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Informist, Monday, Oct. 26, 2026

 

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--CONTEXT: Comments by BPCL mgmt in post-earnings analyst call
--BPCL: Mozambique upstream project 47% completed as of Sept
--BPCL: Gas production from Mozambique project expected by mid-2028
--BPCL: Expecting higher crude oil volumes from West Asia in Oct, Nov
--BPCL: Crude oil from Russia dn in Nov due to commercial reasons
--BPCL: See LPG under-recoveries rising in Nov, at INR 328 per cylinder
--BPCL: Have 10% share in Mozambique project's output in phase 1
--BPCL: FY27 capex target INR 250 bln, spent INR 130 bln in Apr-Sept
--BPCL: Have spent $2.8 bln on Mozambique project so far
--BPCL: Will spend $1.8 bln on Mozambique project in next 1-2 yrs
--BPCL: Plan to incur around $4.5 bln on Mozambique project overall
--BPCL: Did not get discounts on Russian oil cargoes in Q2
--BPCL: Getting full oil cargo volumes but facing some challenges
--BPCL: Expect diesel demand to grow around 4% over 3-5 yrs

 

By Anand JC and Utthara E. S.

 

MUMBAI – Bharat Petroleum Corp. Ltd. Monday said the marketers of liquefied petroleum gas cylinders have asked the government for support as their under-recoveries continue to climb amid the war in West Asia. The company expects under-recoveries on sales of LPG cylinders to climb to INR 328 per cylinder in November from INR 245 in October and INR 199 in September as the deadlock in the Persian Gulf keeps crude oil prices above $100 per barrel.

 

BPCL currently has a buffer of INR 173.34 billion, after accounting for compensation of INR 37.96 billion received in Apr-Sept from the Centre. This buffer is the cumulative backlog of uncompensated loss from the centre for sale of LPG at a lower cost than the market price.

 

When quizzed if the company has made representation to the government regarding this increase in under-recovery buffer, the state-run oil marketer said the industry has submitted a presentation to the oil ministry seeking support.

 

The 12-month support package extended by the ministry previously to all oil marketers will end in October. BPCL was getting INR 6.32 billion per month. The company is currently holding 32 days of inventory of LPG, including the cargoes in transit.

 

"It is a process, there is a process of getting budgetary support. We are in consultation with the ministry for LPG subsidy," the company said. "Any new support, if it comes in this quarter or maybe next quarter, we are not sure what form or what amount the support will come," the company said.

 

The company's LPG under-recoveries for the September quarter were INR 290 per cylinder, down sharply from INR 507 for the June quarter when the war had just begun, its executives told analysts in a post-earnings conference call Monday. 

 

OIL SOURCING

For the September quarter, the company sourced 67% of its crude oil from the spot market. Russian grades of crude oil accounted for around 37% of its overall procurement, similar to the previous quarter. "As flows from the Middle East (West Asia) improved, we progressively restored sourcing from the region, while retaining the flexibility and diversification we had built during Q1," the company said.

 

Supplies of crude oil cargoes from Saudi Arabia improved in the September quarter, compared with the June quarter, especially after the Yanbu pipeline was repaired following drone strikes. BPCL expects higher volumes to continue flowing in from West Asia in October and November. Crude oil cargoes from Iraq and Kuwait are yet to go back to pre-war levels.

 

The company's crude oil purchase from Russia came down slightly in October compared with the months before. "In the month of November, the cargoes from Russia significantly reduced due to the commercial viability of Russian cargoes. Mainly the increase in freight, we are not getting good offers from Russia," the company said. However, it expects the situation to improve in December. The premium on oil purchases offered by Russia has moderated, and is now comparable to Persian Gulf grades. 

 

Supplies of LPG from West Asia improved during the quarter as well, the company said. US-origin cargoes accounted for around 48% of BPCL's overall LPG imports in the September quarter.

 

BPCL expects its crude oil sourcing costs to remain high going forward as significant contracts are based on dated Brent, not ICE Brent. Dated Brent represents actual, physical spot market for oil cargoes loaded in the North Sea while ICE Brent is a liquid, financial futures contract which is traded electronically. Currently, dated Brent price is hovering around $125-$127 per barrel of oil, compared with Brent Futures' rate of $115 a barrel. 

 

"As long as the dated Brent is on a higher side, our cost of crude will be definitely on the higher side," the company said. Dated Brent prices have increased in recent months because of the war. For BPCL, the cost of procurement of crude will be on dated Brent while cost of crude will be on ICE Brent.

 

MOZAMBIQUE PROJECT

BPCL, through its subsidiary Bharat PetroResources Ltd., owns a 10% participating interest in the Mozambique LNG project (Offshore Area 1) in the Rovuma Basin. Work in the area has resumed now after facing prolonged delays because of security threats from insurgent attacks.

 

"The Mozambique project continues to progress steadily, reaching 47% completion as of September 2026. With gas production expected by mid-2028," the company said. BPCL expects to get around 1.3 million tonnes of gas from the first phase of the project, based on its participating interest. 

 

BPCL plans to incur around $4.5 billion-$4.6 billion in the Mozambique project overall, including towards exploration activities. The company has already invested $2.8 billion cumulatively. Hereon, it will spend another $1.8 billion. 

 

 

CAPEX OUTLOOK

BPCL plans to spend INR 250 billion towards capital expenditure in 2026-27 (Apr-Mar). It spent INR 93 billion in the September quarter and INR 137.49 billion in Apr-Sept. The company's capex for FY27 may exceed the initial target by 5-10%, depending on how its projects pan out, its officials said.

 

In FY28 and FY29, the company pencilled in capital expenditure of around INR 400 billion-INR 450 billion, each year, depending on the projects.

 

On Friday, BPCL's board approved setting up a wholly-owned arm as a dedicated project company for its refinery and petrochemical complex in Andhra Pradesh. The company's current capital expenditure plans do not include equity commitments towards this plant. "Once FID (final investment decision) is approved, Andhra (project) will be an addition, my equity commitments," the company said.

 

PROJECT PLANS

Among its downstream projects, BPCL is investing in BPCL Bina Downstream Petrochemical Complex and Refinery Expansion project, located in Madhya Pradesh. The scheduled completion is around 40%, the company said. The approved project cost is INR 433.67 billion. It has incurred INR 75.66 billion in capital expenditure so far. The project is expected to be commissioned in mid-2028, in line with its original plans.

 

The BPCL Kochi Polypropylene project has an approved capital expenditure of INR 48.50 billion. Of this, the company has incurred INR 11.78 billion so far. Around 55% of the work has been completed already and is expected to be fully done by October next year. 

 

BPCL is set to operate India's first Petro Resid Fluidised Catalytic Cracker unit at its Mumbai refinery. The company has incurred a capital expenditure of INR 1.30 billion so far, with the project cost set at INR 136.26 billion. The project is expected to be completed in September 2029.

 

In the coming 3–5 years, BPCL expects demand for high-speed diesel to grow around 3–4%, up from previous expectations of 2.0–2.5%. Demand for motor spirits is expected to grow 5–6%, the same as before. 

 

BPCL had disclosed its earnings for the September quarter on Friday. It reported a net profit of INR 49.93 billion on revenues of INR 1.58 trillion. At 1332 IST, its shares traded 2.57% higher at INR 289.20 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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