ANALYSIS OF PETROLEUM ALOK INDUSTRY IN INDIA PRIYANKABUGDE C009 GARG C019

HARDIK GOGRI ILHAN KHAN RAVI RAMCHANDANI ANIKET SAMANT C022 C033 C047 C048

History
History

Early Phase (1947 to 1969)

o Government consolidated its control with Soviets assistance

Development Phase (1970 to 1989)

o US companies played dominant role replacing the Soviets

The economic liberalization phase ( post 1990 )

o Exploration and Production o Refining and Marketing

Brief Overview

Brief Overview

Development on slow pace Industrial Policy Resolution, 1956 Liberalization and Privatization, 1991 Ever-Increasing Demand Favorable Foreign Investment

F a cto rs A ffe ctin g D e m a n d

Cyclical demand Changes in climate Market speculation

F a cto rs A ffe ctin g S u p p ly

Profit motive Spare capacity External shocks Reserves Exploration Technology

Mic roEc on om ic An aly sis of Pet rol eu m Ind ust ry

Market Structure

Oligopoly Cartel Theory Role of OPEC

MAJOR PLAYERS

MAJOR DOWNSTREAM Company Division Refining (mb/d)Retail outlets PLAYERS

IOCL BPCL HPCL RIL Essar Mlore Chennai

1.2 0.6 0.25 1.24 0.22 0.2 0.19

18140 8389 8539 800 1200 0 0

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Refining Market Share

Retail Market Share

MAJOR UPSTREAM Bus PLAYERS

Market Capitalization 237 , 799 . 85 52,166.13 48,021.90 31,416.57 12,671.25 5,833.11 5,639.15 5,246.79 1,521.77 1,492.84

Company Division ONGC GAIL Cairn India Oil India Petronet LNG IndraprasthaGas Guj Gas Guj State Petro Aban Offshore Hind Oil Explo

ine ss Su m ma ry

PRODUCTS AND EXPORT POTENTIAL

Petroleum Products consumption ( Million tonnes ) 2010-11 2009-10

LPG 14.4 13.1 12.8 10.1 4.6 9.3 56.2 0.5 2.5 11.6 4.9 11.9 137 . 8 Motor Spirit (Petrol) 14.4 Naphtha Aviation Turbine Fuel Superior Kerosene High Speed Diesel Light Diesel Oil Lubes Furnace Oil / LSHS Bitumen Others Total 11.5 5.1 8.9 60.4 0.4 2.6 11.4 4.7 10.7 144 . 4

India - Exports & Imports of Crude Oil US$ Billion

vGross

crude and petroleum products Crude/product Imports : ~ 28% of total imports Product Exports : ~ 8% of total exports

Crude Oil Import

Product Export

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Product Import

80 per met through imports. 2009-10, Oil import bill stood at US$ 79.55 billion 2010-11 Oil import increased to US$ 106 billion Oil import bill accounts for almost one third of the total imports Almost 70 per cent of Indias total crude oil

Import and Export cent potential of crude oil demand is

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Global factors for export potential demand for the refined Worldwide huge

petroleum products, especially gasoline, jet fuel, diesel etc. Developing countries competing with developed West for crude oil.

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Today major economies like Japan, South Korea, China import petroleum products from the open market to relieve spot shortages.

Domestic factors for Export potential : Domestic demand for refined petroleum in India is

around 145 MT

Domestic Petroleum refining capacity in India is 170 MT

Strategically located in the major maritime route from Middle East

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Geographical advantage to serve western and eastern markets

Strong domestic demand

Import parity pricing mechanism of petroleum products

Free on Board Price (FOB) as quoted in Arab Gulf Market and reported by Platt and Argus

Premium/ discount as published in Platt and Argus

Ocean freight from mid port in the Arab Gulf to Indian Ports,

Insurance

Exchange rate

Custom Duty

Ocean Loss

Wharfage and Port charges.

I m p or t P ar it y Pr ic

Administered Pricing Mechanism ( APM )

Prices controlled at production, Refining, Distribution and Marketing Ad Hoc Price adjustments required No Incentives to make profitable investment decisions

Ad min iste red Pric ing me cha nis m( AP M)

Dismantling APM
Prices of all petroleum products except MS, HSD, ATF, PDS Kerosene, Domestic LPG to be de-controlled (April 1998) Market determined tariff based pricing Oil sector is poised for exciting times ahead and we are entering a new era

Dis ma ntli ng AP M

World Oil Refining

88 . 6 Refinery capacity

rld Refining capacity 1 . 1 . 2008 World Refining capacity & thruput 1980 - 2008 ( mbpd )

otal : 88 . 6 mbpd ( 4431 MMTPA )

Sources: BP Stats 2009

World oil demand grown faster than refining capacity - better capacity utilization World average refy capacity utilization moves around 75 % ( 1980 ) to 87 % ( 2008 )

Regional product balance, 2020

North America Deficit : 43 Surplus : 68
LPG : Naphtha : HSD : FO : Others : 19 15 5 14 15 MS : 24 Jet kero : 19

Europe Deficit : 145

LPG : Naphtha : Jet kero : HSD : MS : FO : 17 23 54 49

Russia All figures in MMTPA Deficit : 13 Surplus : 71

LPG : Naphtha : HSD : FO : 1 2 34 34 MS : Jetkero : Others : 7 4 3

Surplus : 133 Net : (-) 12

126 7

Net :

(+) 25

Net :

(+) 58

Latin America Deficit : 50

Naphtha : MS : HSD : Others : LPG : FO : 7 10 32 1 5 25

Africa Deficit : 71
LPG : MS : Jetkero : HSD : Others : Naphtha : FO : 5 24 3 38 1 11 25

Middle East Asia Pacific Deficit : 31 Deficit : 419 Surplus : 188

LPG : Naphtha : Jet / kero : HSD : FO : 85 44 19 17 23 MS : Others : 26 5 LPG : Naphtha : MS : Jet kero : HSD : Others : 40 56 107 26 86 28

Surplus : 30 Net : (-) 20

Surplus : 36 Net : (-) 35

Net :

Surplus : 0 Net (-) 419 (+) 157 :

By 2020 , world would be net product deficit @ 247 MMTPA

100 MMT surplus ( LPG : 49 & Fuel Oil : 51 )

Source: EIA

Refineries in India
BHATINDA (9.0) PANIPAT ( 12 . 0+ 3 . 0) MATHURA (8.0) BARAUNI (6.0) BINA (6.0) HALDIA ( 6 . 0+ 1 . 5) PARADEEP ( 15 . 0 ) Refineries IOC Group BPC group CHENNAI ( 9 . 5+ 1 . 7) KOCHI ( 7 . 5 + 2 . 0) NARIMANAM (1.0) HPC ONGC/MRPL RIL (Pvt.) ESSAR Total Capacity
No MTPA % of Ind 60.2 22.5 13.0 9.8 62.0 10.5 33.8 12.6 7.3 5.5 34.8 5.9

BONGAIGAON ( 2 . 35 )

DIGBOI ( 0 . 65 ) NUMALIGARH (3.0)

GUWAHATI (1.0)

JAMNAGAR ( RIL 33 . 0 + 29 . 0) ESSAR 10 . 5+ 3 . 5) MUMBAI ( BPC 12 . 0 ) ( HPC 5 . 5+ 2 . 4)

BARODA ( 13 . 7 )

VISAKH ( 7 . 5+ 0 . 8) TATIPAKA ( 0 . 08 + 0 . 08)

Existing IOC
Subsi diaries of IOC

MANGLORE ( 9 . 69 + 5 . 31)

10 3

2
2 2 1

Others New / Additions

20

178.0

100

India : Product Demand & Refining Capacity

Gap between Refining Capacity & Product Demand 140 100 29

Surplus refining capacity is expected to increase further by 2030 India will continue to be product surplus Import/Export requirement for crude/products to be quite substantial
Source: Draft XI Plan Demand Document

Located in the major maritime route from Middle East Established refineries on western coast

Strategic Location

Geographical advantage to serve western and eastern markets Strong domestic demand provides an effective edge against fluctuations in exports

Cost Competitiveness
Cost competitiveness driven by lower manufacturing wages

Cash Operating costs

Refinery Premcor Sunoco S-Oil SK Corp Zhenhai Sinopec Indian Ref. Cash Operating Cost ($/ ton) 15.4 17.6 17.6 22.7 9.5 14.7 14.6
Source: A T Kearney

Low capital and cash operating costs

Access to large, technically skilled manufacturing base and workforce

Integration:

Petrochemical Industry

Major
Aggregate Petrochemical Demand in 000T
30000 25000 20000 15000 10000 5000 0 2005 2006 2007 2011-12

capacity additions post 1991 have significantly reduced import dependence Chemicals and Petrochemicals Investment Regions (PCPIR) being set up IOC and RIL

Petroleum

Major capacity additions done by

Demand for polymers alone has the potential to reach 12.5 MMT by the end of the 11th Five-Year Plan, growing at a CAGR of 18%.

Growing rapidly at 1 . 5 - 2 . 5 times the GDP growth rate

Worlds 6th largest refiner with 3% of world oil consumption Over 10,000 KM products pipeline network Excellent maritime infrastructure:

Infrastructure
POL facilities at 14 locations 39 berths 2 barge jetties 8 SPMs

India as a refining hub competing with Singapore & Middle East

Singapore ( MMTPA )
Refinery Capacity : 67 Refinery product surplus : 40 Product supplied to : Asia Pacific

Middle East ( MMTPA )

In di a

Refinery Capacity : 340 Refinery product surplus : 92 Product supplied to : Asia Pacific / Europe

SOLUTIONS

Problems of Petroleum industry : of new fields Exploration and development

Geographical problems Wastage problems Fluctuation in prices: financial problems Skilled human resources are aging and growing scarce Environmental problems

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Opportunities

Development of unconventional resources Maturing oil producing basins Demand for oilfield services Signatory to international treaties Augmentation of refining capacity Expansion of distribution segment

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Solutions :

A green field refinery on Gujarat coast. Strategically located in the major maritime route from Middle East Geographical advantage to serve western and eastern markets Strong domestic demand Established refineries on western coast

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