INDIA - A GLOBAL REFINING HUB

Jaspal Singh
India Head and Director of Operations

Contents
Global Oil Scenario Indian Scenario India Robust Economy India A Global Refining Hub Refining Challenges Conclusion
2

Global Oil Scenario

Country
India China Middle East USA

Reserves
0.4 1.1 56.6 2.1

Production
0.9 4.9 30.3 8.5

Consumption
3.8 10.4 8.7 21.7

Proven Oil Reserves

All figures are in % of Total for 2009

4
Source: BP Stats, 2010

World Crude Production By Region

5
Source: BP Stats, 2010

WORLD HEAVY CRUDE PRODUCTION BY REGION

Production, Million Barrels per Day

Heavy Crude Share of Runs,%

25

25

20

20

15
Other

15

10

Middle East North America

10

5 Latin America

0 1990

1995

2000

2005

2010

2015

2020

6
Source: Purvin & Gertz

Oil Production & Consumption

12 10.0 10 8 9.7

Oil Production,2009
7.2

mbpd

6 4.2 4 2 0 3.8 3.2 3.0 2.4 2.5 2.5 0.8

SA

M ex ic o

Ir an

Ch in a

Ru ss ia

Ca na da

Sa ud iA ra b

20 18 16 14 12 10 8 6 4 2 0
U

18.7

Ve ne zu el a

mbpd

Oil Consumption,2009
8.6 4.4 3.2

2.7

2.6

2.4

2.3

Ku w

2.2

In di a

Ir aq

ia

ai t

1.8

SA

G er m an y

Su ad iA ra b

So ut h

Source: BP Stats, 2010 7

Changing dynamics in oil trade linked to production / consumption matrix

Ca na da

Fr an ce

Ch in a

In di a

Ru ss ia

Ja pa n

ia

Ko re a

Regional product balance, 2009

8
Source: BP Stats, 2010

World Refinery Utilization

World Refining capacity 2010
USA 20% Others 47%

Refinery capacity
90 85 82 80 75

Refinery throughput

Refinery Utilization
83 84 82 84 86 87 86 86 85 81

China 10% Germany Russia 3% 6% Japan India 5% S. Korea 4% 3% S. Arabia 2%

mbpd

70 65 60 55 50

Total: 90.7 mbpd

1999

2001

2003

2005

2007

2009

Source: BP Stats, 2010

World oil demand grown faster than refining capacity-better capacity utilization

Indian Scenario

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India - Refineries
Existing
BHATINDA (180) PANIPAT (240+60) MATHURA (160) BARAUNI (120) BARODA (274) BINA (120) PARADEEP (300) VISAKH (150+50) TATIPAKA (1.4 + 1.4) CHENNAI (190+ 34) KOCHI (190 + 40) NARIMANAM (20)

New / Additions All data in kbpd as per 1.10.2009 and XIth five year plan
BONGAIGAON (47) DIGBOI (7)

GUWAHATI (20)

NUMALIGARH (60)

JAMNAGAR (RIL 1240) ESSAR 210+ 110+360) MUMBAI (BPCL 240) (HPCL 110 + 48)

HALDIA (120+30)
Existing Refineries
IOCL BPCL HPCL CPCL ONGC/MRPL RIL ESSAR NRL Total Capacity

No
8 2 2

kbpd
994 430 260

% of Capacity
27.6 11.9 7.2

MANGLORE (194 +106)

2
2 2 1 1 20

210
195.4 1240 210 60 3599.4

5.8
5.4 34.5 5.8 1.7

11

100

New / Expansion

600 / 839.4

40

India Oil Trade

Product wise Naphtha Kerosene 2009 (kbpd) +56 -26 Product Import 317 823 506 +75 +142 +250 Product Export Net Product Export India Crude Oil Import 2009 (kbpd) 2950

5 4

Jet Fuel Gasoline Distillate

mbpd

3 2 1 0 1995 -1

Refinery Fuel
Others (LPG major)

+63
-54

Net Product Export

Product Export

1997

1999

2001

2003

2005

2007

2009

2015*

India will continue to be product surplus Import/Export requirement for crude/products to be quite substantial
12
Source: Purvin & Gertz

India - Refinery Utilization

200 180 160 140 120 100 80 60 40 20 0

Refinery throughput
107% 100% 98%

Refinery capacity
105% 101%

1.10 105% 1.05 1.00 0.95 0.90 0.85 0.80

MMT

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

Over 100% utilization inspite of Product Surpluses

13
Source: PPAC

Refining Hubs

14

Major Refining Hubs

Middle East
Refinery Capacity: 7.7 mbpd Product Export: Asia Pacific, Europe

Rotterdam
Refinery Capacity: 0.4 mbpd Product Export: Continental Europe, US

Jamnagar US Gulf Coast (USGC)

Refinery Capacity: 8.5 mbpd Product Export: US East Coast, Mexico Refinery Capacity: 1.5 mbpd Product Export: Europe, US

Singapore
Refinery Capacity: 1.42 mbpd Product Export: Asia Pacific

15

Success Factors
Middle East
Availability of feed stock Ample funds Technological partners Leveraging crude reserves advantage

Rotterdam
Largest port in Europe Access to hinterland navigable rivers Favorable policy regime Well developed infrastructure

US Gulf Coast (USGC)

Discovery of oil & gas along coast/ offshore Easy access to shipping Favorable policy regime Robust infrastructure back-up

Jamnagar
Economies of Scale State of the art Technology Efficient Logistics Enabling Regulations Superior Product Quality

Singapore
Strategic location, at cross roads of Indian and Pacific oceans busiest international waterways, Deep water berths Well established infrastructure incl. storage terminals

16

Grabbing the Opportunity

Probable scenario Build indigenous refining capacity Increase the refining capacity by existing hubs Emergence of new players with export orientation China Likely players : Emerging deficit centre. May invest on its own.

Singapore : Existing strong player. Middle East : May augment capacity for Asian markets India : With surplus capacity and focus on export market. South Korea : Strengthen its ability to service the regional deficit markets.

17

Compete with existing or emerging hub

India - Robust Economy

18

India - High GDP Growth (%)

9.5 8.5 7.5 7.4 5.8 4.4 3.8 6.7 9.7 9 8.4

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Source: RBI

19

India - Per Capita Income on the rise

People Getting Richer
Rs.'000 24.3 24 22.5 22 20.7 20 18.2 18 16.1 16 14 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Per Capita NNP

25.5

19.2

16.9

17.1

Annual Growth 6 9%

Source: RBI

20

Foreign Capital Inflows ( US $ Billion)

Expanding Foreign Investment

US $ Bn
40 30 20 10 0 -10 -20

FDI

FII

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010 -11*

2010 -11 * - Figure only till June 2010

Source: RBI

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What it takes to Succeed

Size Location Complexity/ Cost competitiveness Flexibility in handling various crude varieties Flexible downstream product mix Integration Capture Economies of scale Access to crude sources and to local deficit markets Upgrade low value products to offset transportation cost To take advantage of the cost differential between sweet and sour crude oils Secondary Conversion facilities to tilt output towards light and middle distillates Upstream and downstream, synergies with related facilities power, petrochemicals

Taxes and fiscal issues Governments need to provide support in the form of tax breaks, fiscal incentives Infrastructure back-up Facilitates feed stock supply, product evacuation
22

India - A Global Refining Hub

23

Critical Success Factors

24

Cost Competitiveness
Cost competitiveness driven by lower wages Access to large, technically skilled manufacturing base and construction workforce Indigenous procurement Labor Productivity

Resulting in low capital and cash operating costs

25

Strategic Location
Located in the major maritime route from Middle East to Far East West and southwest coast - as transit landfall for middle-east crude

Established refineries on west coast

Geographical advantage to serve western and eastern markets

26

Robust Domestic Demand

180 160 140 120

MMT

100 80 60 40 20 200102 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11* 11-12* 12-13* 13-14* 14-15*

Strong Domestic Demand - an anchor to provide an effective hedge against market fluctuations.

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Source: PPAC

Quality of Automotive Fuels

Product Quality Parameters
Sulphur 50 ppm (max) Benzene 1 % (max) Aromatics 35 % (max) Olefins 21 % (max)

Equivalent

Locations

Euro IV

13 Major cities

Petrol
Sulphur 150 ppm (max) Benzene 1 % (max) Aromatics 42 % (max) Olefins 21 % (max) Cetane No 51 Sulphur 50 ppm (max) 95% Rec. 360 oC

Euro III

Rest of the country

Euro IV

13 Major cities

Diesel

Cetane No 51 Sulphur 350 ppm (max) 95% Rec. 360 oC

Euro III

Rest of the country

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Infrastructure
Worlds 5th largest refiner with 4% of world refining capacity 4th largest consumer (3.8%) Over 12,700 KM products pipeline network > 40,000 sale points Excellent maritime infrastructure: POL facilities at 14 locations 39 berths

2 barge jetties
13 SPMs
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Refining Challenges

30

Refining Challenges
Changing Feed Quality and Availability

Challenges in processing. Configuration/ Complexity

Product Mix Variation Environmental Regulations

31

Changing Feed Quality and Availability

Quality 0API / Sulfur / Acidity Availability Declining trend of low sulfur crude oils Growing supply of Heavier, Sour and high TAN crudes New Frontiers - Unconventional sources - Tar sands, Oil shales Designing/ Configuration Challenges - Dovetailing units to absorb natural gas - for processes and as fuel Widening of crude basket
32

WORLD HEAVY CRUDE PRODUCTION BY REGION

Production, Million Barrels per Day

Heavy Crude Share of Runs,%

25

25

20

20

15
Other

15

10

Middle East North America

10

5 Latin America

0 1990

1995

2000

2005

2010

2015

2020

33
Source: Purvin & Gertz

Refinery Configuration
New capacity creation based on: Processing cheap heavy, high TAN and high sulfur crudes Stringent automotive fuel quality norms

Upgrading BOB Zero Resid

Energy Efficiency Reliability: Capacity utilization and Peak processing requirements
34

Above measures contribute to improve refining margins

Indian Refinery Configuration Historical Perspective

1970s and earlier Hydro-skimming with DCU based on indigenous crudes FCC or lube blocks based on import crudes. Residue used for bitumen or FO.

Early 1980s - six FCC units & Upgraders with capacity expansion, product quality not stringent
Late 1980s & 1990s - Hydrocrackers added to meet Increasing demand for middle distillates, followed by HCU+FCC combinations to improve flexibility & product slate.
35

Indian Refinery Configuration Historical perspective Contd

Late 1990s Stringent product quality stringent - Hydrotreating. Post 2000 More stringent Auto fuel specs. New technologies/ unit - Isom / Alkyl Integration with petrochemicals - PX, PTA, Polymers etc

Most refineries have undertaken capacity expansion and product quality improvement projects.
Refinery configurations are now driven by improved product quality and margins. Refinery configurations have undergone a sea change in their level of complexity

36

Typical Refinery BFD

37

Recent trends show increasing Crude Natural gas price differentials

120 100 80 60 40 20 0 1990
Carbon Rejection Hydrogen Addition

Oil $/Bbl
WTI, Cushing Henry Hub

Natural Gas $/MM BTU

18 15 12 9 6 3

1995

2000

2005

0 2010
38

The time for Hydrogen Addition is now here

Refinery of the Future

C4Crude Distillation Unit SDA

Slurry Phase HC Stage 1

Slurry Phase HC Stage 2

Naphtha

Middle Distillates

Recycle VGO

Residue

39

Product Mix variation

Address growing demand amidst tighter product specifications Shifting regional balance of demand as western markets mature and new markets grow rapidly in Asia Disposal of surplus Naphtha, especially from hinterland refineries Production of synthetic fuels through CTL / GTL routes

40

Integration: Petrochemicals
Major capacity additions post 1991
Aggregate Petrochemical Demand in 000T

have significantly reduced import dependence

Indias per capita consumption at 5

kg - much lower average of 25 kg

Largely

than

global

naphtha (61%) ethylene cracker capacity

based

Petroleum

Chemicals and Petrochemicals Investment Regions (PCPIR) being set up

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%.

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Growing rapidly at 1.5 - 2.5 times the GDP growth rate

Success Factors: India Advantage

Cost Competitiveness

HIGH

Flexibility of Product Mix

MEDIUM to HIGH

Location

HIGH

Quality of Products

MEDIUM to HIGH

Infrastructure

LOW to MEDIUM

Government Support

LOW to MEDIUM
42

Way Forward
Leverage strategic advantage of coastal locations Consolidate with current/proposed location Proposed PCPIRs Timely project completion is the key Economies of scale in setting up the hub Cost competitiveness to position the 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
43

In Conclusion

Global Opportunity for India to emerge as a Refining Hub is real & attractive

44

Thank You

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