 28th June 2006, the IndianOil Board has approved the JV agreement to be executed between IndianOil, Oiltanking and Skytanking GmbH of Germany, for construction & operation of aviation fuel services at the new Bengaluru International Airport. While complimenting Director (Mktg.) and the Aviation team for bagging this opportunity in the face of stiff competition, I wish to add that we will bid for such opportunities elsewhere too. One major breakthrough recently has been the one-time special permission of Pakistan Govt. for supply of Group-II LOBS (Lube Oil Base Stock). The LOBS parcel will be loaded for Pakistan from Haldia during July. In my capacity as President of the Council of Indian Employers, I recently headed the nine-member delegation of Indian Employers at the 95th Session of the International Labour Conference at Geneva. I had the opportunity to speak at the United Nations on behalf of India on Abolition of Child Labour and how to bring in decent work practices. TOPDirector
(Pipelines):
The stretched targets for product and crude oil pipelines for 2006-07 are 18.75 MMT (MoU target – 18.30 MMT) and 32.46 MMT (MoU target – 31.15 MMT) respectively. Conversion of Churwa-Sidhpur section of KBPL to crude oil service has been completed. Conversion of its Sanganer-Panipat section will commence shortly. With this, the KBPL line will be renamed as MPCPL (Mundra-Panipat Crude oil Pipeline) and will feed crude oil to the (expanded) Panipat Refinery. Subsequent to the commissioning of a Diesel Hydrotreater (DHDT) at Panipat, SRGO (Straight Run GasOil) is being pumped ex-Koyali through the Kandla-Bhatinda Pipeline and Koyali-Viramgam-Sidhpur-Sanganer Pipeline for processing in the DHDT at Panipat Refinery. During 2005-06, a total of 127 tankers berthed at Vadinar, taking the total number of tankers to 3561 since the inception of the facility. This is commendable in the light of the fact that IndianOilPeople have handled berthing since the last 27 years without any major incidence of accidents. AT HBCPL, Haldia, 211 tankers berthed in 2005-06, taking the total number of tankers berthing since the inception of the facility to almost 1000 (987). As informed by Chairman, the 683 km long Chennai-Trichy-Madurai Pipeline (CTMPL), IndianOil’s longest pipeline in any single state, was dedicated to the nation by Chief Minister of Tamil Nadu in the presence of Union Ministers. CISF has been de-inducted at 10 locations of WRPL. Finalisation of security agencies sponsored / recommended by Directorate General of Resettlement, New Delhi, is underway. The conversion of KBPL to crude oil service is on schedule and is expected to be completed by July 2006. IndianOil Board has approved the construction of Panipat-Jalandhar LPG Pipeline. Areas of Concern: India’s largest PTA plant was commissioned at Panipat recently. Set up at a cost of Rs. 4600 crore, it utilises the latest state-of-the-art T-10 technology of Invista and will enable production of superior quality product. The PX complex, which consists of eight processing units, has also been commissioned partly and mixed Xylenes are already in production. Balance plants for separation of PX from mixed Xylenes to enhance production / purification are under start-up. When we had set up the LAB unit at Gujarat, the quality of IOCLAB was remarkably superior to competition, which gave us an advantage in the marketplace. Superior product from PTA plant should also give us an edge over competition. If we are not able to sell the full quantity of PTA, we can sell the intermediate product PX profitably. In PREP, except the Coker unit, all main units, including the 6 MMTPA CDU / VDU, have been commissioned. This expansion is designed to process heavier grades of crude oil. The expected throughput of IndianOil refineries during the first quarter of 2006-07 is 10,060 TMT (which is higher than last year’s throughput of 9176 TMT). The GRM for the year 2005-06 (excluding discounts to Marketing Division and under-recoveries) was USD 7.16/bbl as against USD 6.86 / bbl in the previous year, mainly on account of operational improvement, price variation, etc. GRM of the expanded Panipat refinery processing over 75% heavy crudes is expected to closer to RIL’s. As the first step in the product quality upgradation plans of Gujarat Refinery, its MSQ project is nearing completion. The pre-start up activities are currently on and it is expected to be on-stream by end-July. The Resid Upgradation project at Gujarat has also been approved in-principle by the IndianOil Board. Selection of licensors and basic engineering design is in progress. The Panipat Naphtha Cracker project is being executed through multi-LSTK contracts and is expected to be commissioned by 2009. A consortium of Toyo and L&T is the LSTK contractor for Naphtha Cracker Unit (EPCC-1). The pre-project activities have started in the Rs. 25,000 crore, 15 million tonne refinery-cum-integrated petrochemicals complex at Paradip. Selection of PMC as well as licensors is in progress. IndianOil’s Ship Chartering Cell has completed one year during which it finalised 321 voyage fixtures for IndianOil, CPCL and BRPL. Based on international indices, a savings of Rs. 100 crore has accrued to IndianOil through in-house ship chartering. Six Sigma, which was launched in all Refineries about an year ago, has started showing results. 15 black belt and 10 green belt projects have already been certified by the Motorola University. Areas of Concern: · Proper reportage of near-miss incidents. Need to institutionalise
rigorous procedures to report near-miss incidents too. Director (Marketing) : Sales performance was not good during the period April-May 2006. Bihar, AOD (featured for the first time), Rajasthan, Karnataka and Tamil Nadu got the best scores on MOU performance. IndianOil’s sales went up by 249 TMTs (3.2%). MS (Retail) volume grew by 1.2% while that of HSD (Direct) and ATF by 2.7% and 16.3% respectively. Our market share fell by 0.3% in HSD (Retail) among PSUs. Market share of Gujarat and Tamil Nadu State Offices increased by 1% & 0.6% respectively including private players. Punjab, Delhi, Tamil Nadu, Rajasthan and Orissa State Offices recorded the highest increase in sales volume. The number of locations achieving 100 Safety Index has gone up to 114 in June 2006 against 88 in April 2005 (69 in April 2004). 83 locations achieved a QC index of 100 in June 2006 vis-à-vis 62 in April 2005 (41 locations in April 2004). Locations demonstrating the best maintenance performance during 2005-06 are Jaipur AFS, Khapri depot and Ahemdabad TOP. During 2006-07, Marketing Division has identified cross cutting thrust areas. These are Q&Q interventions, cost optimization, safety, monitoring competitor’s activity, SAMBANDH, bringing about attitudinal change and evaluation of critical performance. Marketing Division targets to generate additional revenue of Rs. 1000 crore during 2006-07. 88 RON XtraPremium with friction busters has been launched in Maharahstra and UP. Under the retail automation plan, 72 ROs have been covered in the trial phase. The second phase will cover 1000 ROs with sales of 200 kl and above. IBP lost market share by 0.1% during April-May 2006 including private players. Premium MS and HSD were rolled out at 310 and 767 IBP ROs respectively, while the reach of XtraPower card was extended to 482 more ROs. IBP’s under-realisation stood at Rs. 320 crore per month (excluding upstream and refinery sharing) vis-à-vis Rs. 170 crore per month last year. IOML’s market share grew by 2.5% (over 14.1% in 2005-06) and stood at 16.6%. In Mauritius, IOML is ranked 25th among the top 100 companies by sales. It also launched Petrocard in the country recently. IPPL handled 91 TMT of LPG through terminalling (80 TMT) and direct
sales (11 TMT). Its direct sales went up by 213% from 3.5 TMT during
April-May 2005. LIOC sold 104 TKl of petroleum products during April-May
2006. Director (Finance)
:
The recent price revision brought in Rs. 9300 crore out of the total under-recoveries of Rs. 73,500 crore for all the OMCs. To bridge the gap, the OMCs hope to receive the Government’s Oil Bonds worth Rs. 28,000 crore and upstream sharing up to Rs. 24,000 crore. The implementation of the recommendations of the Rangarajan Committee in the form of introduction of trade parity (instead of Import parity) and reduction in customs duty from 10% to 7.5%, was a welcome move but it hardly impacted a well integrated company like IndianOil. The Cabinet decision of giving SKO at subsidised rates to BPL families is expected to be implemented later this year. We are also awaiting how the Government will implement its plan to grant limited autonomy on the principle of price band to the OMCs in the wake of spiraling crude oil prices. Our borrowings were to the tune of Rs. 26,400 crore in March 2006 and Rs. 28,000 crore in April 2006. Riding on unlocking the potential of GAIL and ONGC shares as well as sale of Bonds (which yielded Rs. 1400 crore from IndianOil’s Bonds and Rs. 200 crore from IBP bonds) helped us to bring down our borrowings to 23,000 crore currently. In view of the high borrowings and tight liquidity, it is commendable for the Marketing Division to operate at low / optimal levels of inventories to cut costs while at the same time ensuring that the ROs do not run dry. I also compliment the Treasury group for offloading the ONGC stake at good prices at the right time because the sensex dipped soon after. At the current levels of international crude oil prices, IndianOil’s under-realisation on MS is Rs. 6.50 per litre, on HSD, it is Rs. 8 per litre, while LPG and SKO yield an under-realisation of Rs. 135 per cylinder and Rs. 7 per litre respectively. International Trade: IndianOil has tied up with KPC, ADNOC, Saudi Arabia, Iran and Petronas for supply of crude oil. SAP / Optimisation: It is our endeavour to train the senior executives to reap the MIS benefits of SAP. The second phase of data ERP has been implemented and is on trial at Mathura. Audit: Secretary, MoP&NG, recently reviewed the audit reports of all oil companies and advised implementation of better reporting procedures. Areas of Concern: Director (HR) :
1. Meeting with Collectives: Information sharing sessions were held with Collectives – with Officers’ Association in May and with all recognized Unions in Kolkata on 29th June 2006 during which, issues pertaining to IndianOil’s business were raised. No issues pertaining to employee benefits etc. came up. Due to a proactive management approach, we are endeavouring to create a positive environment in the Corporation. 2. e-PMS Implementation: 3. Modification in the Performance Linked Incentive (PLI)
scheme: 4. Modification in Productivity Incentive Scheme (PIS): 5. The Post-Retirement Medical Attendance Scheme (PRMAS) has also been reviewed and modified. 6. Resolution of OSOA regarding notice of indefinite strike: 7. Resignation of senior IndianOil executives: 9. IiPM: 11. Vigilance: 12. RTI: ED (Gas) – On behalf of Director (Planning & Business Development): GAS: IndianOil has secured the membership of the International Gas Union (IGU), which will facilitate the updation on the latest in the global gas industry as well as an opportunity to network with other players. IndianOil is pursuing a pilot project for transporting LNG through cryogenic tankers. In the first phase, captive power and industrial units have been targeted and is expected to be completed in January 2007. The second phase will see its application to the auto sector.
PETROCHEMICALS: Product availability of IOCLAB is restricted due to a 36-day shutdown of the LAB plant during April-May. Exports of LAB are picking up well. A parcel of 2000 MT has been scheduled to Southeast Asian countries. On PTA, IndianOil is fully prepared to undertake bagging and dispatch operations at Panipat. Domestic customers and export opportunities for the product are being explored. GLOBALISATION: A wholly-owned subsidiary has been registered in Dubai to provide
flexibility in procurement and marketing SERVO lubes in Middle East
countries.
TOP GM (R&D) on behalf of ED (R & D) R&D Centre has bagged the prestigious Golden Peacock Eco-Innovation award for development of lubricity improver for low sulphur diesel. A 50:50 JV company between IndianOil and Intercat, USA has been incorporated for manufacturing catalysts and additives. In the first Board meeting, matters related to land purchase, selection of PMC consultant, plant costs, etc will be discussed. SERVO Marine Oil received its second major international approval from Wartsila, Switzerland, for SERVO Marine 7050 and SERVO System 0530 for all Sulzer models of 2-stroke engines. Clubbed with the earlier approval of MAN B&W, Denmark, this approval covers 90% of the shipboard 2-stroke engines worldwide. R&D Centre has also developed INDSORD process based on reactive adsorption (under Hydrogen atmosphere) for production of ULSD on pilot scale. Preliminary study carried out at Nagapattinam shows that it is possible to produce Euro-IV equivalent Diesel with INDSORD. Indian Railways have accepted SERVOEco 68, a refrigeration compressor oil compatible with new generation eco-friendly refrigerant, which was earlier being imported by the Railways at a high cost. IndianOil Technologies Ltd. is working on a proposal to train KNPC personnel, besides bagging a sub-contracting job worth Rs. 87 lakh from Toyo Engineering India for developing basic design package for Sour Water Stripper, Amine Regenrator and Naphtha Splitter units. IndianOil is also conducting economy and performance tests on a bus
and a 3-wheeler using 5% and 8% blends of H2 in CNG.
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