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MOSCOW (MRC) -- The chairman of Indian
Oil Corporation, the country’s biggest refiner, predicted demand would begin to
rebound only by year-end as the coronavirus pandemic hits one of the world’s
largest energy markets, said the
Financial Times.
Shrikant Madhav Vaidya said new lockdowns in India
had knocked capacity utilisation down from 93 per cent in early July to 75 per
cent by the end of the month but predicted it would stabilise in the coming
months. "There is demand destruction but then the country is recovering,” Mr
Vaidya told the Financial Times after reporting a sharp fall in year-on-year net
profit in the quarter ended June 30. “By the end of the year, I expect that
things will be nearly back to pre-Covid times."
New lockdowns in India
are hitting the country’s economic recovery as coronavirus rips through the
population of 1.4bn people. India is adding more than 50,000 infections daily,
bringing its tally of Covid-19 cases to more than 1.6m, the third-largest in the
world, with no sign of the infection rate slowing. Recovery looks difficult, we
don’t know whether there will be multiple lockdowns imposed
IOC reported
a 47 per cent drop in net profit to Rs19bn (USD253m) in the quarter ended June
30 compared with a year earlier. This followed a sharp loss in the three months
ended March 31. The economy was hit by a tough initial lockdown imposed by Prime
Minister Narendra Modi while dreams of a V-shaped recovery have been obliterated
by a surge in cases and new lockdowns. The country’s crude imports fell 19
per cent year on year to a five-year low in June, according to oil ministry data
released on Friday.
Mr Vaidya said that once the turmoil had settled, he
expected appetite for fossil fuels in India, the world’s third-largest oil
importer, to recover more strongly than in other markets. Unlike other refiners,
Mr Vaidya said IOC had no plans to cut capital expenditure. "The energy demand
for the country is going up, unlike the US or Europe, where it is either
stagnant or there is negative growth," said Mr Vaidya.
"No single one
form of energy will be able to satisfy it all. The Indian bouquet will [consist]
of traditional fossil fuels with an increasing amount of gas."
India is
seeking to increase the share of gas in its energy mix from 6.2 per cent to 15
per cent by 2030 but progress on meeting the target and deregulating the sector
has been slow. Mr Vaidya, who took over as IOC chairman in July, said the
refiner was also seeking to expand capacity in petrochemicals and catch up with
peers Reliance Industries — the flagship company of billionaire Mukesh Ambani —
and Gail.
Probal Sen, oil and gas analyst at Centrum Broking in Mumbai,
said IOC was “sounding the alarm” by underlining the impact of new lockdowns.
Other companies were predicting a faster return to relative normality. Mr Sen
pointed to a flood of new cases hitting Andhra Pradesh, Karnataka and Kerala.
“Recovery looks difficult, we don’t know whether there will be multiple
lockdowns imposed,” he said.
As MRC wrote
before, Indian Oil Corporation Ltd (IOCL) was in plans to undertake a
planned shutdown at its polypropylene (PP) plant in Paradip last weekend. The
plant is expected to remain under maintenance for about two weeks. Located at
Paradip in the India state of Odisha, the PP plant comprises of two lines with a
production capacity of 340,000 mt/year each.
We remind that Indian
Oil Corp restarted operation at its naphtha cracker in India in early-October,
2019, after completing maintenance works. The cracker was shut in
early-September, 2019 for a maintenance turnaround. Located in Panipat, in the
northern Indian state of Haryana, the cracker has an ethylene production
capacity of 857,000 mt/year and propylene capacity of 425,000
mt/year.
According to MRC's DataScope report, PP
imports into Russia rose in the first six months of 2020 by 21% year on year to
105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main
increase in imports.
Indian Oil Corporation Limited, or IndianOil, is an
Indian state-owned oil and gas corporation with its headquarters in New Delhi,
India.
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