Refining capability and opportunities in India

1. 2nd India Africa Hydrocarbons Conference Capabilities of Indian Hydrocarbon Sector Refining capability and opportunities in India 7th December 2009

2. Contents Energy Scenario in India 1 Refining Sector 2 Challenges & Opportunities 3

3. 1 Energy Scenario in India

4. Consumption pattern of fuels in India Primary Energy Consumption in India Per Capita energy consumption in India - 277 KOE (World Average - 1480 KOE) As the economy grows, energy consumption is set to increase significantly in the coming years.

5. Projected growth in energy demand Demand for Primary Energy expected to reach 1651 MTOE by 2031-32 (GDP rate :8%) Source: Report of the Expert Committee on Integrated Energy Policy

6. Indian Energy Scenario : Key Features • Oil and gas accounts for around 40 % of total primary energy consumption • The present oil demand stands at 2.9 million bbl / day and is expected to grow at a compounded annual rate of 3-4 % • India is a net exporter of Naphtha, Gas oil, Gasoline and Fuel oil • Net importer of Crude and LPG • Refinery throughput in 2008-09 was 157 MMT and crude oil imports stood at 128 MMT Although India is dependent on crude oil imports, adequate refining capacity is available to meet the product requirements

7. Indian Energy Scenario : Key Features • Reforms initiated for E & P activities to boost domestic production of oil and gas • Domestic oil and gas production expected to increase with major discoveries coming on stream • Indian companies also investing in joint exploration activities overseas • Companies also entering the renewable energy space Oil and Gas sector is gearing up to meet the increasing energy needs of a growing economy

8. 2 Refining Sector

9. Refineries in India Jammu & Kashmir Himachal Pradesh Punjab Uttaranchal Haryana Panipat Refinery Arunachal Pradesh Sikkim Mathura Refinery Digboi Bongaigon Refinery NRL Uttar Pradesh Nagaland Rajasthan Assam Gauhati Refinery Barauni Refinery Meghalaya Bihar Manipur Tripura Jharkhand Gujarat Bina Refinery West Bengal Mizoram Koyali Refinery Madhya Pradesh Essar Refinery Jamnagar Refinery Chattisgarh Haldia Refinery Paradeep Refinery Orissa Maharashtra BPCL/HPCL Vizag Refinery Andhra Pradesh Goa Karnataka MRPL Chennai Refinery Tamil Nadu Kerala Narimanam Refinery Kochi Refinery Map not to scale Existing refinery • 20 refineries: 17 PSU & 3 Pvt. • Refining capacity has grown from 11.5 MMT in 1965 to 178 MMT in 2009 • Refining capacity slated to reach 235 MMT by March 2012 Proposed refinery

10. Capacity, Demand & Production Figs in MMT Note : Production figure is yield from refineries Source : PPAC Ready Reckoner

11. Key characteristics • Crude mix processed by Indian refineries (PSU) 52% high sulphur and 48% low sulphur crude • The GRMs of Indian refineries (PSU) is presently around US $ 6 – US $ 7 per barrel while that of private refineries is around US$ 10 per barrel • The product slate (wt% on crude ) • Light + Middle distillates = 73.2% • Heavy ends = 26.8%

12. Exports from Indian refineries US $ billion US $ billion As the refining capacity increases, India is becoming a major exporter of petroleum products

13. Projected demand for oil in India Figs in MMT Source: Report of the Expert Committee on Integrated Energy Policy As the Indian economy embarks on a sustained growth path, oil will have a major role to play in meeting the energy requirements

14. 3 Challenges & Opportunities

15. India’s advantage – Refining Investments • Strategic location for crude supply and product export • Economies of Scale in very large projects • Experienced and competitive construction companies • Tax holidays/Special Economic Zones provide a favourable fiscal regime • Large domestic market to act as an anchor offtaker of products/only surplus to be exported The location, market size and investment climate make India an attractive destination for investments in the oil refining sector

16. Opportunities in the Refining Sector • Refinery expansions and upgrade • Grass-root refineries • Integrated complexes – petrochemical / power • Tankages and strategic storage • Pipelines – crude and products (oil & gas) • Emergence of India as a refining hub Attractive investment opportunities are available in every area of the refining sector

17. Refining Investment opportunities - Modernisation • Upgrade refineries in line with ultra-low sulphur global fuels specifications • Tightening environmental regulations and CO2 regime requiring modernising refinery units • Increasing complexities of refineries to handle low quality (heavy – sour) crude oils including residue upgrade units. • Modifying refinery configuration to produce more distillates (diesel) at the cost of lower Gasoline in-line with increasing Diesel demand (Dieselisation) Older refineries are upgrading their facilities to meet new requirements and process heavier crude oils

18. Refining Investment opportunities - Modernisation • Crude-oil blending facilities for creating opportunity of buying cheap very heavy-sour crude oils along with compatible blend stocks • Upgrading equipment metallurgy and installing on-line corrosion monitoring and control facilities for handling high TAN feed stocks • Residue upgrade units like Delayed coker, Gasification, Resid FCC etc • Hydro-cracking and hydro-treatment units for Diesel • CCR, Isomerisation, Alkylation units for Gasoline • Improve energy performance Besides expanding capacity, refineries are seeking to improve yields and lower operating costs

19. Forward Integration Opportunities – Petrochemicals, Power, Fertilizer etc • Projected power deficits in the country • Prospects of higher growth rates in petrochemicals as compared to fuel products • Disposal of incremental olefins and aromatics removed for quality upgrades of transport fuels • Counter-cyclic profit margins between petroleum and petrochemical sectors and absorption of economic downturn in any one market The growing economy offers immense potential for forward integration and better margin realisation

20. Refining Investment opportunities – Improvements in Systems & Practices • Improving equipment reliability through best practices monitoring, inspection and maintenance practices • Reducing turnaround duration and frequency • Improve safety in refineries by implementing best practice process safety management systems • Adopt agile manufacturing strategies supported by state-of-the-art information and decision support systems • Refinery optimisation using simulation & modelling tools - LP based Production Planning, Advanced Process Control, blend optimisation • Improve manpower skills and talent retention Refineries are working towards making improvements in systems and practices with a view to enhance productivity

21. Conclusion • Notwithstanding the recent economic slowdown, Indian refining sector is poised to grow consistently in the coming years given the rising domestic demand and the need to secure the country’s energy security • With the continuing thrust on expansion, product quality upgradation and optimising operating costs, the refining sector shows immense potential • Integration into downstream petrochemicals, power and fertiliser sectors will be crucial for improving the economic robustness of the new projects by improving the refining margins

22. Thank you