India's BPCL eyes refining expansion, term crude deals with new suppliers

India's state-run Bharat Petroleum has set aside a capital expenditure of about $20 billion over the next five years to push expansion of refining capacity, widen petrochemicals footprint, boost its network of retail fuel stations, as well as embrace clean energy opportunities, according to company sources.

With the core refining business as the key focus, BPCL is scouting around for opportunities to seal term crude deals from suppliers other than from the Middle East. At the same time, the refiner is also looking to grow its aviation fueling capabilities at leading airports by setting up new infrastructure, as well as sealing strategic partnerships in the new energy space, the sources added.

"India's booming economy is our tailwind. We're confident it will drive a surge in energy demand, further fueling growth in our core and new businesses. We are planning to expand our refining capacity to 45 million mt year and add 4,000 new fuel stations by 2029," BPCL Chairman G. Krishnakumar said recently, adding that BPCL was going to expand petrochemical facilities at Bina and Kochi refineries.

BPCL' s refineries at Mumbai, Kochi and Bina have a combined refining capacity of around 35.3 million mt/year (709,000 b/d). It plans to build a 12 million mt/year (241,000 b/d) refinery in the next five years, according to company officials, and is exploring suitable sites in the states of Andhra Pradesh, Uttar Pradesh and Gujarat.

"The details of our fourth refinery are being worked out," said a company official who declined to be identified due to confidentiality restraints.

The estimated cost of the greenfield refinery would be around Rupees 500 billion ($6 billion), according to company officials.

BPCL also recently inaugurated new hydrant facilities at the newly established Manohar International Airport in north Goa.

According to the International Energy Agency, 1 million b/d of new refinery distillation capacity would be added in India over the next seven years -- more than any other country in the world outside of China. S&P Global Commodity Insights expects Indian oil demand to grow to as high as 5.54 million b/d in 2030 from about 4.5 million b/d in 2023.

Crude buying strategy

In May, BPCL's combined runs at the three refineries stood at 106%, largely unchanged from the same period a year earlier.

BPCL and other state-owned refiners are exploring the possibility of term crude deals outside the Middle East in a bid to diversify supply sources, according to oil ministry officials -- a move that would help reduce India's dependence on Middle Eastern crude.

"Talks are on for securing Brazilian supplies," said a state refining source, adding that nothing concrete had been finalized yet.

Officials from the top three state-run refineries -- Indian Oil Corp., BPCL and Hindustan Petroleum Corp. -- visited Brazil recently to explore the possibility of procuring long-term crude supplies from Petrobras, according to refining sources.

But analysts said high shipment costs and long sailing period from the South American producer will keep the size of any new term deals relatively small.

BPCL's marketing infrastructure includes over 21,800 energy stations, over 6,200 LPG distributorships, 70 aviation service stations and four cross-country pipelines.

Stake sale, new energy

BPCL has also chalked out the plan to offer electric vehicle charging facilities at around 7,000 energy stations over next five years.

Recently, BPCL said it had tied up with Bounce Infinity, a domestic electric scooter manufacturer in order to strengthen electric vehicle adoption across the country through the launch of innovative 'eDrive stores' at select BPCL retail outlets.

"These stores are designed to make EVs more accessible and to raise awareness among aspiring EV customers. For the first time, consumers will be able to purchase electric two-wheelers directly at BPCL fuel stations, facilitating a smooth transition from internal combustion vehicles to electric vehicles," BPCL said.

Petroleum minister Hardeep Singh Puri has also said the government isn't planning to privatize the refiner, reversing its decision made more than four years earlier. In 2020, the Indian government invited bids for the sale of its entire stake, amounting to 52.98% in the company, and had set the goal to complete the disinvestment by March 2021.

"BPCL is making almost as much profit in a single year than the price it was supposed to be sold for. Decision made: BPCL is not for sale," the minister posted on X platform.