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‘Data Will Be King’: BPCL Chairman On Evolving Nature Of Fuel Consumption

For The Core Report: Weekend Edition, financial journalist Govindraj Ethiraj spoke to Krishnakumar Gopalan to understand the evolving nature of the energy economy. 

By The Core Team
New Update

We are living in the age of renewables, electrification and personalisation. To meet its net zero goals, India has been pushing for the adoption of electric vehicles (EVs), with a goal to become a global leader in the EV sector by 2030. The EV push has made oil marketing companies (OMCs) think beyond petrol and diesel, and they are now evolving to build EV corridors. OMCs are no longer just hubs where you drive through to load up on fuel. They need to adapt to changing consumer behaviour, which includes not only a shift to green energy, but also more personalised, targeted marketing. 

The nature of the consumer universe around energy is evolving and so are the companies that supply the energy, whether it's refining companies or distribution companies. “We started off as a refining company, then we became a marketing company,” Krishnakumar Gopalan, chairman and managing director of Bharat Petroleum (BPCL) told The Core. 

The push for renewables has forced a change in the fuel universe. “Since the pandemic, the world has changed,” Gopalan said, adding that the transition from fossil fuels to renewables isn’t going to be easy for India. “The pace at which energy is growing, we will not be able to replace fossil fuel-driven energy with renewable energy. It's going to take time,” he explained. 

Plus, renewable energy is still high in cost. “What we as a company and probably the country will do is that we are very clear that fossil fuel will be there for some time. Might as well nurture the core, leverage the old fuel, serve the needs of the country, and then use that to drive the renewable business,” he added. 

Gopalan pointed out that offering personalised services will be the key differentiator now. BPCL, in the 90s, made offering quality and quantity – ‘Pure for Sure’ – its marketing strategy. Now, he said, data will be king. “As far as I understand, quality and quantity is a given. You cannot call it a differentiator anymore,” he said. However, how well an individual consumer is treated, and how his personal preferences are catered to, will be key to success. 

For The Core Report: Weekend Edition, financial journalist Govindraj Ethiraj spoke to Gopalan to understand the evolving nature of the energy economy. 

Edited excerpts: 

There are many pumps I could go to when I fill gas in my car. But when I enter a Bharat Petroleum pump, I'm expecting the experience to be a little different. But how would I know today that I am actually in a Bharat Petroleum pump versus any other pump? 

If you walk into any Bharat Petroleum pump, what stands out clearly is the distinct blue and yellow colour logo, and you have the Retail Visual Identity – which is a wave which actually denotes what [our] core purpose of innovation, reliability, and caring is. 

When you enter the outlet, at the entrance of every outlet there is a forecourt supervisor smilingly guiding you to these filling points where you can fill. One of the primary differentiators amongst the three oil companies, way back in 1999, the environment was such that people did not trust the quality or quantity of the petrol which was being served or dispensed at these outlets. We took a very stated position way back in ‘99 and there was the evolution of our brand, ‘Pure for Sure’, where we said, come to this outlet and we will certify that these pumps will deliver you quality and quantity… That was a big game-changer for us. The ‘Pure for Sure’ actually became a social movement. And then it became a given. 

Initially, we started with manual inspection, tightening it. Over the years we have done a series of technological upgrades. Now we can certainly say most of our retail outlets, which are not technologically upgraded, are Pure for Sure. We very clearly promise areas of personalisation, care and trustworthiness are offered at these outlets. 

When you enter the pump, you are guaranteed a smiling forecourt supervisor takes you inside, then he shows you the zero. That's one of the primary things to ensure that the quantity is being delivered as much as whatever you pay for. Once he does that, automatically the pump locks in and you will be delivered and then there is a payment which is linked to it. 

Second, we have now introduced a newer technology, which we call Ufill. In this, the customer can decide how much he wants to pay, how much he wants that quantity… it gets locked. As soon as he does it the dispenser will dispense the fuel automatically. So there is no manual intervention of somebody setting the pump. 

Apart from this when you go down, there is an air filling, which you get. There is a convenience store located in most of these stations, where you can pick up your normal last-minute emergency purchase. In some places there are ATMs where they can withdraw money and so on and so forth. So in the outlet, when they buy fuel, they have this one Ufill, which is already preloaded through a UPI mechanism. Credit card payments are always available. We have our loyalty programmes, which was Petro Bonus, and now Smart Fleet for the fleet customer

This is as far as the cities are concerned. When you go down the highways, we have a lot of intermittent stations, which we call ‘ghar’. It's a home away from home, where the drivers, we believe every 250 kilometre they have a natural stopping point. At those locations, there are essential needs for a driver. If you look at a driver, a long-distance driver, he's very particular about the goods he carries… so he doesn't like to leave the vehicle for a long time. Normally there is a cooking space arranged for him. There is a dormitory if required. There is a toilet. We have also upgraded the pumps in between so that there are other people who can use facilities which may not be of that standard. 

With the introduction of EVs, we are also taking up highways where we are giving a complete network of chargers, where one of the key factors for anybody adapting to an EV vehicle is the range anxiety [for which] we have taken corridors. We have built about 10-12 corridors across the country, which covers about a range of 300-400 kms. We are spreading it across. Soon we will have about 7000 stations which will have EV chargers…It will be one of the largest networks which we'll have… mostly we will be also be looking at battery charging options, swapping options. These are things which. It's work in progress. 

Let me go back to the pump. Two or three things you mentioned. One is you said, the person who smiles as you enter. Second is, now that you say it, it didn't strike me that it was a function of training – the zero factor.

It begins with a greeting. Then he shows you the metre. 

Yeah. And he insists. I've noticed that it's a function of training rather than something that they do instinctively. 

This is one of our value propositions, where I'm guaranteeing you Q and Q.

Let me understand the technology part. One is you say, okay, there is no water, there is no mixing. There is no other sort of blending happening. How do you demonstrate that? 

Right from the depot or installation, where the petrol or diesel is stored, it is loaded in a lorry. After doing the necessary checks that I've loaded the correct product, the correct quantity, it is sealed, electronically sealed. And then when he reaches the destination, both the recipient as well as the driver can open the lock together. So that is the first step of guaranteeing. 

Then it goes into the tank, where there is an automatic tank gauge in most of the outlets, which also gauges the quantity… any variation we can. Then there are density checks which are done to the product. So we know there is no quality change. All the quality necessary is there in the pumps. And when the pump dispenses the petrol, we also tell the customer that you can do a sample check and see whether the quantity or quality you've got is correct. There is a five-litre can which is kept. He can look at it… can also check the density… if he has a doubt, he can verify.

Do people do that? 

Some people do it. And sometimes they have pointed out some variance as well. So these are good ways to…
And that feedback comes back into the BPCL systems…?

We make those course corrections. Sometimes it happens on lower long distances, but very rarely it happens, but immediately corrections are done. 

Let me now come to the refining side of it. Tell us about the journey. Suppose one barrel of crude lands outside Mumbai via a container or a crude tanker. What is the journey from there into your refinery? And as it gets split, where does it go? What is the value add? 

We have three refineries in the country. One is at Bombay, one is at Kochi, and one is at Bina in Madhya Pradesh. Bina and Kochi have arrangements to import large VLCCs (very large crude carriers). And they have something called a single-point mooring system at the sea, where the crude from the VLCC (which is a draught requirement, so they are little off the coast) are delivered to the single-point mooring and from there it's transported through pipelines to the refinery. 

At the refinery, there are four or five processes. What the crude goes through, one is distillation. Based on the boiling points, the crude is separated and the products are separated. After distillation, there is cracking. In the cracking, the hydrocarbon molecules are broken down, bigger hydrocarbon molecules are broken down. And then there is something called reforming. In the reforming stage, molecules are rearranged to add value. And then there are impurities which happen in this process, which are removed and separated. There will be further refining processes which happen to remove the finer purities or qualities so that we get the desired performance level in the way. 

From this crude, what is separated out is gasoline, which we call petrol. There's diesel, there's LPG, and so on and so on. Once it is separated, it's stored in a tank, which then again follows the same process through pipeline, by train, by lorries…it goes into regional depot locations and from there to the prospective petrol station, which is then dispensed to what you get at the outlet. This is typically the journey of a crude.

What is the hierarchy? 

It depends on the different boiling points. It is separated…then they are stored in different tanks and different locations it is transported to. So depending on the need, where it is…we have a wide network of depots and installations across the country. These LPG distributorships, we have LPG installations, we have aviation stations. Aviation stations are largely located in the airport so that the fueling can happen. 

Let's come to lubricants. So lubricants are also an important part of what, say, a two-wheeler consumer or even a four-wheeler consumer will buy. Where does this fit in the chain that you've just described? 

One of the products which aggregates out of the refinery is something called lubricant blending stock, which goes into the refinery. There's a hydrocracker unit which segregates and makes the lubricant. So the lubricant, once it is made, then the base stock, base oil, whatever we call it, is blended at a lube oil installation with additives. Various formulations are made which are based on each engine performance. There are tests being done on these engines and basis, the performance levels required there are various categories of lubricants, blended and packed. 

Some are stored for industrial use in barrels. Some are stored in small packs for individual customers. But this is a very intense business because, for example, in the consumer world, most of the users do not know what oil goes into the engine. It's actually the mechanic who influences it or the manufacturers who make the car. So the game is how well you educate the consumer to make the difference. 

Let me ask you a larger BPCL question. We've talked about, let's say, the experience at the pump and how that's changing and what goes into making that a good experience. You've talked about the input and the output. You've talked about crude coming in, the output, the various products. What else is BPCL about as a company today? 

One, we are a marketing company. Second, we are a refining company. We started off as a refining company, then we became a marketing company that was almost concurrently… whatever we refined. But those days are still, today we still import crude. Right. As we grew in size in the company, we realised that our product security is not in a comfortable position. We needed to integrate it with the upstream so that we have become a completely integrated company. And this is a very cyclical business. If the upstream moves up, the refining goes down and vice versa, because of the cost dynamics. 

Early in 2008, we started getting into the exploration business. We worked on it and we have acquired assets in Brazil and Mozambique. The exploration is a long drawn process. So we are in the process. Early returns are expected in 2027-28. So we believe we have got a good asset in Mozambique and we think it's going to turn out big if it works out well. 

That's the exploration part and then there's the renewables part. So one part of renewables is obviously, let's say the EV network charging network that you're setting up. 

Since the pandemic, the world has changed, right? There was energy transition, which is a very, very serious requirement because the environment is changing because of the use of fossil fuel. But the world realised that transition is slightly getting delayed. We believe strongly that fossil fuel will be there for a couple of decades because the country needs energy, needs to develop. 50% of the country today is developed and we're still growing. Probably by 2050, 60% may not have grown and the pace at which energy is growing, we will not be able to replace fossil fuel-driven energy with renewable energy. It's going to take time. So both are going to work on it parallelly. 

There's a couple of other reasons as well. Renewable technology as such is not yet mature. Right now it's very costly. So people are taking a backseat in investing. The returns are not as commensurate, but that is a necessary thing to do as well. So what we as a company and probably the country will do is that we are very clear that fossil fuel will be there for some time. Might as well nurture the core, leverage the old fuel, serve the needs of the country, and then use that to drive the renewable business. 

So we have said that we will nurture the core business of refining, marketing and upstream and also leverage that and start building on big bets. So our big bets are basically petrochemicals. We'll have gas, we'll have renewables. That is the green energy business. And we also look at digital to weave the whole thing together. 

We feel consumption of petrochemicals in India is only very low compared to the world. So there is a huge space for us to grow. Per capita consumption is very low. Although China is big, but they are in terms of volume. For us, the consumption growth story is there. So we are now investing big in Bina and Kochi, 

Gas, the Prime Minister mentioned [that] ambition is to move from 6% to 15%. There is a huge opportunity there…we are also going big on gas…we are also looking at the industrial segment so that we try to convert them to a gas based economy. The third part is renewables, which we feel there are five or six elements of the renewal block. One is bioethanol, which is being used right now. Because we are net importers, we need to reduce our dependence on imports and we need to reduce costs as well. 

So ethanol… We are also building up a 2G and 1G plant in Bargarh, Odisha which will be commissioned at the end of this year. We are also looking at about 5% biodiesel, which we will be using by 2030. And 5% ethanol also…we are experimenting with. 

Then we are also looking at compressed bio gas big time. 26 biogas plants we are planning to put across the country. We are looking at the government for support for giving us feedstock, which is a municipal solid waste. We have just recently tied up in Kochi with the municipality…so that project has already started. We have got about 15 sites. Once that feedstock is tied up, we'll have a good arrangement and about 26 will come in 5-6 years. That is the Sustainable Aviation Fuel we are trying to process…Green hydrogen is big. You know about the national green hydrogen mission which the prime minister has stated. So the stated intent is 5 million metric tons by 2030. But we are going small because we just started an experiment with an electrolyser in the Bina refinery. We have also co-created one with Bhabha Atomic Research Centre (BARC). So that will be the first. If that works, that will be the first indigenous electrolyser we make. Most of the electrolysers are imported. So this BARC development, which will be the 500 kilowatt electrolyser, we are trying to experiment with it inR&D centre. Maybe we'll try and launch it in the Indian Energy Week as well. That's regarding hydrogen. 

When you put EV chargers, is the gain more because you're keeping the customer in the same premises and therefore all the add-on benefits, or is it something else? 

Right now we are not looking at so much of the benefits. Right now I'm giving an option, a bouquet of offering to the consumer that if he comes with a petrol vehicle or diesel vehicle or an EV vehicle, I am giving you my offering. But there are limitations of space at many of the city outlets. So I need a charging station for electricity, I need a transformer installed along with it, so on and so forth. But we also need to engage them for 30 minutes when the charging is on. So that is where our In&Out stores work. So we're looking at various options to keep them engaged. 

And what's changed in the stores? They've been there for several decades. Is there anything new that's going to happen?

There are two types of stores which we have, one which we have in the cities, and we are looking at experimenting at slightly mid-level grocery, in rural areas. We feel rural is the place where fast-moving consumer goods are growing phenomenally. And we have an opportunity because we have captive footprints coming to our outlet.

Coming back to the consumer. So loyalty is an important part. One way you ensure loyalty is with cards and co-branded credit cards or debit cards and so on. If you were to look back now, let's say a decade or two. How has that worked out? And is that something that you feel is one of your, or could be a continuing USP? 

Yes. Obviously, very early in 1999, we launched PetroBonus, which was a prepaid loyalty card where people actually paid in advance to use it. That time, the time and context was completely different in the sense that very few people were given credit cards because of the strict credit norms and all. Holding a card was a status symbol and people use that card phenomenally. We went up to about two and a half, 3 million customers, individual customers. What we gained was we knew the exact profile of the customer. I could tailor offerings to these people. 

We have also now gone very big in the fleet segment where I give a complete fleet solution to the fleet owner right from the safe fueling money transfer…For example, if somebody picks up a load, delivers a load in, say Assam, he collects a huge amount of money for that transhipment and once he collects, he does not know what to do. It's not pretty safe even today on the highway. So he has that facility to deposit at the RO and that gets credited into the owner's account. Then he also has all the doctors on call, emergency pickups, he can go to outlets, rest for a while. So a complete solution for the driver and the fleet owner. So these are some of the loyalty and we think loyalty will go a long way. Even Ufill is another way of doing it. So that I know he can lock, he can be sure of what it is. And we feel that it has demonstrated that it's a good repeat customer base we have. 

As you look ahead, what is going to be the most, let's say, where is the battle going to be fought, a consumer's mind or wallet? 

Data will be king. How I use the data, honest preferences, however well I personalise the offer will be the key differentiator. As far as I understand, quality, quantity is a given. You cannot call it a differentiator anymore. What you will be giving, how well I treat you as an individual…That takes you to a different level. Comparatively. We are a long way off, but that is where we want to go. Where I need to identify you as a person with specific requirements and needs, you will be completely different from the other customer who's following you. So unless I am able to personalise my offering to that extent, that will be the battle, I think, which will make the difference. 

And it's almost like it's a holy grail, but which is in sight? 

Yeah, one of the things is now the world is so interconnected, I'm not compared for services at the petrol station, I'm compared with maybe a McDonald's or maybe a service in the mall, or even an Amazon. How quick I'm responding to it. When you go searching for a book on Amazon, they'll tell you, you have been reading these sorts of books. That's the kind of level of personalisation somebody is able to reach. And many of these startups have come with amazing ideas, they can tailor it, but certain times at the station we are limited because of the space, but that's where the game, I think, will change, where we can personalise the offering to the [smallest] detail. 

Right, and you mentioned startups. When you talk to or the BPCL system is talking to startups or engaging with them, what are the problems that you're trying to solve today or trying to address today? 

Productivity, efficiency are basically the statements which we have, but largely trying to see how best I can serve the customer better. Increasingly the customer is coming to the fuel station because it's a low involvement product, he doesn't have any involvement with the product, he doesn't take a decision on whether to buy or not to buy, he has no choice. He's coming to buy it and most of them feel it's a drudge purchase, not the price being what it is. He doesn't like buying petrol or diesel. So these startups, what we are trying to do is how best we can make that customer experience, that interaction with the fuel station that much better, that much faster, so that he's in and out quickly. And that is where we want to try and make a difference. And then maybe a time will come that as soon as he walks in, some sensor will read the car and say he normally fills 20 litres of petrol…so probably that's where we will reach. And the quicker he gets delivered and he's out of the station and whatever forms of energy he wants, we should be able to cater to. 

The India Energy Week is coming up, what are you looking forward to from that whole engagement interaction? 

I think it's one of the best platforms which has been created in the country so far. It gives us a wide expanse of opportunities to meet people, see technology and see how we can best adapt practices. I think this sort of platform and interaction will give us a lot of leeway in the future. We get access to technologies, which we have never seen before. 

I think India Energy Week is a good platform for us to scale up. Plus there are lots of on site dealings with national oil companies which also gives us a lot of opportunities for business…and also to showcase our companies as well as to learn from those companies. 

When you say technology, what all aspects of technology do you [mean]?

From the refining process to the consumer process, every single piece of the value chain, we can look at opportunities for doing that. And there are so many startups that showcase new technology. New processes which can be adapted to our use may not be directly, but we can work on it and work on some adaptation. Last time also, we found a couple of them on which we are working. We are working on a membrane-less technology for hydrogen. A couple of things we can work on. So I think this gives a good opportunity. A huge number of footfalls in this 1-3 days which we get, which may not get otherwise. Getting to meet each one of them separately takes years for us. 




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