CPCL targets improvements to margins

Measures to boost realisation include a naphtha splitter, low sulphur fuel oil foray

State-owned refiner Chennai Petroleum Corporation Ltd. (CPCL) , which posted a loss of ₹2,078 crore in FY20, has planned several initiatives for the current fiscal to improve its operational performance, said a top official.

CPCL posted a pre-tax profit of ₹430 crore in the first quarter following improvement in crude prices though product margins continued to remain below the economic level and demand was only 70-75% of the normal. “We expect the demand to significantly improve by Q3 of FY21,” Chairman S.M. Vaidya told shareholders at the annual general meeting.

“CPCL has initiated many measures to improve profitability and reduce operating costs and with good physical performance combined with these new measures, we are confident of better financial performance in the current fiscal,” he said.

As part of measures to improve margin realisation, a naphtha splitter was being installed in crude unit II to split the naphtha into light and heavy grades.

“This initiative will improve margin realisation of naphtha through exports and also help to consume part of the production within India as also contribute to improve the company’s gross refining margin,” Mr. Vaidya said.

CPCL had also initiated action to manufacture low sulphur fuel oil, which has a better margin compared to other products. It also plans to raise hexane output from 20,000 MT to 36,000 MT per year during 2021-22 and later scale it up by an additional 15,000 MT per year in the near future. These efforts were expected to improve profitability by about ₹90 crore per year.

Higher production of Lube Oil Base Stock (LOBS) products would also increase CPCL’s profitability, as margins from LOBS are quite high, he added.

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