Company Overview

Hindustan Petroleum Corporation Limited (HPCL) (NSE: HINDPETRO) was formed on July 15, 1974. HPCL is a Maharatna Central Public Sector Enterprise (CPSE) and a S&P Platts Top 250 Global Energy Company with a ranking of 55 with Annual Gross sales of Rs. 2,86,250 Crore during financial year 2019-20.1

HPCL enjoys over 18% market share in India and has a strong presence in Refining & Marketing of petroleum products in the country. During 2019-20, HPCL recorded Profit after Tax (PAT) of Rs. 2,637 Crore.

HPCL has the second largest share of product pipelines in India with a pipeline network length of 3,775 kms.

HPCL undertakes Exploration & Production (E&P) of hydrocarbons through its wholly owned subsidiary M/s. Prize Petroleum Company Limited (PPCL). HPCL also conducts business through 19 Joint Venture (JV) & Subsidiary companies operating across oil & gas value chain.

Consistent excellent performance has been made possible by highly motivated workforce of over 9,800 employees working all over India at various refining and marketing locations.

Refineries

HPCL owns and operates Refineries at Mumbai (west coast) & Visakhapatnam (East coast) with designed capacities of 7.5. MMTPA (Million Metric Tonnes Per Annum) & 8.3 MMTPA respectively. HPCL also owns the largest Lube Refinery in the country at Mumbai for producing Lube Oil Base Stock with a capacity of 428 TMTPA. HPCL holds 48.99% equity stake in JV company, HPCL-Mittal Energy Limited (HMEL) which operates a 11.3 MMTPA capacity refinery at Bathinda (Punjab) and also has 16.96% equity stake in Mangalore Refinery and Petrochemicals Limited (MRPL) which operates a 15 MMTPA capacity refinery at Mangalore (Karnataka).

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LPG (HP Gas)

HPCL commenced marketing of LPG under the brand name HP GAS in 1979 with takeover of these concessionaires and merger with HPCL with a customer holding of 7.8 lakhs. The demand was sluggish till 1970 - sales 174 TMT.

Today Liquefied Petroleum Gas (LPG) has become the single most popular household fuel. Since it was introduced in 1955, LPG consumption has gone up tremendously. HP Gas today (As of March 2020) has over 85 million domestic LPG consumers catered through a network of over 6,110 distributors.. HP GAS, the HPCL brand of LPG, is what keeps the fire burning in millions of Indian homes Bottled at 50 LPG Bottling Plants throughout the country with a total capacity of nearly 5,582 TMTPA(thousand metric tons per annum), HP Gas reaches you after thorough checking at every stage right from bottling to distribution. That is what makes HP Gas synonymous with Safety.

Retail Business

HP Retail Business unit of HPCL is engaged in making available automotive fuels/ lubricants and other value added services for the automobile / private transport sector across the country, through a dedicated network of Retail Outlets, commonly known as Petrol Pumps. The Retail unit is so named, as it involves dispensing fuels of relatively smaller volumes to the vehicle fuel tank.

The main products delivered include Diesel, Petrol, Turbojet, Power, AutoLPG, CNG and lubricants required for various vehicles, which are supplied at the Petrol pumps. In addition, Products for cashless transactions, like Co-branded cards, Fleet cards and other loyality cards have been developed for the convenience of customers. The Retail Business unit is also responsible for the supply of subsidised Kerosene under the Public Distribution System (PDS) to the nominated wholesalers appointed by the State Governments, basis the allocation plan provided by the respective State Governments..

Marketing Network

HPCL has a vast marketing network consisting of 14 Zonal offices in major cities and 133 Regional Offices facilitated by a Supply & Distribution infrastructure comprising 43 Terminals/TOPS/ Installations, 44 Aviation Fuel Stations, 50 LPG Bottling Plants and 68 Inland Relay/Lube Depots. The customer touch points constitute of 16,868 Retail Outlets, 1,638 SKO/LDO dealers and 6,137 LPG Distributorships, 115 carrying and forwarding agents, 253 Lube distributorships with a customer base of over 8.4 Crore domestic LPG consumers.

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Pipelines

HPCL has laid pipelines for transportation of Petroleum Products to ensure product availability to its Consumers and the Public at large.2

MainlineCapacity (MMTPA)Length (KM)
Mumbai-Pune-Solapur Pipeline (MPSPL)4.3508
Vizag-Vijayawad-Secundrabad Pipeline (VVSPL)7.7572
Mundra-Delhi Pipeline (MDPL)6.91054
Ramanmandi-Bahadurgarh Pipeline (RBPL)7.11243
Ramanmandi-Bhatinda Pipeline (RBhPL)2.130
Managalore-Hassan-Mysore-Solur LPG Pipeline (MHMSPL)1.94356
Black oil Pipeline (BOPL)1.521
Uran-Chakan-Shikrapur LPG Pipeline (UCSPL)1169
Mainline Total32.552953
   
Branch Line  
Bahadurgarh-Tikrikalan Pipeline (BTPL)0.7514
Awa-Salawas Pipeline (ASPL)2.3493
Rewari-Kanpur Pipeline (RKPL)7.98443
Palanpur-Vadodara Pipeline (PVPL)4.5235
Branch Line Total15.57785
   
Speciality Product Pipeline  
Lube oil Pipeline (LOPL)117
HPFR-Mumbai Airport ATF Pipeline1.120
Speciality Product Pipeline Total2.137
   
Hpcl Grand Total34.653775

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Industry Overview

Crude Oil Supply

Global crude oil production increased to 100.50 million barrels per day (mbpd) during 2019 as compared to 100.3 mbpd in 2018. Crude oil supply from USA grew by 1.7 mbpd during 2019 and exceeded the market estimates. This additional supply was partially offset by production cuts from OPEC+ and forced cuts from Venezuela and Iran. Global oil demand registered a higher growth and increased to 100.1 mbpd in 2019 as compared to 99.3 mbpd in 2018. A bulk of demand growth came from China, which registered a strong demand growth and accounted for more than 80% of global demand growth. India also registered positive demand growth of 2.8% year-on-year in 2019. 3

Crude Oil Prices

Brent Crude oil prices have witnessed high volatility in 2019-20 with price ranging from below US$ 20 per barrel to over US$ 70 per barrel. From US$ 69.18 per barrel at the start of the year, Brent prices rose to more than US$ 74 per barrel in late April on concerns about supply as Iranian export waivers were due to end and an OPEC+ output cut agreement took effect. Further, fears about oil demand growth dominated sentiments and prices fell below US$ 60 per barrel in August. Crude prices also witnessed short spike in September after attack on Saudi Arabia™ oil facility. Prices strengthened during Q4 on positive sentiments of recovery in economy on the backdrop of reaching long disputed trade agreement between US and China. This boosted confidence in healthy demand growth for 2020. The geopolitical developments, following U.S. military operations in Iraq drove oil prices to reach at US$ 69.96 per barrel on 6th January, 2020, the highest level since May 2019. However, crude prices started falling significantly since January 2020, largely driven by the economic contraction caused by COVID-19. Added to this was the sudden increase in crude oil supply following the suspension of previously agreed upon production cuts among OPEC and partner countries. On an overall basis, Brent averaged at US$ 61.01 per barrel for 2019-20, which is about US$ 9.09 per barrel below the average of US$ 70.1 per barrel in 2018-19.

Indian Crude Basket

Significant volatility was observed in International crude oil prices during Q1 of 2019-20 resulting in Indian crude oil basket price increasing to an average of US$ 67.81 per barrel in Q1 as compared to previous quarter average of US$ 63.49 per barrel. During Q2, the Indian crude oil basket price slided down to US$ 61.57 per barrel, due to softening of international crude oil prices. The Indian crude basket price showed an upward trend in Q3 and closed at an average of US$ 62.60 per barrel in Q3. Geopolitical developments drove international oil prices to the level of about US$ 70 per barrel in the first week of January 2020. However, the international prices displayed declining trend further with concerns about economic growth and outbreak of COVID-19 and reached to the level of US$ 50 per barrel in March 2020. The Indian crude basket prices also followed this trend closing the quarter at the lowest level in the financial year at a quarterly average of US$ 50.80 per barrel.

Benchmark Refining Margins

Singapore refining margins averaged at US$ 3.47 per barrel during Q1 of 2019-20 against margins of US$ 3.20 per barrel during last quarter of 2018-19. This was due to Naphtha cracks remaining depressed due to seasonal cracker maintenance and middle distillate cracks remaining stable at US$ 13.01 per barrel during the period owing to higher than usual refinery turnarounds in the Asian region. Indian exports started increasing towards the end of the quarter as refineries returned from maintenance. Gasoline (Petrol) margins lost its ground as new refineries ramped up in China, where the government has issued more gasoline export quotas. Fuel Oil (FO) margins remained supported amid multiple residue upgradation facilities coming up in the world as IMO 2020 deadline approached with a mandate for using FO with lower than 0.5% sulphur content for bunkering purpose. The elevated crude prices during this period kept FO margins under check.

Singapore refining margins rose to US$ 6.52 per barrel in Q2 supported by higher FO and Gasoline margins. Gasoline margin averaged US$ 7.9 per barrel in the period owing to shutdown of refineries in US due to hurricane Barry and permanent closure of PES refinery. Gasoil (Diesel) margins also increased during the period to average at US$ 16.25 per barrel, amid unplanned outages in India and lower exports out of China. FO inventories were drawn heavily across the world during Q2 and margins remained supported at record levels due to summer demand from Saudi Arabia and other Gulf nations. Further, ahead of the 2020 IMO regulations, refiners produced less HSFO and some storage providers cleaned tanks so that they are ready to store compliant fuel. Naphtha cracks in Singapore gained over US$ 4.5 per barrel post attacks in Saudi Arabia which is a key supplier of Naphtha to Asia Pacific region. The disruption in supply and healthy regional demand supported the cracks.

Singapore margins fell by US$ 4.90 per barrel to US$ 1.62 per barrel in Q3 with average margins in December 2019 being US$ (-0.19) per barrel, a negative margin for the first time ever. This was due to a sharp fall in FO margins to US$ (-18.71) per barrel (US$ 0.93 per barrel in Q2), as IMO 2020 drew closer and demand for high Sulphur bunker fuel dropped sharply. Gasoil cracks averaged US$ 15.37 per barrel for the period, as domestic demand for the fuel in India remained sluggish amid weak macroeconomic scenario & delayed monsoon resulting in high exports while supplies from new refineries commissioned in 2019 started coming in, putting pressure on prices. Gasoline margins averaged at US$ 8.18 per barrel for the period as refiners preferred producing VLSFO over Gasoline thereby reducing its production.

Q4 of 2019-20 was the weakest for Singapore margins since 1999 with quarter average at US$  1.29 per barrel as all the product cracks dropped. China continued to export Gasoline due to weak domestic demand, which weighed on margins, which averaged at US$ 5.14 per barrel for the quarter. All transportation related demand was severely hit as the World came into the grip of COVID-19. Jet fuel and Gasoil margins averaged at US$ 8.6 per barrel and US$  11.80 per barrel respectively amid weak demand scenario. FO margins saw some recovery as the historically low prices in previous quarter incentivised purchases from refineries to be used as a feedstock.

Business Overview

Gross sales of the Corporation (inclusive of excise duty) in the financial year 2019-20 was Rs 2,86,250 Crore as compared to Rs 2,95,713 Crore in the financial year 2018-19. The total sale of products for the year 2019-20 was 39.64 MMT as against 38.71 MMT for the year 2018-19.

  • The Corporation has earned a Profit Before Tax (PBT) of Rs 1,573 Crore in 2019-20 as compared to Rs 9,339 Crore in 2018-19.
  • The Corporation has earned a Profit After Tax (PAT) of Rs 2,637 Crore during 2019-20 as compared to Rs 6,029 Crore during 2018-19.
  • The Gross Refining Margin for HPCL averaged at US$ 1.02 per barrel for the year 2019-20 as against US$ 5.01 per barrel for the year 2018-19.
  • Gross Refining Margin of Mumbai Refinery averaged at US$ 3.63 per barrel for the year 2019-20 as against US$ 5.79 per barrel for the year 2018-19.
  • Gross Refining Margin of Visakh Refinery averaged at US$ (1.30) per barrel for the year 2019-20 as against US$ 4.31 per barrel for the year 2018-19.

Crude Oil Imports

HPCL imported 13.30 MMT crude oil in 2019-20 as compared to imports of 14.01 MMT during 2018-19 and procured 4.31 MMT crude oil from indigenous sources. Out of the total crude import of 13.30 MMT, 10.05 MMT high sulphur crude oil was imported through term contracts from Middle East countries, while 3.25 MMT low sulphur crude oil was imported from spot markets. Free on Board (FOB) cost of imported crude oil amounted to US$ 6,018.43 million (` 42,809 Crore) in 2019-20 as compared to US$ 7,267.50 million (` 51,096 Crore) in 2018-19. The average cost of crude oil imported in 2019- 20 stood at US$ 61.34 per barrel as compared to US$ 70.20 per barrel in 2018-19. The average exchange rate was Rs 71.13/US$ in 2019-20 as compared to Rs 70.31/US$ in the previous year.

During 2019-20, both HPCL refineries at Mumbai and Visakh recorded robust and sound physical performance with combined capacity utilisation of about 108.7%. Effective management of intermediate streams evacuation as well as meticulous handling of two grades of MS and HSD during the interim period of rollout of BS-VI grade of fuels at both the refineries was a key factor in achieving the performance.

During 2019-20, HPCL refineries have recorded refining throughput of 17.18 MMT as compared to 18.44 MMT during previous year. The lower throughput was due to planned shutdowns at both Mumbai and Visakh refineries for upgrading to BS-VI fuel norms. Both Mumbai and Visakh Refineries were upgraded to produce BS-VI compliant transportation fuels. Refineries completed the rollout of BS-VI Grade MS and HSD before the timeframe stipulated by Government of India. Mumbai Refinery achieved highest ever LOBS (Lube Oil Base Stock) production of 478.1 TMT surpassing past best of 472.8 TMT in 2018-19. Visakh Refinery processed WTI Crude from US for the first time, thereby improving the flexibility in handling different grades of crude in the refinery. The refinery has also started the production of VLSFO (Very Low Sulphur Fuel Oil with Sulphur content less than 0.5%) to meet the regulatory requirement of MARPOL.

Marketing

During 2019-20, HPCL has delivered an excellent marketing performance and exceeded various milestones achieved during previous years. HPCL achieved highest ever sales volume of 39.6 MMT during 2019-20 compared to previous year sales volume of 38.7 MMT.

In domestic sales, HPCL recorded sales of 37.74 MMT with market share of about 21% amongst the public sector Oil Marketing Companies (OMCs) as on 31st March, 2020. The sales have been achieved against the backdrop of intense competition and subdued demand growth for petroleum products. March sales were impacted by the lockdown implemented in the country to contain the spread of COVID-19 pandemic.

Retail

In retail sales, HPCL continued the performance momentum of previous years. Total sales volume of 24.4 MMT has been achieved in 2019-20. MS (Petrol) sales crossed the 7 MMT mark for the first time registering a growth of 4.7%.

A number of initiatives were undertaken during the year to enhance customer value and reach. During 2019-20, HPCL commissioned 1,194 retail outlets taking the number of total retail outlets to 16,476 as of 31st March, 2020. HP brand is now present across all north-eastern states with commissioning of 41 new retail outlets in the area. CNG facilities were provided at 166 Retail outlets taking the total number of retail outlets with CNG facilities to 471 ensuring availability of alternate fuels and offering more choices to customers. Door-to-Door delivery facilities for Diesel were increased to 18 cities/towns to meet the requirement of select customers in getting fuel delivered at their premises. Auto LPG continues to be available at select retail outlets ensuring wider fuel choices to customers

Strong thrust was laid on automation of retail outlet network to enhance the operational efficiencies and productivity. During 2019-20, HPCL achieved 100% automation of all operating/active retail outlets attaining new industry benchmark of 94.8% of ˜No Automation No Operation™ (NANO) at the automated outlets. Creation of real-time dashboards with online data from the automated outlets has helped in enhancing the operational efficiencies.

LPG

HP Gas™, the LPG brand of HPCL is one of the most preferred brands among domestic and non-domestic LPG customers and serves over 8 Crore consumers. During 2019-20, HPCL achieved highest ever LPG sales of 7 MMT, registering a growth of 7.3% over previous year. During lockdowns across the country to combat the COVID-19 pandemic, HPCL ensured refill deliveries at the doorsteps of consumers with additional precautionary measures.

HP Gas™ has enrolled over 37.53 lakh new customers, including 19.56 lakh PMUY connections during the year. In 2019-20, 245 new LPG distributorships were commissioned taking the total number of distributors to 6,110.

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Lubricants

Indian finished lubricants market is the third largest lubricant market in the world. The total demand in India for finished lubricants, including process oils, is estimated at 2,500 TMT in 2019 with process oils contributing one third of the demand.

HPCL has recorded overall sales volume of 650 TMT during 2019-20 making the Corporation the number one lube marketer in India for seventh consecutive year. Highest ever sales of value added lubes of 518 TMT has been achieved during the year representing a growth of 6% over historical. During the year, HPCL exported Lubricants to 10 countries. Export volume of 16.7 TMT has been achieved making HPCL the largest exporter of lubricants from India amongst PSUs.

Direct Sales

HPCL™ Industrial & Consumer (I&C) business-line handles the institutional sales of fuels, bitumen, naphtha and other bulk products consumed by industries, mining, construction, power plants, shipping, etc. in both private and government sectors and also carries out exports of these products to various overseas markets.

During 2019-20, HPCL™ Industrial & Consumer (I&C) business line recorded overall sales of about 5 MMT. The strategy of maximising volumes in three focus products helped HPCL to cross 1 MMT sales volume in Fuel Oil (FO), Diesel and Bitumen individually for the fifth consecutive year. Highest ever sales in LDO and Mineral Turpentine Oil (MTO) have been achieved during the year.

Aviation

HPCL supplies Aviation Turbine Fuel (ATF) to airline customers through a vast network of Aviation Service Facilities (ASFs) covering all the major airports in India. ˜HP Aviation™ fuelling service meets the stringent International regulations for handling ATF. During 2019-20, HPCL achieved ATF Sales volume of 732 TMT.

Natural Gas

To move towards a gas-based economy, Government of India is stepping up efforts to raise the share of natural gas from 6% to 15% by 2030 in the overall energy basket. HPCL has also undertaken several initiatives to expand presence in Natural gas sector by increasing footprints in midstream and downstream gas market in India.

HPCL is operating City Gas Distribution (CGD) networks through Joint Venture (JV) Companies viz. Bhagyanagar Gas Limited (BGL), Aavantika Gas Limited (AGL) and Godavari Gas Private Limited (GGPL). These CGD networks are being operated in Hyderabad, Vijayawada & Kakinada through BGL, in Indore, Ujjain & Gwalior through AGL and in East Godavari & West Godavari districts through GGPL. HPCL is also operating a CNG network in Ahmedabad on standalone basis.

Bio Fuels

HPCL continues to give emphasis on environment protection, sustainability measures and steps for reduction in Green House Gas (GHG) emissions with promotion of bio fuels in transportation. HPCL has continued the participation in Ethanol blending program of Government of India towards this direction. During 2019-20, HPCL has procured 46 Crore litre of Ethanol which resulted into an overall Ethanol Blending Percentage of 4.9%. In addition, HPCL recorded the blending of highest ever quantity (5 Crore Litre) of Biodiesel during 2019-20. Storage capacity for keeping 15 days of Ethanol inventory has been provided at all storage locations of HPCL as an important step towards uninterrupted blending of fuels and better flexibility to suppliers in terms of logistics.

To have footprint in alternate fuels in transportation sector, HPCL is actively participating in Government of India™ SATAT (Sustainable Alternative Towards Affordable Transportation) initiative for promotion of Bio Gas. HPCL had invited Expression of Interest (EoI) from potential investors & entrepreneurs for setting up Compressed Bio Gas (CBG) plants to supply CBG to various retail outlets of OMCs for marketing. During 2019-20, HPCL released Letter of Intents (LOIs) for setting up 40 CBG plants with total estimated production capacity of 55 TMTPA taking total LOIs to 51 numbers with capacity of 76 TMTPA.

Pipelines & Projects

HPCL is currently operating petroleum product pipeline network of 3,775 Km with mainline capacity of 32.55 MMTPA & branch line capacity of 15.57 MMTPA. During 2019-20, Pipeline throughput of 21.2 MMT was recorded.

Pipeline network expansion remains a major focus area for HPCL and a number of projects were completed and commissioned in 2019-20. One of the key achievement for HPCL in 2019-20 is commissioning of the new Palanpur-Vadodara Pipeline & marketing Terminal at Vadodara along with capacity expansion of the existing MundraDelhi Pipeline which was completed 6 months ahead of schedule and at 90% of the approved cost. The extension of Mundra-Delhi pipeline to Vadodara shall help HPCL in enhancing the presence in South Gujarat, Madhya Pradesh and part of Maharashtra with abilities for effective placement of petroleum products in these areas. The 168.45 Km long Uran-Chakan LPG pipeline has also been commissioned in 2019-20 to substantially reduce the LPG tanker movement on Mumbai Pune route. In addition, Ramanmandi Bahadurgarh Pipeline (RBPL) Capacity Expansion project and VVSPL Capacity Expansion Project were commissioned during the year. The increased pipeline networks & capacities shall lead to enhanced logistic efficiencies besides the associated environmental benefits.

To further expand the pipeline network and capacities, a number of large-scale expansion projects are underway with an estimated investment of about Rs 5,600 Crore. HPCL™ major ongoing pipeline infrastructure projects include information Extension of VVSPL from Vijayawada to Dharmapuri and construction of marketing terminal at Dharmapuri, (ii) Hassan Cherlapally LPG Pipeline and (iii) Barmer Palanpur Pipeline. These projects are expected to increase HPCL™ pipeline capacity to over 41 MMTPA & network length to about 5,300 Km thus significantly strengthening HPCL™ position in key markets. HPCL has also teamed up with IOCL and BPCL in development of India longest LPG pipeline from Kandla to Gorakhpur (2,757 Km) through joint venture route.

Recent developments

HPCL acquires balance 50% stake in Chhara LNG Terminal 4

30 March 2021; Hindustan Petroleum Corporation Limited (HPCL) has acquired the balance 50% equity stake in HPCL Shapoorji Energy Private Limited (HSEPL)™ from M/s S P Ports Pvt Ltd on 30th March 2021. Post-acquisition, HPCL™s stake in HSEPL gets enhanced to 100%, making HSEPL a wholly owned subsidiary of HPCL.

HSEPL is constructing a 5 MMTPA Liquified Natural Gas (LNG) Terminal at Chhara, Gujarat at a project cost of about Rs 4300 crore which is likely to be completed by end of calendar year 2022. The Terminal will have all facilities for receipt of LNG through ocean going tankers, marine unloading, storage, LNG Road Tanker loading, regasification, and supply of regasified LNG to the gas grid. The project is further expandable to a capacity of 10 MMTPA in future

The acquisition is in line with overall future strategy of HPCL to diversify its product portfolio and is an important step in the direction of having a strong presence in the total Natural Gas value chain. Percentage of Natural Gas in the overall energy basket of India is expected to grow from 6% at present to 15% by 2030 which makes it one of the important growth drivers in future.

HPCL, along with its joint venture companies, has presence in CGD business in 20 Geographical Areas (GA) in 34 districts covering 9 states in the country. HPCL on its own operates 674 CNG stations as on date which it plans to expand further. It is also foraying into setting up of LNG dispensing stations. These, together with the focus on enhanced use of Natural Gas in refineries of HPCL and its joint ventures/subsidiaries add to the strategic value of the acquisition.

References

  1. ^ https://www.hindustanpetroleum.com/aboutus
  2. ^ https://www.hindustanpetroleum.com/productpipelines
  3. ^ https://www.hindustanpetroleum.com/documents/doc/HPCL%20Annual%20Report%202019-2020.pdf
  4. ^ https://www.hindustanpetroleum.com/pressreleasedetails?EnDocID=358
Tags: IN:HINDPETRO
Created by Asif Farooqui on 2021/05/10 20:03
     

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