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India-IEA Seminar on

Global Oil Market Outlook & Stability

Shri B. N. Bankapur

Director (Refineries),

Indian Oil Corporation Ltd.

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Fr m w rk

Global Oil Scenario

Indian Oil Scenario

Refining Challenges

India as a Global Refining Hub

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Global Oil Scenario

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World OilDemand

Share of Coal Gas and 26%

2% 10% 1%

2007

RENEWABLEBIOMASSHYDRO

Renewable rise marginally, Oilremains the most dominant fuel

NUCLEAR

COAL

and China

OPEC share in the output rises

21%

34%

2

GAS

OIL

The projections hinge upon

adequate and timely investments2% 10%

2%

29%RENEWABLEBIOMASSHYDRO

. - NUCLEAR

4

30%GAS OIL

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Oil Consum tion vs GDP Growth

5

6

World

2

3

4

GrowthinGDP

0

1

2000 2001 2002 2003 2004 2005 2006 2007 2008

GrowthinOilConsumption

% Growth8

10

% Growth

India

0

2

4 GrowthinGDPGrowthinOil

5

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

Consumption

Source: BP Stats, World Bank, RBI, EIA

Source: BP Stats,

World Bank, RBI, EIA

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Smaller Refineries getting shut downSource: OGJ 2007

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Indian Oil Scenario

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Industry Structure

Major Players / Companies

UpstreamExploration & Production DownstreamRefining & Marketing Industry BodiesEIL

ONGC Directorate General

of Hydrocarbons

Petroleum Planning

IOCL BPCL

Limited

HPCL

y

Centre for High

Technology

PCRA

MRPL(ONGC)

n aLimited

RIL Oil Industry SafetyDirectorate

Petroleum India

International

Essar Oil Ltd.

Other PrivatePvt / Govt.

E&P Cos.

GAIL PetroFed. .Oil & Gas

Marketing

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Wide gaps between product demand and

indi enous crude availabilit

Widening gap between product demand and c rude production

Bridg ing the gap - Oil Equity abroad and fresh finds under NewExp loration & Licensing Policy

Need for huge investments in refining, p ipe lines & Marketinginfrastructure

Source: XIth Plan Document

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IndianRefineries

DIGBOI

PANIPAT(12.0+3.0) BONGAIGAON

BHATINDA

(9.0)

Refineries No. MMTPAIOC Group 10 60.2BPC group 3 22.5

MATHURA(8.0)

GUWAHATI(1.0)BARAUNI

(0.65)

NUMALIGARH(3.0)

(2.35)HPC 2 13.0

ONGC/MRPL 2 9.8RIL (Pvt.) 2 62.0ESSAR 1 10.5

(6.0)

HALDIABARODA(13.7)JAMNAGAR

(RIL 33.0 + 29.0)

BINA

(6.0)

.

MUMBAI(BPC 12.0)(HPC 5.5+ 2.4)

. .

VISAKH(7.5+7.5)

ESSAR 10.5+ 3.5) PARADEEP

(15.0)

MANGLORE(9.69 +5.31)

CHENNAI(9.5+ 1.7)

(0.08 + 0.08)

Others

Subsidiaries of IOC

KOCHI(7.5 + 2.0) NARIMANAM

(1.0)

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Refinery Capacity Utilisation

177.9

148.9156.1

160.7

160

180

200

132.47

.

100 98.2

132.4

127.4

127.4 130.1

110.6108104.8

131.7

120.2

145.3140.7

122.4

100

120

140

MMT

40

60

80

0

20

2004-05 2005-06 2006-07 2007-08 2008-09

Around 100% capacity utilisation of Indian Refineries

Source:MOP&NG 2008

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India : Downstream Industry Overview

40

50(in MMTPA)

2030

0

10

' - ' - ' - ' - ' - ' - ' - ' - ' - - *

Imports Exports

Since 2001-02, India has transformed from being a net importer of

Indian Hydrocarbon sector has acquired the critical mass for major productivity leaps

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India : Refining Capacity GrowthMMTPA

235

302

250

300

350

7610090 94 94

117 127 127132 149

178

73

106

159

10699100

150

200

27 33 33 3344

0

50

2003 2004 2005 2006 2007 2009 2012* 2017*

PVT PSU Total

As on April 1, 2009, India has a total refining capacity of 178 MMTPA

* XIth Plan Projection

nc u ng t e new y comm ss one re nery at amnagar 18 out of the total 20 refineries in India belong to PSUs (with a capacity ofa 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; Projectedcapacity by 2017 is 302 MMTPA

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302

300

350

Gap betw een Refin ing Capacit y & Product Demand

178

235

162200

250

140

136 135

100

150 42

0

2008-09 2011-12 2016-17

Refining Cap (MMT) Product Demand (MMT)

Surplus refining capacity is expected to increase further by 2030

India will continue to be product surplus

Source: PPAC/ Draft XI Plan Demand Document

Import/Export requirement for crude/products to be quite substantial

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Refining Challenges

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Refining Challenge

Crude Oil Sourcin / Oil Securit

Margin Improvement

Environmental Issues

Funding for New Projects

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Crude Sourcing/Oil Security

Crude Potential available from existing fields in Middle East, Africa

and South American countries to support refining capacity expansion

Efforts for new finds

Attractive New Exploration Licensing Policy (NELP)

206 oil & gas exploration blocks awarded in 7 rounds

68 major discoveries reported

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

Alternative sources : CBM and Gas Hydrates

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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

ncrease n e o mpor s

Storage capacity augmentation actions have been taken to enhance

.

Planned capacity addition: 8.62 MMT

5.33 MMT by ISPRL at Vizag, Mangalore and Padur

3.29 MMT at other locations

Strategic storage to provide addl. 12 days cover

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Refinery Configuration/ Complexity Factor Improvement toaddress

Changing Feed Stocks : Input cost reduction

Energy Efficiency improvement

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R fin r nfi r i n m l xi

Changing Feedstocks : Input Cost Reduction

Quality 0API / Sulfur / Acidity

Widening of crude basket

New Frontiers - Unconventional sources - Tar sands,Oil shales

Compulsion to co-process feed-stocks of Bio-origin

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Refinery Configuration/ Complexity

Product Mix Improvement

Growing demand with stringent product specs. hiftin r i n l m n

Large number of grades

Naphtha to Petrochemicals

Black Oil to Distillates

Pet Coke to Petrochemicals

High level of integration to reduce Capex and Opex (from topping Refineryto integrated Petrochemical Complex

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Energy Efficiency Improvement

Energy efficiency improvement by use of Energy efficient technologies/designs

Best operation and maintenance practices

improvement

Close monitorin and timel actions brid e the a in s ecificenergy consumption to match with the global best

Tools applied are: Pinch Technology, Hydrogen Management,

Waste Heat Recovery, Steam Power balance (CogenerationCycle)

Increased utilization of gas in place of conventional liquid fuel

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Envir nm n I Managing new norms

Environmental

Qualit u radation re uirements

GHG emission

Societal (Corporate Social Responsibility)

Regulatory and legislative norms

Sustainability

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Environmental Issues: Stringent Product Quality Norms

Product Quality Parameters Equivalent Locations

Sulphur 50 ppm (max)13 Major cities

Petrol

Aromatics 35 % (max)

Olefins 21 % (max)

by April 2010

Sulphur 150 ppm (max) 13 Major cities

Aromatics 42% (max)

Olefins 21% (max)

Euro III- urren

Rest of the country by April2010

Sulphur 500 ppm (max)Euro II Rest of the countr - Current

enzene max

Cetane No 51

Sulphur 50 ppm (max)

95% Rec. 360 0CEuro IV

13 Major cities

by April 2010

Diesel

x

Cetane No 51

Sulphur 350 ppm (max)

95% Rec. 360 0C

Euro III

13 Major cities

- Current

Rest of the country by April

Cetane No. 48

Sulphur 500 ppm (max)

95% Rec, - 3700C

Euro II Rest of the country - Current

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F n in N w Pr

Investment lans for Indias downstream etroleum

industry for the period 2007-2012; ~ US $55 bn

Investment planned by IOCL in the similar period is ~ US$11 bn

Petrochemicals: 27%

Pipelines, Marketing and others: 14%

Majority of available fund is getting diverted in development ofnational infrastructure like power generation, roads/highways, rail,

, .India

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India as a Global Refining Hub

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r i l i n

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

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m i iv n

by lower manufacturingwages

Refinery Cash OperatingCost ($/ ton)

as pera ng cos s

Low capital and cash

operating costs compared to

Premcor 15.4

Sunoco 17.6

S-Oil 17.6

Access to large, technically

skilled manufacturing base

SK Corp 22.7

Zhenhai 9.5

and workforce Indigenous procurement

.

Indian Ref. 14.6

Source: A T Kearne 2005 re ort

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Integration: Petrochemical industry

Ma or ca acit additions ostAggregate Petrochemical Demand in 000T 1991 have significantly reduced

import dependence

Indias per capita consumption at25000

30000

5 kg - much lower than globalaverage of 25 kg

Largely naphtha (61%) based10000

15000

20000

ethylene cracker capacity

Petroleum Chemicals andPetrochemicals Investment

0

5000

2005 2006 2007 2011-12

Regions (PCPIR) being set up Major capacity additions planned

by IOC and RIL

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

Growing rapidly at 1.5 - 2.5 times the GDP growth rate

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W F rw r Leverage strategic advantage of coastal

locations

location

Proposed PCPIRs / SEZs

me y pro ec comp e on s e ey

Economies of scale in setting up the hub

os compe veness o pos on eproduct in target markets

Integration with petrochemicals, derivative

and utility units, for maximizing valueaddition

Environmental norms and product qualityspecs to meet the export markets

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

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Asia Pacific