India-IEA Seminar on Global Oil Market Outlook & Stability

India s Indias Refinery Outlook

Shri B. N. Bankapur Director (Refineries), Indian O Corporation Ltd. Oil C

Framework
Global Oil Scenario Indian Oil Scenario Refining Challenges India as a Global Refining Hub

Global Oil Scenario

World OilDemand
2007
2% 10%
BIOMASS

1%
RENEWABLE

Share of Coal, Gas and , Renewable rise marginally, Oil remains the most dominant fuel Fastest growth projected for India and China OPEC share in the output rises from 44% in 2007 to 51% in 2030 The projections hinge upon adequate and timely investments (USD 6.3 trillion during 2007 2030) 63 2007-2030)

HYDRO

6%
NUCLEAR

26%
COAL

21%
GAS

34%
OIL

2030
2%
HYDRO 5% NUCLEAR

10%
BIOMASS

2%
RENEWABLE

29%
COAL

Source: IEA 2008

22%
GAS

30% OIL
4

Oil Consumption vs GDP Growth p

6

World

5 4 3 2 1 0
2000 2001 2002 2003 2004 2005 2006 2007 2008

% Growth

GrowthinGDP GrowthinOil Consumption

12

% Growth

India

10 8 6 4 2 0 200001 200102 200203

% Growth

GrowthinGDP GrowthinOil 2008- Consumption

09

200304

200405

200506

200607

200708

Source: BP Stats, World Bank, RBI, EIA

Source: BP Stats, World Bank, RBI, EIA

Towards Economic Size

Smaller Refineries getting shut down

Source: OGJ 2007

Indian Oil Scenario

Industry Structure Indian Hydrocarbon Sector

Major Players / Companies
Upstream
Exploration & Production

Downstream
Refining & Marketing

Industry Bodies EIL

Directorate General of Hydrocarbons Petroleum Planning & Anal sis Cell Analysis Centre for Technology PCRA Oil Industry Safety Directorate Petroleum International India High

ONGC
ONGC Videsh Limited

IOCL
CPCL

BPCL
NRL

MRPL
(ONGC)

HPCL Essar Oil Ltd. GAIL

Oil I di India Limited

Pvt / Govt. E&P Cos.

RIL
Other Private /Govt. Cos. /Govt Cos Oil & Gas Marketing

PetroFed

Wide gaps between product demand and d ge ous c ude a a ab ty indigenous crude availability

Widening gap between product demand and crude production from indigenous sources; Heavy dependence on Imports Bridging the gap - Oil Equity abroad and fresh finds under New Exploration & Licensing Policy Need for huge investments in refining, pipelines & Marketing infrastructure
Source: XIth Plan Document

Indian Refineries
Refineries No. MMTPA

IOC Group 10 60.2 BPC group 3 22.5 HPC 2 13.0 ONGC/MRPL 2 9.8 RIL (Pvt.) 2 62.0 ESSAR 1 10.5 Total 20 178 0 178.0

BHATINDA (9.0)

PANIPAT (12.0+3.0) MATHURA (8.0) BARAUNI (6.0) (6 0) BINA (6.0)

BONGAIGAON (2.35)

DIGBOI (0.65)

GUWAHATI (1.0)

NUMALIGARH (3.0)

BARODA JAMNAGAR (13.7) (RIL 33.0 + 29.0) ESSAR 10.5+ 3.5) MUMBAI (BPC 12.0) (HPC 5.5+ 2.4)

VISAKH (7.5+7.5) TATIPAKA (0.08 + 0.08) CHENNAI (9.5+ 1.7)

HALDIA (6.0+1.5) (6 0+1 5) PARADEEP (15.0)

Existing IOC
Subsidiaries of IOC

MANGLORE (9.69 +5.31)

KOCHI (7.5 + 2.0)

Others New / Additions

NARIMANAM (1.0)

Refinery Capacity Utilisation

200 180 160 140 120
MMT

177.9
160.7 156.1 146.5 146 5 127.4

148.9 140.7 131.7 110.6

145.3

127.4 120.2 100

132.47

130.1

132.4

122.4 104.8 108 98.2

100 80 60 40 20 0

2004-05

2005-06

2006-07
Throughput

2007-08
Capacity Utilisation

2008-09
Consumption

Installed Capacity as on 1st April

Around 100% capacity utilisation of Indian Refineries

Source:MOP&NG 2008

India : Downstream Industry Overview

50 40 30 20 10 0 '97-98 '00-01 '01-02 '02-03 '03-04 '04-05 '05-06 '06-07 '07-08 08-09* 97 98 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 Imports Exports (in MMTPA)

Import/Export Products only

Since 2001-02, India has transformed from being a net importer of petroleum products to being a net exporter
Indian Hydrocarbon sector has acquired the critical mass for major productivity leaps

India : Refining Capacity Growth

350 302 300 250 200 150 100 50 0 117 90 27 33 127 94 33 127 94 33 132 99 106 44 149 106 73 76 178 235 202 159 100

MMTPA

2003

2004

2005

2006 PVT

2007 PSU

2009

2012*

2017*
* XIth Plan Projection

Total

As on April 1, 2009, India has a total refining capacity of 178 MMTPA (including the newly commissioned RIL refinery at Jamnagar) (i l di th l i i d fi tJ ) 18 out of the total 20 refineries in India belong to PSUs (with a capacity of a little over 59%) In the last few years, the Indian refinery sector has witnessed continuous capacity additions and the trend will continue in near future also; Projected capacity by 2017 is 302 MMTPA

India : Product Demand & Refining Capacity

350 300 250 200 150 100 50 0 2008-09 2011-12 2016-17 178 136
42

Gap between Refining Capacity & Product Demand

235

302

140 100

162

135

Refining Cap (MMT)

Product Demand (MMT)

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: PPAC/ Draft XI Plan Demand Document

Refining Challenges

Refining Challenge
Crude Oil Sourcing/ Oil Security g y Margin Improvement Environmental Issues Funding for New Projects

Crude Sourcing/Oil Security

Crude Potential available from existing fields in Middle East, Africa and South American countries to support refining capacity expansion and sustain capacity utilization Efforts for new finds
Attractive New Exploration Licensing Policy (NELP) 206 oil & gas exploration blocks awarded in 7 rounds 68 major discoveries reported Investment commitments of the order of $ 10 billion Huge Unexplored acreage Worlds biggest deep water gas discovery made in 2002 (K-G Basin)

India Hydrocarbon Vision 2025 100% exploration coverage of all sedimentary basins by 2025 Internationally competitive fiscal terms Alternative sources : CBM and Gas Hydrates

Oil Security: Strategic Storage

Storage & Supply Infrastructure Integrated Energy Policy recommended 90 days storage of oil imports Present storage coverage is 74 days and will reduce to 63 days with increase i th oil i i in the il imports t Storage capacity augmentation actions have been taken to enhance the total storage capacity to 78 days. Planned capacity addition: 8.62 MMT 5.33 MMT by ISPRL at Vizag, Mangalore and Padur y g g 3.29 MMT at other locations Strategic storage to provide addl. 12 days cover

Margin Improvement
Refinery Configuration/ Complexity Factor Improvement to address Changing Feed Stocks : Input cost reduction Product Mix improvement : Value addition Energy Efficiency improvement

Refinery Configuration/ Complexity

Changing Feedstocks : Input Cost Reduction Quality 0API / Sulfur / Acidity Wid i of crude basket Widening f d b k t New Frontiers - Unconventional sources - Tar sands, Oil shales Compulsion to co-process feed-stocks of Bio-origin

Refinery Configuration/ Complexity

Product Mix Improvement Growing demand with stringent product specs. Shifting regional demand Large number of grades Upgradation of low value/surplus products
Naphtha to Petrochemicals Black Oil to Distillates Pet Coke to Petrochemicals
High level of integration to reduce Capex and Opex (from topping Refinery to integrated Petrochemical Complex

Energy Efficiency Improvement

Energy efficiency improvement by use of
Energy efficient technologies/designs Energy efficient equipments Best operation and maintenance practices

GHG emission reduction through energy efficiency improvement Close monitoring and timely actions bridge the gap in specific g y g g p p energy consumption to match with the global best Tools applied are: Pinch Technology, Hydrogen Management, Waste Heat Recovery, Steam Power balance (Cogeneration Cycle) Increased utilization of gas in place of conventional liquid fuel I d ili i f i l f i l li id f l

Environment Issues
Managing new norms Environmental Quality upgradation requirements y pg q GHG emission Societal (Corporate Social Responsibility) Regulatory and legislative norms Sustainability

Environmental Issues: Stringent Product Quality Norms

AUTO FUEL POLICY : Aligning with global norms
Product Quality Parameters
Sulphur 50 ppm (max) Benzene 1 % (max) Aromatics 35 % (max) Olefins 21 % (max)

Equivalent
Euro IV

Locations
13 Major cities by April 2010

Petrol

Sulphur 150 ppm (max) Benzene 1% (max) Aromatics 42% (max) Olefins 21% (max) Sulphur 500 ppm (max) Benzene 3% ( B (max) ) Cetane No 51 Sulphur 50 ppm (max) 95% Rec. 360 0C PAH 11% (ma ) (max)

Euro III

13 Major cities -C Current t Rest of the country by April 2010 Rest of the country - Current y 13 Major cities by April 2010

Euro II

Euro IV

Diesel

Cetane No 51 Sulphur 350 ppm (max) 95% Rec. 360 0C PAH 11% (max) Cetane No. 48 Sulphur 500 ppm (max) 95% Rec, - 3700C

Euro III

13 Major cities - Current Rest of the country by April 2010 Rest of the country - Current

Euro II

Funding New Projects

Investment plans for Indias downstream p p petroleum industry for the period 2007-2012; ~ US $55 bn Investment planned by IOCL in the similar period is ~ US $11 bn
Refining Sector: 59% Petrochemicals: 27% Pipelines, Marketing and others: 14% Majority of available fund is getting diverted in development of national infrastructure like power generation, roads/highways, rail, airports, airports ports etc. which are essential for developing country like etc India

India as a Global Refining Hub

Strategic location
Located in the major maritime route from Middle East to Far East Western and southwestern coast - as transit landfall for middle-east crude Established refineries on western coast 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 Low capital and cash operating costs compared to developed countries Access to large, technically skilled manufacturing base and workforce Indigenous procurement Cash O C h Operating costs ti t
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 7 14.6
Source: A T Kearney 2005 report y p

Integration: Petrochemical industry

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

capacity additions post p y p 1991 have significantly reduced import dependence 5 kg - much lower than global average of 25 kg

Indias per capita consumption at

Largely

naphtha (61%) based ethylene cracker capacity Chemicals and Petrochemicals Investment Regions (PCPIR) being set up by IOC and RIL

Petroleum

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

Major capacity additions planned

Growing rapidly at 1.5 - 2.5 times the GDP growth rate

Way Forward
Leverage strategic advantage of coastal locations Consolidate with current/proposed location Proposed PCPIRs / SEZs Timely Ti l project completion is the key j t l ti i th k Economies of scale in setting up the hub Cost C t competitiveness to position the titi t iti th product in target markets Integration with petrochemicals, derivative and utility units, for maximizing value addition Environmental norms and product quality specs to meet the export markets

Opportunity for India to emerge as a refining hub appears to be real and attractive

Thank You

India could emerge as a significant product exporter in Asia Pacific