India's IOC eyes new subsidiary to ensure laser-focus on both oil, clean fuels

State-owned Indian Oil Corp. is looking to set up a wholly-owned subsidiary that will drive the lower-carbon and clean energy business while the parent firm will continue to focus on core refining operations, multiple company sources said.

The decision to spin out a new subsidiary will help India's largest state-run refiner to make a strategic push to grow its fossil fuels business, as well as tap the opportunities that the changing energy landscape might offer in coming years.

"Oil will continue to remain a key focus for the company. But there is a need to push new energy growth in a strategic manner. Therefore, the company has decided to set up a new subsidiary," said a company source, adding that additional details about the new unit were not immediately available.

IOC's refinery throughput at its nine standalone refineries rose 1.2% on the year to 73.31 million mt in 2023-24 (April-March). Its pipeline throughput stood at 98.63 million mt in 2023-24, up 1.3% from a year ago, achieved through more than 19,500 km of pipeline network across the nation.

In 2023-24, IOC's domestic sales rose 1.8% on the year to 92.31 million mt while exports climbed 3.6% to 5.24 million mt. Its refineries have a combined refining capacity of 70.25 million mt/year, accounting for 27.4% of India's total refinery capacity.

"The performance showcases the company's commitment to fueling India's energy needs, while navigating the complexities of the global energy market," according to a company statement.

However, IOC's gross refining margin for the fiscal year ended March 31 fell 38.3% on the year to $12.05/b, company officials said, reflecting lower returns from cracks in Asia's third-largest economy. It recorded a GRM of $19.52/b in the previous fiscal year.

Key refinery project

According to company sources, other than the various refinery expansions the company is pursuing, plans for its mega refinery is still on track.

The mega refinery-cum-petrochemicals complex, which would be called the Ratnagiri Refinery, was initially planned to have an annual capacity of 60 million mt. It would be jointly built by three state-run refiners -- Indian Oil Corp., Hindustan Petroleum Corp. and Bharat Petroleum Corp. -- while Saudi Aramco and ADNOC have signed initial agreements to take a joint stake in the project.

However, the project has been facing delays as the land acquisition process is yet to be completed.

Indian Oil Chairman Shrikant Madhav Vaidya told S&P Global Commodity Insights recently that the Ratnagiri Refinery is very much required in the country to bridge the energy gap. But there has been a conscious call among all proposed stakeholders to not try and put up the entire 60 million mt capacity at one go, but build in batches of 20 million mt. The process of land acquisition for the refinery is ongoing.

New energy

In an effort to push the company's vision for a greener future, IOC has decided to set up a wholly owned subsidiary to undertake low carbon, new, clean and green energy business, company sources said. As part of its sustainable energy vision, IOC plans to establish one gigawatt of renewable energy capacity across the country.

Furthermore, IOC aims to strengthen EV mobility infrastructure by setting up charging points and battery-swapping facilities at its fuel stations.

The company has also signed a binding term sheet with Panasonic Group company for formation of a JV for manufacturing cells in India. This venture will meet the expanding demand for lithium-ion for mobility applications and energy storage systems in India, according to company sources.

"IOC aims to address environmental challenges, such as reducing CO2 emissions, through its partnership with Panasonic Energy. Leveraging Panasonic Energy's expertise in battery development and manufacturing, both companies will strive to contribute to the growth of the lithium-ion battery industry and to India's energy transition, while pursuing its mission of helping to build a sustainable society," the company statement said.