Congratulations on a great set of numbers. How much of a demand rebound have you seen in this quarter? Your annual profits have come in at an all-time high, but do you see challenges coming in into this quarter due to mini lockdowns?
Yes, this year was very different because it was marked with the global pandemic demand contraction, safety concerns, health concerns. And on the other side, it was marked with the crude oil volatility because of the restriction on the supply by some of the major producers, as well as a demand destruction; there was an inventory overhang also. Among these two ends, to ensure essential commodities or supplies uninterruptedly to the all the consumers, keeping in view the safety and health of our workforce, at the same time managing the supply chain was real task this time; also to ensure the financial performance of the company.
But I must congratulate and compliment all the team members of HPCL and each and every employee of HPCL that showed resilience and determination to perform in challenging times to come off with really excellent results, wherein we have posted a record profit of Rs 10,664 crore. It is the first time HPCL has crossed the 10K mark in that and the highest ever profit earlier was in the range of Rs 6,356 crore. So to that extent, I am very happy with the performance.
What is the share of GRM in this quarter versus Singapore? How much is the inventory contribution gain in the quarter?
This quarter, let us say the Q4 of 2021, our our GRM was $8.11 in which the inventory gains were $4.61. So, the core GRM was $3.5. For the full year if you compare, the full year GRM was $3.86 in which the inventory gains were $1.99 and that gives the core margin of $1.87.
How is the petchem capex panning out, is it on track?
Our petchem project is still under construction. We will be getting in Rajasthan Refinery two million metric tonne further. We have got a petchem business in HMEL which produces polypropylene and are also in the process of completing their cracker which will bring that additional 1.7 million metric tonne of petrochemical LLDPE, HDPE and PPE. As well in Rajasthan, we will have these products of around 2 million tonnes. But the petchem business is really looking good from here. Our project should be pitching in the right time.
With regard to our refinery expansion projects, you may be aware that our Mumbai Refinery expansion will be completing in this quarter and should be commissioning that part in the early of Q2 of this year. Our Vizag refinery units expansion is also progressing very well and we hope to complete it in the calendar year 2022 itself. The bottom upgradation project also we wish to complete in calendar year 2022. Apart from bottom upgradation of Vizag refinery that will be completed in this calendar year, we hope to commission it in this financial year.
What was the utilisation of assets like this quarter? What is the demand for fuel like?
Our refinery utilisation, if I say in the whole of the year on aggregate, it was 104% compared to the average industry refinery utilisation of less than 90%. On that account, we did very well for two reasons. One thing is HPCL sells lot more than what we produce, but in this year to continue operating the refinery with all the concerns which we have was really commendable. We had the utilisation of 104% in the last year on overall basis and the industry average was around 89.
As far as the demand is concerned, in the initial part of the year there was substantial demand contraction. It had almost come down 50%, then slowly and gradually it picked up and by the end of the year the aggregate demand has almost reached to 91-92% of 2019. Then the second wave of pandemic came and therefore localised lockdowns. In May, we have got a demand contraction to the extent of almost 30% compared to 2019, because if you compare 2020 it will be 20% more than that. But last year it was a complete lockdown at this period of time. Compared to that, it is different that it is not a complete lockdown. Second part is there is no restriction to interstate movement which was there last time around. Last time industries also got closed completely during this period which is not the case this time.
Migrant labour also had not moved back as was the case last time and offices are not completely closed down. They are operating with the combination of some people coming to office, some people operating from home. We see hopes of the localised lockdowns getting more relaxed because in the major states the impact is receding and improvement is visible. The vaccination drive gives further hope and, in that case, I expect that the rebound should be quicker and sharper this time than the last time and that should bring back the demand. There are also learnings from the last time to this time.
What is the outlook on marketing margins from here on as prices have been hiked now? Can you talk to us about that?
As such we do not have the practice of giving the marketing margins, but in the last year I must say that the marketing margins were reasonable. And in the initial period of the year when the demand contraction was substantially high, it was higher, which got tapered over the quarters. But on an average, it was reasonable for the marketing margins. And going forward, we hope to maintain and align the domestic prices to international prices.
There have been ups and down in the crude market in the last three, four days. You would have seen that crude has moved between $65-69 in the last two, three days based on the discussions which are going on with the Iran sanctions. We believe that the crude prices should be maintained less than 70 dollars in the long time. If the Iran deal comes favourably, it should move more towards $60 side and even if it does not, we do not see it going much beyond $70. I think that we should have a reasonable month.
Is there a genuine improvement in the GRMs which is happening now if we strip out the inventory gains as well?
Well, that is true because there is an improvement in cracks. If you remember the last time gas oil and gasoline cracks had come down substantially low, it has come down in the rage of two to three dollars. And that was a result of substantial inventory overhang and the demand contraction. With the pickup in the demand in Europe, US and Asia there is a soaking up of the inventory. There are definitely improvements in the cracks of MS and HSD which are the major components and that is also reflected in the Singapore benchmark GRMs which has also moved like the last year. The Singapore margin had been in the range of minus 0.93 in Q1 where it is almost around 1.78 in Q4 and currently it is slightly better than that.
We hope that given the projections of Singapore benchmark, GRMs are showing an improvement over it. There are differences between the way the Singapore GRM is calculated and Indian refinery GRMs are calculated in the sense that Singapore GRMs are more loaded towards MS while the Indian GRMs are more loaded towards HSD. There are definite improvements in the benchmark GRMs and in the net GRMs. Also, the companies have been trying to bring in operations efficiencies like in HPCL itself we have done a lot of things to reduce our energy consumption and improve our operational efficiencies and align our processing and crude basket accordingly; that helps the GRMs. So I hope the GRMs should improve from here.