Good if we get Russian crude, but no major concern if we don’t: BPCL Director (Refineries) Sanjay Khanna

We started taking Russian crude in 2022 as post sanctions (due to the Ukraine war), they (Russians) brought down the price heavily and the discounts were very attractive and too good to resist, even though we had some challenges with Russian oil. For instance, it had more salt which would get deposited in our units. We decided that even if we need to take temporary outages for units to wash off the impurities, we should still go ahead as it was worth it from a price perspective. So gradually, from less than 1 per cent (share of our oil imports), Russian oil went up to 33-34 per cent… But then this number (discount), which used to be over $20 per barrel, started coming down. Like last year, it came down to $5 to $10, and now it is around $3 per barrel (on landed price basis) compared to their competition.

Today, because of the shrinkage in discounts, it (Russian oil) is not as attractive as it used to be. So, if I am getting it, good. But if I am not getting it, it is not a make-or-break type of factor for my profitability. And we have enough sources of crude supply globally.

How do you see the situation evolving from here? Russia has managed to bounce back from sanctions in the past

The very first time when the sanctions had come, we were a bit sceptical as a few shipping companies were also under sanctions. But they (Russians) found a way out by saying that they will deliver at our ports and everything will be well within the sanction limitations. With time, they ensured that everything worked out that way… Now, with more and more shipping companies under sanctions, it has become difficult, and in the present circumstances, nobody wants to take a chance. But what will happen tomorrow, nobody knows. It’s a very fluid situation.

BPCL along with other public sector refiners Indian Oil Corporation and Hindustan Petroleum Corporation was understood to be in talks for a term deal for Russian crude. Have the latest sanctions complicated that process?

I will not say it has become complicated, it is an ongoing process. But it is not something that is critical to our operations or profitability. Basically, we are looking for crude that is cost economical and has operational reliability, and with that in mind, we scout every geography for crude. Even today BPCL is processing 14-15 types of crude, and the criteria is maximisation of value addition.

BPCL plans to build a large coastal refinery in Andhra Pradesh. There is some chatter that Saudi Aramco or ADNOC (Abu Dhabi National Oil Company) may be interested in picking up a stake in the project. Are you keen to have any of them as partners?

We needed to expand our refining capacity, and in the meantime, we got a great offer from Andhra Pradesh, which included coastal land for the project and other support. So, we decided to go ahead and start work on a detailed feasibility report. As of now, that is the level we have reached.

It is quite likely that some people (investors) would want to join the project as hardly any new large refinery projects are coming up (globally). And if the parties are credible and it is good for our business, we would like to take them on board. To answer specifically whether Aramco, or ADNOC, or someone else for that matter will be a partner, that answer is not known yet.

But have they shown any preliminary interest in partnering for the project?

There is nothing firm yet… we have not reached a stage where any potential partner would say that they want a 20 or 25 per cent stake in the project. We are always talking to such (global) companies as they are also our crude suppliers, and in these general conversations, this (Andhra Pradesh refinery project) may have come up. But no one has said, “I want 20 per cent share in your Andhra refinery”. Also, everybody would be a bit sceptical, especially in view of the planned joint venture refinery in Ratnagiri (which has failed to take off). So, now everybody would like to have a certain level of clarity about this new project. If the project is really good and can stand on its own feet, then there can be many takers.

Where is BPCL in its carbon neutrality and decarbonisation journey?

We can’t shed our responsibility of cleaning the environment. We have decided that we will achieve net-zero status (Scope 1 and 2) by 2040. Two years back, we undertook a study and our net-zero pathway was charted out. We saw that 97 per cent of our Scope 1 and 2 emissions were from the refineries only, which means that refineries will see major action in our decarbonisation journey, and we have paved the way for what needs to be done. We have been working on specific areas like (refinery) reliability improvement and efficiency improvement, we have gone for biofuels in a big way. Then we have expanded our renewable portfolio, which used to be just 20-30 megawatt (MW) and by next year, we are aiming for 600 MW…On green hydrogen, a 5 MW electrolyser is expected to be commissioned in the next quarter at our Bina refinery (in Madhya Pradesh).

With energy transition bound to pick up pace, how is BPCL looking to evolve and reinvent itself?

A key focus area is of course petchem (petrochemicals), 30-40 per cent of which are imported despite our per capita consumption being quite low. Even without a new refinery, our petchem portfolio will go up to 8 per cent from 2.3 per cent, which will be a significant jump. We also realise that energy transition is inevitable. So, we are working to convert what we call petrol pumps into energy stations where customers can go and get the fuel they need — be it conventional petrol and diesel, biofuels, CNG (compressed natural gas), liquefied natural gas (LNG) — and also go there for charging their EVs (electric vehicles). We are also looking at scaling up BeCafé (BPCL’s food and beverage cafes at fuel stations) by opening them at numerous locations. Also, BPCL has always been a market leader (in fuel retail) on highways and we are working to scale up wayside amenities at highway fuel stations in a big way. These are the few areas where we are strong and are aiming to get stronger by providing more facilities to customers.

There is a lot of talk around the potential of green hydrogen for mobility. Given that refineries use a lot of hydrogen and your familiarity with the gas, do you foresee its wider adoption as a fuel for regular consumers?

If there is a big breakthrough in technology, it can happen. On green hydrogen for mobility, challenges are plenty. Even with EVs, the traction is not great, even though people are familiar with batteries and how they work. Because we use hydrogen in refineries, we very well know the challenges with hydrogen. It has an extremely large combustion range, which makes it highly vulnerable. Secondly, if it burns, you can’t see the flame. Then it’s a very light gas, so it is extremely difficult to add additives to the gas. There are other significant challenges also in wider adoption of hydrogen as a fuel for regular consumers. But you never know when a major breakthrough can make that possible.