Summer Internship Project Report

On

“SUPPLY CHAIN MANAGEMENT IN LPG”

In partial fulfillment of the Course-Industry Internship Programme (IIP) in Semester II of the Master of Business

Administration(July 2011-13)

Under the kind guidance of

Industry Guide College Guide

Mr. Ashutosh Gupta, Sr. Manager, Dr. Satish kumar Mrs. Kavita Tickoo, Dy. Manager,Indian Oil Corporation Ltd.

Submitted byJYOTIRAMAN DEY & ARSHE NOOR

Date: 20TH JUNE 2012

1

Student Declaration

We, JYOTIRAMAN DEY & ARSHE NOOR to the best of our knowledge & belief, hereby declare that the project report entitled:

“SUPPLY CHAIN MANAGEMENT IN LPG in Indian Oil Corporation Ltd.”

Is the result of our own work in the fulfillment of academic requirement. The training is done in Indian Oil Corporation Limited (IOCL) [Western Region, Marketing HO, Mumbai, Maharashtra State Office] for a period of two and half months commencing from 09.04.2012 to 15.06.2012. This project work is submitted to Alliance University-School of business, Bengaluru. As well as in Indian Oil Corporation Limited [Western Region, Marketing HO, Mumbai, Maharashtra State Office].

JYOTIRAMAN DEY (REGD NO. 11010121427),

ARSHE NOOR (REGD NO. 11010121358)

MBA- MARKETING SPECIALIZATION

Alliance University-School of business, Bengaluru

2

Master of Business Administration

Certificate

This is to certify that Mr. Jyotiraman Dey and Ms. Arshe Noor bearing Regn. No. 11010121427 & 11010121358 respectively has completed the report titled “SUPPLY CHAIN MANAGEMENT IN LPG”

under my guidance for the partial fulfillment of the Course: Industry Internship Programme (IIP) in Semester II of the Master of Business Administration (July 2011 – 2013).

(Signature of Faculty Guide)

Dr. Satish Kumar

3

ABSTRACT

Indian Oil Corporation Limited, with a yearly turnover of about 3 Lac Crores is the biggest Company in India in terms of sales. It has once again topped the Indian Companies in the Fortune 500 list of Companies with a rank of 98. In such a large sized corporation the common problem is the supply chain management. In this fluctuating Gas Market it is very difficult to maintain the price of LPG cylinder and hence the Profits. Moreover the Private Companies are entering the Oil & Gas Industry which has provided a tough competition for IOCL. In this study all over India (every region) are analyzed and provided a suitable pipeline grid for LPG for the smooth transportation of it. All the Regions have been analyzed in details and a few probable solutions to the existing problems has been formulated i.e. pipeline grid.

4

AcknowledgementIt’s a privilege to be associated with Indian Oil Corporation Limited, a fortune ‘Global 500’Company, India’s top brand also world’s 18th best largest company. This acknowledgement is not only the means of formality, but to me, it is a way by which I am getting the opportunity to show the deep sense of gratitude and obligation to all the people who have provided me with inspiration, guidance and help during the preparation of the project. At the very outset, I would like to express my gratitude from bottom of my heart to Mr. P.K. JHA [Chief Manager, LPG OPERATION] for giving me the opportunity to do my Summer Internship Project in this esteemed organization.

I articulate my sincere gratitude to my project guide Mr. Ashutosh Gupta, Sr. Manager (LPG-OPS) & Ms. Kavita Tickoo, Dy. Manager(LPG-OPS) , Marketing HO, Mumbai, Indian Oil Corporation Ltd. who have spend their valuable time and guided me throughout the training process in spite their busy schedule, in shaping of my project.

I am also thankful to Ms. S. MATHIAS, Manager (T & D), and Mr. RAJOO, Marketing HO, IOCL for guiding me throughout the project providing me with the required information about Indian Oil.

I would also like to express my indebtedness to my faculty guide Dr. SATISH KUMAR, Faculty Alliance University-School Of Business who helped me in preceding my project work, which ultimately resulted in successful completion of the project.

But last not the least I am thankful to my parents, friends and all well wishers for blessing me for my success.

JYOTIRAMAN DEY (REGD NO. 11010121427)ARSHE NOOR (REGD NO. 11010121358)

MBA- MARKETING SPECIALIZATIONAlliance University-School of business, Bengaluru

5

TABLE OF CONTENTS

Sl. No. PARTICULARS Page No.

1. Oil Industry Overview 92. Oil Industry Structure 103. Company Profile 124. Location 155. Vision, Mission & Values 206. Products Profile 247. SWOT of the Company 258. Organizational Structure 279. Pipelines 3010. Introduction to Fossil Fuel 3511. LPG 3612. IOC’s LPG Market Structure 4213. Supply Chain Management 4914. Objectives 5215. Sources 5416. Methodology 6417. Secondary Data 7118. Observations & Analysis 7619. Findings 8320. Pipeline Details 8521. Recommendations 8722. Conclusion 8823. Annexure 9024. References 91

6

LIST OF TABLES

Table No. PARTICULARS Page No.

1. Retail Market Share 112. Actual Demand 443. Forecasted Demand 464. Secondary Data 71-755. Calculation of Pipeline 816. Pipeline Details 85

7

LIST OF FIGURES

Fig. No. PARTICULARS Page No.

1. Structure of Oil Industry in India 102. Market share of different companies in India 113. Formation of IOCL 134. Organizational Structure of IOCL 275. Pipeline network of IOCL in India 306. Sales 417. IOC’s LPG market statistics 428. Market share of IOCL 439. Sector wise LPG consumption in India 4310. Actual trend graph 4511. Forecasted trend graph 4712. Supply chain of LPG 5013. Industry refineries 5414. Bottling plants of IOC 6715. Import & refineries 7016. Production of LPG 7817. Sales of LPG 7818. Proposed LPG pipelines in India map 84

8

OIL INDUSTRY OVERVIEW

Background

After the Indian Independence, the Oil Industry in India was a very small one in size and Oil was produced mainly from Assam and the total amount of Oil production was not more than 250,000 tones per year.

This small amount of production made the oil experts from different countries predict the future of the oil industry as a dull one and also doubted India's ability to search for new oil reserves. But the Government of India declared the Oil industry in India as the core sector industry under the Industrial Policy Resolution bill in the year 1954, which helped the Oil Industry in India vastly.

Oil exploration and production in India is done by companies like NOC or National Oil Corporation, ONGC or Oil and Natural Gas Corporation and OIL who are actually the oil companies in India that are owned by the government under the Industrial Policy Rule. The National Oil Corporation during the 1970s used to produce and supply more than 70 percent of the domestic need for the petroleum but by the end of this amount dropped to near about 35 percent. This was because the demand on the one hand was increasing at a good rate and the production was declining in a steady rate. Oil Industry in India during the year 2004-2005 fulfilled most of demand through importing oil from multiple oil producing countries. The Oil Industry in India itself produced nearly 35 million metric tons of Oil from the year 2001 to 2005. The Import that is done by the Oil Industry in India comes mostly from the Middle East Asia.

The Oil that is produced by the Oil Industry in India provides more than 35 percent of the energy that is primarily consumed by the people of India. This amount is expected to grow further with both economic and overall growth in terms of production as well as percentage. The demand for oil is predicted to go higher and higher with every passing decade and is expected to reach an amount of nearly 250 million metric ton by the year 2024.

9

OIL INDUSTRY STRUCTURE

Fig.1: Structure of Oil Industry in India

10

Oil Industry Dynamics in India

At present, there are four PSUs namely, IOC, HPC, BPC and IBP (subsidiary of IOC) marketing oil products in the country. In addition, certain private players like Reliance, Essar and Shell have also in marketing rights for transportation fuels. Their marketing presence today, however, is not significant and is limited to about 1370 outlets out of total retail outlet strength of about 29,380 . Some additional players like ONGC, who have also been granted marketing rights for transportation fuels, are in the process of setting up retail outlets to integrate across the entire hydrocarbon value chain. The company – wise market share in sales is tabled below:

It is evident that the share of the private sector in meeting total consumption of refined petroleum products presently stands at around 15%. This proportion is however, expected to grow significantly in the coming years.

11

COMPANY PROFILE

INTRODUCTION

In order to ensure greater efficiency and smooth working in the petroleum sector, Government

of India decided to merge the refineries and the distribution activities. The Indian Refineries

and Indian Oil Company were combined to form the giant Indian Oil Corporation (IOCL) on 1st

September 1964, with its registered office at Bombay. In 1967, the pipeline division of the

corporation was merged with the refineries division. Research & Development of Indian Oil

Came into Existence in 1972. In October 1981 Assam Oil Company was nationalized and has

been amalgamated with IOCL as Assam Oil Division (AOD).

12

Beginning in 1959 as Indian Oil

Company Ltd., Indian Oil Corporation

Ltd. was formed in 1964 with the

merger of Indian Refineries Ltd.

(established1958). Indian Oil and its

subsidiaries account for 49%

petroleum products market share,

40.4% refining capacity and 69%

downstream sector pipelines

capacity in India.

Fig. 3: Formation of Indian Oil Corporation Ltd.

13

In operation for the convenience of large consumers, ensuring products and inventory at their

doorstep. Indian Oil operates the largest and the widest network of petrol & diesel stations in

the country, numbering over 17,600. It reaches Indane cooking gas to the doorsteps of over 50

million households in nearly 2,700 markets through a network of about 5,000 Indane

distributors.

Indian Oil’s ISO-9002 certified Aviation Service commands over 62% market share in aviation

fuel business, meeting the fuel needs of domestic and international flag carriers, private airlines

and the Indian Defense Services. The Corporation also enjoys a dominant share of the bulk

consumer business, including that of railways, state transport undertakings, and industrial,

agricultural and marine sectors.

14

As the flagship national oil company in the

downstream sector, Indian Oil reaches

precious petroleum products to millions of

people every day through a countrywide

network of about 34,000 sales points. They

are backed for supplies by 166 bulk storage

terminals and depots, 101 aviation fuel

stations and 89 Indane (LPG) bottling plants.

About 7,100 bulk consumer pumps are also in

operation for the

LOCATION

Registered Office: Indian Oil Bhavan,

G-9, Ali Yavar Jung Marg,

Bandra(East), Mumbai-400 051

Corporate Office: 3079/3, Sadiqnagar,

J B Tito Marg, New Delhi- 110 049

Refineries Division:

Head Office : SCOPE Complex, Core-2

7, Institutional Area, Lodhi Road,

New Delhi -110003

Barauni Refinery: P.O. Barauni Oil Refinery,

Dist. Begusarai -861 114 (Bihar)

Gujarat Refinery: P.O. Jawahar Nagar,

Dist. Vadodara -391 320(Gujarat)

15

Guwahati Refinery: P.O. Noonmati,

Guwahati-781020 (Assam)

Haldia Refinery: P.O. Haldia Refinery

Dist. Midnapur-721 606 (West Bengal)

Mathura Refinery: P.O. Mathura Refinery,

Mathura -281 005(Uttar Pradesh)

Panipat Refinery: P.O. Panipat Refinery,

Panipat-132140(Haryana)

Bongaigaon Refinery: P.O. Dhaligaon

Dist. Chirang, Assam - 783 385

Marketing Division

Head Office: G-9, Ali Yavar Jung Marg,

Bandra (East), Mumbai -400 051

Northern Region: IndianOil Bhavan,

1, Aurobindo Marg, Yusuf Sarai

New Delhi -110016

Eastern Region: IndianOil Bhavan,

2, Gariahat Road, South (Dhakuria)

Kolkata -700 068

Western Region: 254-C, Dr. Annie Besant Road, Worli Colony,

Mumbai -400 025

16

Southern Region: IndianOil Bhavan,

139, Nungambakkam High Road

R&D Centre

R&D Centre: Sector 13 Faridabad -121 007(Haryana)

Pipelines Division

Head Office: A-1 Udyog Marg,

Sector-1, Noida-201301

Northern Region: P.O. Panipat Refinery

Panipat -132 140 (Haryana)

Western Region: P.O. Box1007,Bedipara,

Morvi Road,Gauridad, Rajkot-360 003

Southern Region: 139, Nungambakkam High Road,

Chennai – 600034

Assam Oil Division

Assam Oil Division: P.O. Digboi -768 171(Assam)

IBP Division

IBP Division: 34-A, Nirmal Chandra Street, Kolkata - 700 013

Business Group(Cryogenics): Sewri Terminal II, Sewri (East),

Mumbai - 400 015

Business Group(Cryogenics): A-4, MIDC, Ambad,

Nashik - 422 010

17

Group Companies

Chennai Petroleum Corporation Ltd.: 536, Anna Salai,

Teynampet, Chennai - 600 018

Indian Oil Technologies Ltd: SCOPE Complex, Core-2

7, Institutional Area, Lodhi Road,

New Delhi-110003

Indian Oil (Mauritius) Ltd.: Mer Rouge Port Louis

Maruritius

IOC Middle East FZE: LOB 14209, Jebel Ali Free Zone,

P.O.Box: 261338

Lanka IOC PLC: Lanka IOC Head Office Level 20,

West Tower, World Trade Center,

Echelon Square, Colombo - 01,

Sri lanka

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SALIENT FEATURES India’s Most Trusted Fuel Pump Brand (ET. Brand Equity-AC Nielson Survey 2007)

India’s largest commercial enterprise with leading market shares in downstream

segment of oil business.

Highest ranked Indian corporate in Fortune’s list of world’s 500 largest Companies

(2008:: 116th )

20 th largest petroleum company in the world- Fortune Global500

Local Currency Rating of A1+(short-term) & LAA+(long-term) from ICRA

India’s No.1 corporate in annual listing of Business Standards (BS 10000),Business

India(BI Superior 100) &Economic Time (ET 500).

19

VISION, MISSION AND VALUES

Vision:

A major diversified, trans-national, integrated energy company, with national leadership and a

strong environment conscience, playing a national role in oil security & public distribution.

20

Mission:

To achieve international standards of excellence in all aspects of energy and diversified business

with focus on customer delight through value of products and services, and cost reduction.

To maximize creation of wealth, value and satisfaction for the stakeholders.

To attain leadership in developing, adopting and assimilating state-of-the-art

technology for competitive advantage.

To provide technology and services through sustained Research and Development.

To foster a culture of participation and innovation for employee growth and

contribution.

To cultivate high standards of business ethics and Total Quality Management for a

strong corporate identity and brand equity.

To help enrich the quality of life of the community and preserve ecological balance and

heritage through a strong environment conscience.

VALUE:

21

OBJECTIVES & OBLIGATIONS OF IOCL

Objectives:

To serve the national interests in oil and related sectors in accordance and consistent

with Government policies.

To ensure maintenance of continuous and smooth supplies of petroleum products by

way of crude oil refining, transportation marketing activities and to provide appropriate

assistance to consumers to conserve and use petroleum products efficiently.

To enhance the country's self-sufficiency in crude oil refining and build expertise in

laying of crude oil and petroleum product pipelines.

To further enhance marketing infrastructure and reseller network for providing assured

service to customers throughout the country.

To create a strong research & development base in refinery processes, product

formulations, pipeline transportation and alternative fuels with view to

minimizing/eliminating imports and to have next generation products.

To optimize utilization of refining capacity and maximize distillate yield and gross

refining margin.

To maximize utilization of the existing facilities for improving efficiency and increasing

productivity.

To minimize fuel consumption and hydrocarbon loss in refineries and stock loss in

marketing operations to effect energy conservation.

To earn a reasonable rate of return on investment.

To avail of all viable opportunities, both national and global, arising out of the

Government of India’s policy of liberalization and reforms.

22

To achieve higher growth through mergers, acquisitions, integration and diversification

by harnessing new business opportunities in oil exploration production, petrochemicals,

natural gas and downstream opportunities overseas.

To inculcate strong ‘core values’ among the employees and continuously update skill

sets for full exploitation of the new business opportunities.

To develop operational synergies with subsidiaries and joint ventures and continuously

engaged across the hydrocarbon value chain for the benefit of society at large.

Obligations:

Towards customers and dealers: - To provide prompt, courteous and efficient service

and quality products at competitive prices.

Towards suppliers: - To ensure prompt dealings with integrity, impartiality and courtesy

and help promote ancillary industries.

Towards employees: - To develop their capabilities and facilitate their advancement

through appropriate training and career planning. To have fair dealings with recognized

representatives of employees in pursuance of healthy industrial relations practices and

sound personnel policies.

Towards community: - To develop techno-economically viable and environment-

friendly products. To maintain the highest standards in respect of safety, environment

protection and occupational health at all production units.

Towards Defense Services: - To maintain adequate supplies to Defense and other Para-

military services during normal as well as emergency situations.

23

PRODUCTS PROFILE (IOCL)The Products produced by IOCL are broadly classified into the following cases:

Class A:

1. Liquid Petroleum Gas (L.P.G)

Class B:

2. Motor Spirit (M.S.)/Gasoline

3. Super Kerosene Oil (S.K.O)

4. High Speed Diesel Oil (H.S.D)

Class C:

5. High Speed Diesel Oil (H.S.D)

6. Furnace Oil (F.O.)

7. Bitumen

8. Naphtha

9. Aviation Turbine Fuel (A.T.F)

Class D:

10. Mineral Turpentine Oil (M.T.O)

11. Jute Batching Oil (J.B.O)

12. Light Diesel Oil (L.D.O)

13. Unleaded petroleum

14. Lubes & Greases

15. Fuel & Feedstock

16. Super Kerosene Oil

24

SWOT OF THE COMPANY

Controls 10 refineries

Acquired equity stakes in CPCL & BRPL,

& in 2001, became subsidiaries of IOC.

58% of IOC’s refining capacity is

located in the Northern and Western

regions

Very strong distribution network

Acquired management control of the

marketing company IBP

Extensive joint venture agreements

Already entered overseas markets such

as Sri Lanka, Maldives, and Oman.

Major weakness for the company is the

R&D

Petrochemical product development

technology

Technological drawback, as compared

to some major foreign player

Easily go for extension at any point of

time, and can introduce any new

products.

Make the buying process more easy for

the customers.

Think over the issue to build its own

pipelines

Great scope in E&P

Foreign players with more advanced

technology.

Crude oil supply - cannot fix its price ,

In future the market will welcome

more private players

If the Govt. Policies allow the private

players to set their own price, the pvt.

Player can seriously harm IOCL share.

25

STRENGT WEAKNESS

OPPERTUNIT THREAT

MARKETSIndian Oil has one of the largest petroleum marketing and distribution networks in Asia, with

over 34,000 marketing touch points. Its ubiquitous petrol/diesel stations are located across

different terrains and regions of the Indian subcontinent.

From the icy heights of the Himalayas to the sun-soaked shores of Kerala, from Kutch on India's

western tip to Kohima in the verdant North East, Indian Oil is truly 'in every heart, in every part'.

Indian Oil's vast marketing infrastructure of petrol/diesel stations, Indane (LPG)

distributorships, SERVO lubricants & greases outlets and large volume consumer pumps are

backed by bulk storage terminals and installations, inland depots, aviation fuel stations, LPG

bottling plants and lube blending plants amongst others. The countrywide marketing operations

are coordinated by 16 State Offices and over 100 decentralized administrative offices.

Several landmark surveys continue to rate Indian Oil as the dominant energy brand in the

country and an enduring symbol for high quality petroleum products and services. The heritage

and iconic association that the brand invokes has been built over four decades of commitment

to uninterrupted supply line of petroleum products to every part of the country, and unique

products that cater not only to the functional requirements but also the aspiration needs of

millions of customers.

Indian Oil has been adjudged India's No. 1 brand by UK-based Brand Finance, an independent

consultancy that deals with valuation of brands. It was also listed as India's 'Most Trusted

Brand' in the 'Gasoline' category in a Readers' Digest - AC Nielsen survey. In addition, Indian Oil

topped The Hindu Business line’s "India's Most Valuable Brands" list.

26

ORGANIZATION STRUCTURE OF IOCL:

Fig. 4: Organizational Structure of IOCL

27

BUSINESS OF IOCL

REFINING:

Born from the vision of achieving self-reliance in oil refining and marketing for the nation,

Indian Oil has gathered a luminous legacy of more than 100 years of accumulated experiences

in all areas of petroleum refining by taking into its fold, the Digboi Refinery commissioned in

1901.

Indian Oil controls 10 of India’s 20 refineries. The group refining capacity is 60.2 million metric

tonnes per annum (MMTPA) or 1.2 million barrels per day -the largest share among refining

companies in India. It accounts for 33.8% share of national refining capacity.

The strength of Indian Oil springs from its experience of operating the largest number of

refineries in India and adapting to a variety of refining processes along the way. The basket of

technologies, which are in operation in Indian Oil refineries include: Atmospheric/Vacuum

Distillation; Distillate FCC/Reside FCC; Hydro cracking; Catalytic Reforming, Hydrogen

Generation; Delayed Coking; Lube Processing Units; Visbreaking; Merox Treatment; Hydro-

Desulphurization of Kerosene & Gasoil streams; Sulphur recovery; Dewaxing, Wax Hydro

finishing; Coke Calcining, etc.

The Corporation has commissioned several grassroots refineries and modern process units.

Procedures for commissioning and start-up of individual units and the refinery have been well

laid out and enshrined in various customized operating manuals, which are continually

updated. Indian Oil refineries have an ambitious growth plan with an outlay of about Rs. 55,000

crore for capacity augmentation, de-bottlenecking, bottom up gradation and quality up

gradation. Major projects under implementation include a 15 MMTPA grassroots refinery at

28

Paradip, Orissa, Naphtha Cracker and Polymer Complex at Panipat, Panipat Refinery expansion

from 12 MMTPA to 15 MMTPA, among others.

In addition, petrol quality up gradation projects are under implementation at Panipat, Mathura,

Barauni, Guwahati and Digboi refineries proposed to be completed by the end of 2009.

On the environment front, all Indian Oil refineries fully comply with the statutory requirements.

Several Clean Development Mechanism projects have also been initiated. To address concerns

on safety at the work place, a number of steps were taken during the year, resulting in

reduction of the frequency of accidents.

Innovative strategies and knowledge-sharing are the tools available for converting challenges

into opportunities for sustained organizational growth. With strategies and plans for several

value-added projects in place, Indian Oil refineries will continue to play a leading role in the

downstream hydrocarbon sector for meeting the rising energy needs of our country.

29

PIPELINES:

Indian Oil Corporation Ltd. operates a network of 10329 km long crude oil and petroleum

product pipelines with a capacity of 71.60 million metric tonnes per annum. Cross-country

pipelines are globally recognized as the safest, cost-effective, energy-efficient and environment-

friendly mode for transportation of crude oil and petroleum products.

30

During the year 2008-09 Indian Oil’s crude oil pipelines registered the throughput of 38.46

million metric tonnes. Corporation’s largest crude oil handling facility at Vadinar marked the

berthing of 4000th tanker since inception. The terminal operates two offshore Single Point

Mooring (SPM) systems, to feed Koyali, Mathura and Panipat refineries.

Raising efficiency and emerging as the least-cost supplier, Indian Oil has added the 330-km

Paradip-Haldia crude oil pipeline (PHCPL) to its bustling pipeline network during the year. The

PHCPL system has a Single Point Mooring installed 20-km off the Paradip coast. With this, it is

now able to pump crude oil from Very Large Crude Carriers to the tank-farm set up onshore and

onward to Haldia through the pipeline. The Pipeline has replaced the earlier system of receipt

of crude oil at Haldia port through smaller tankers.

On the west coast, the Mundra-Panipat pipeline is being further augmented to transport an

additional 3 Million Metric Tonne Per Annum (MMTPA) of crude oil to Panipat Refinery, under

expansion from 12 to 15 MMTPA. Additional requirement of crude oil for Koyali, Mathura and

Panipat refineries is planned to be met by de-bottlenecking and augmenting Salaya-Mathura

Pipeline system.

Indian Oil’s product pipelines, connecting its refineries directly to high-consumption centers,

achieved a throughput of 20.92 million tonnes during 2008-09. Indian Oil has now joined the

select group of companies in India which owns and operates LPG pipelines by building its first

such cross-country facility linking Panipat with Jalandhar. Apart from providing better logistics,

this pipeline can transport 700,000 tonnes of LPG from Kohand near Panipat refinery to Indian

Oil’s bottling plants at Jalandhar and Nabha in Punjab. The pipeline will also simultaneously to

meet the requirement of LPG at Una and Baddi in Himachal Pradesh and at Jammu and Leh in

J&K.

31

Two pipelines linking the major airports of India have been commissioned during the year to

transport Aviation Turbine Fuel to these airports. The 36 km long pipeline from existing

Devangonthi terminal to New Bengaluru International Airport, Devanhalli, Bengaluru was

commissioned in October 2008. The 95 km long ATF pipeline from CPCL to Chennai AFS was

commissioned in December 2008.

In its continuous efforts of expanding the network Indian Oil is implementing 290 km long

product pipeline from Chennai to Bengaluru to facilitate cost effective positioning of products

at consumption centre located in and around Bengaluru and to strengthen product positioning

capabilities of CPCL Refinery. Indian Oil is also implementing a 217 km Long Branch pipeline

from Koyali-Sanganer Pipeline at Viramgam to existing scrapper station at Churwa along with

use of a 14 km long existing pipeline from Churwa to Kandla.

One of the major product pipelines currently under execution is 290 km long Chennai-

Bengaluru Pipeline. A 21-km spur line from Mathura to Bharatpur and a 94-km branch line to

Hazira on the Koyali-Dahej pipeline are also under implementation. A grassroots terminal

facility is being set up at Ratlam to feed the local markets. A 118-km pipeline is being laid from

Bijwasan to Panipat for transporting Naphtha from Mathura Refinery to the upcoming Naphtha

Cracker unit at Panipat.

Indian Oil sees gas pipelines as a major growth area in the future. The gas market in India is

expanding fast, thanks to enhanced availability of the product from indigenous sources and

through imports. The Corporation will commission its first regassified LNG pipeline from Dadri

to Panipat (132 km) to synchronize with the completion of the first phase of the power plant

coming up under the Naphtha Cracker project at Panipat.

32

Indian Oil has translated the expertise of its personnel in pipeline operations into a business

opportunity, by offering training and consultancy to several Indian and overseas companies.

Currently, the Corporation is imparting training for personnel of the Greater Nile Petroleum

Company, Sudan.

Reaching out to a Billion Hearts:

Indian Oil has one of the largest petroleum marketing and distribution networks in Asia, with

over 35,000 marketing touch points. Its ubiquitous petrol/diesel stations are located across

different terrains and regions of the Indian sub-continent. From the icy heights of the Himalayas

to the sun-soaked shores of Kerala, from Kutch on India's western tip to Kohima in the verdant

North East, Indian Oil is truly 'in every heart, in every part'. Indian Oil's vast marketing

infrastructure of petrol/diesel stations, Indane (LPG) distributorships, SERVO lubricants &

greases outlets and large volume consumer pumps are backed by bulk storage terminals and

installations, inland depots, aviation fuel stations, LPG bottling plants and lube blending plants

amongst others. The countrywide marketing operations are coordinated by 16 State Offices and

over 100 decentralized administrative offices.

Several l and mark surveys continue to rate Indian Oil as the dominant energy brand in the

country and an enduring symbol for high quality petroleum products and services. The heritage

and iconic association that the brand invokes has been built over four decades of commitment

to uninterrupted supply line of petroleum products to every part of the country, and unique

products that cater not only to the functional requirements but also the aspiration needs of

millions of customers.

Indian Oil has been adjudged India's No. 1 brand by UK-based Brand Finance, an independent

consultancy that deals with valuation of brands. It was also listed as India's 'Most Trusted

Brand' in the 'Gasoline' category in a Readers' Digest - AC Nielsen survey. In addition, Indian Oil

33

Topped The Hindu Business line's "India's Most Valuable Brands" list. However, the value of the

Indian Oil brand is not just limited to its commercial role as an energy provider but straddles

the entire value chain of gamut of exploration & production, refining, transportation &

marketing, petrochemicals & natural gas and downstream marketing operations abroad. Indian

Oil is a national brand owned by over a billion Indians and that is a priceless value.

34

INTRODUCTION TO FOSSIL FUELS

When the remnants of trees and animals get buried in the earth’s crust they are subjected to

high pressure and temperature for a prolonged period of time and get converted to a fuel

which is rich in carbon and hydrogen content. This is called as fossil fuel. Fossil fuels are

naturally found in the earth’s crust and are not unlimited.

Crude oil, the most common fossil fuel, is processed to remove impurities to produce fuels of

different carbon content. As the carbon and hydrogen contents vary in the fuel the calorific

value, i.e. the energy the fuel produces, of the fuel varies.

A COMPARISION OF CALORIFIC VALUE OF FOSSIL FUELS:

CNG @ 3000PSI

METHANOL

LNG

ETHANOL

LPG

PETROL

DIESEL

020406080

100120

35

LIQUEFIED PETROLEUM GAS (LPG)

Liquefied petroleum gas is one of the most common and an alternative fuels used in the world

today. Liquefied petroleum gas is also called as LPG, LP Gas, or Auto gas. The gas is a mixture of

hydrocarbon gases used as a fuel for various purposes. This is mainly used in heating appliances

and vehicles and is replacing chlorofluorocarbons as an aerosol propellant. It is also used as a

refrigerant mainly to reduce damage to the ozone layer.

The main reason behind this being the soaring in the prices of the oil, LPG has emerged as much

preferred choice. LPG is a fossil fuel and can be refined from oil and natural gas.

LPG is basically a hydrocarbon with propane and butane as main constituent. LPG is a by-

product of natural gas processing. It is the product that comes from crude oil refining when

carried with the smaller amounts of propylene and butylenes. LPG is largely propane and thus

the characteristics of propane are sometimes taken as a close approximation to those of LPG.

LPG or Liquefied Petroleum Gas has become the most preferred fuel when it comes to domestic

and certain industrial uses.

LPG is used for:

Cooking

Domestic and Industrial Heating

Automotive Fuel

Propellant for aerosols

Feedstock for production of petrochemicals

36

Properties of LPG:

Flammable

Volatile –Vaporizes readily

Liquid forms lots of vapor – one volume forms 250 volumes of vapor

Liquid expands with temperature

Vapor heavier than air : 1.5-2 times

Colorless and odorless (unless odorized)

Not much heat needed to vaporize

No lubricating qualities

Liquid is light weight: half as that of water

Can cause asphyxiation

There are many advantages which can be associated with LPG:

1) The most important advantage of using LPG is its effect on the environment. It is certainly a more

environment friendly way and this is also another reason why many Asian Countries are also switching

to LPG run cars and other vehicles.

2) LPG offers clean burning and this is also another reason why it is not very detrimental to the

atmosphere in comparison to other fuels.

3) LPG equipments and burners do not demand a high maintenance because the burners have a longer

life due to no soot deposits.

4) LPG is also considered highly efficient in comparison to many other fuels. It is good to be used in

direct firing system.

5) LPG provides instant heat and is ideal when you require faster warm up or cooling down in any

process.

6) With usage of LPG, corrosion effects are also reduced to a great extent.

37

7) Using LPG also avoids the parts of the equipments to get decarburized. At the same time, it also

avoids scaling to a large extent.

8) The flame temperature resultant from LPG is instantly controllable and this is what is required when it

comes to domestic uses of LPG.

9) LPG is indeed a greener and cleaner fuel since it has a low carbon content.

Like LPG, CNG is also a clean gaseous fuel which gives a tough competition to LPG. So we compare the

properties of both to find out the better of the two.

A COMPARISION BETWEEN CNG AND LPG:

CNG LPG

Requires higher initial investment Lower initial investment

Lower running costs Higher running costs

Lesser calorific value Higher calorific value

Bulkier and heavier storage tanks Smaller and lighter storage tanks

Limited availability Far better availability

Safer: It is lighter and has a higher ignition temperature

Heavier and has a lower ignition temperature

More popular with commercial vehicles. More popular with private vehicles.

38

WHY LPG IS BETTER:

LPG MARKETING IN INDIAN HISTORY:

o LPG marketing started in India in the mid-fifties by the multinational oil companies (Burmah Shell / Stanvac)

o The bottling operations were then mainly confined to Refinery plants and marketing was limited to nearby areas

o Though IOC started functioning in the month May 1959, it actually started marketing of LPG in the year 1965 with brand name `INDANE‟.

o Demand started picking up from 1980s with1. its acceptability as clean and safe product2. additional availability from refineries and gas fractionators

o Till 1993, only government oil companies were permitted to market LPG

39

o The LPG (supply and distribution) Order was revised in 1993 to allow Private entrepreneurs to

import, bottle, distribute and market LPG within the country under PMS.

o In the earlier eighties, the total number of customers in the country was about 30 Lakhs. After 3

decades, there is a multifold increase in number of customers/sales.

o LPG sales on account of IOC stood at 6600 TMT during 2010-11 as against Industry sale of 13911

TMT.

o LPG waiting list stands fully liquidated.

GRADES MARKETED/TYPES OF SALES:

1. Domestic LPG-

o Packed product in 14.2kg, & 5kg cylinders, home delivered through distributors.

2. Non domestic LPG-

o Packed product 19kg and 47.5 kg delivered supply through distributors. Exclusive

distributorships in offing.

3. Bulk LPG-

o Delivered to storage tanks of customer’s o Business associates to garner customers.

4. Auto LPG-

o Through retail outlets and stand alone outlets at distributor premises.

40

INTERNATIONAL DEMAND OF LPG:

LPG production in the US has been growing due to the exploitation of growing shale Gas & Oil prices, but global LPG markets have been tighter than expected. This has created an unusual dynamic in which LPG prices in the US have been significantly lower than international prices & arbitrage has resulted in record exports of propane from the US gulf coast.

FACTORS RESPONSIBLE FOR LPG MARKET OUTSIDE THE US TIGHT IN 2010:

o Reduction in LPG production in Algeria resulted in a drop in LPG exports by sonatrach.

o LPG terminal maintenance in the North Sea disrupted trade in northern west.

o Global demand of LPG totaled slightly less than 220 million tons in 2005.Puroin & Gets

estimates that the market will grow to about 228 millions tones in 2006 & reach more than

258 million by the year 2010.

41

IOC’S LPG MARKET STATISTICS

IOC MARKET SHARE IN LPG

Presently, there are three Oil Marketing Companies (OMC) in India – Indian Oil

CorporationLimited, Bharat Petroleum Corporation Limited and Hindustan Petroleum

Corporation Limited. IOCL has been enjoying the major market share of the three since 2004-

05.

42

SECTOR-WISE LPG CONSUMPTION IN INDIA (2010-11)

43

DEMAND FORECAST OF LPG:

Every plan starts with a demand forecast. So with the past eight years‟ data of actual LPG

demand of the country we have forecasted the future demand of LPG. It is only a quantitative

demand forecast.

The actual demand values for the past 7 years are as follows:

44

By visual inspection we can see that the demand has been increasing every year. So this made

us choose the “trend analysis” method for forecasting demand.

45

The forecasted demand for the next 12 years is as under:

46

Other data:

The trend equation: Y = 8729560 + 678453.3 X

Where X = time and Y = demand

Mean Absolute Deviation (MAD) = 257947.9

The demand figures we have drawn are not accurate even. We tried to reduce the error by

avoiding rounding off. The values for the first couple of years may get closer to the actual

demand but as the forecasted values go further into the future the more unreliable the value

gets. It is because there may be many unforeseen or unanticipated events that may increase or

decrease the demand.

47

FUTURE DEMAND OF LPG:

What do we see over the next 30 years? The answer to that question varies by region, reflecting diverse

economic and demographic trends as well as the evolution of technology and government policies.

Everywhere, though, we see energy being used more efficiently and Energy supplies continuing to

diversify as new technologies and sources emerge. Other key findings of this year’s Outlook include:

Global energy demand will be about 30 percent higher in 2040 compared to 2010, as economic output

more than doubles and prosperity expands across a world whose population will grow to nearly 9 billion

people. Energy demand growth will slow as economies mature, efficiency gains accelerate and

population growth moderates. In the countries belonging to the Organization for Economic Cooperation

and Development (OECD) – including countries in North America and Europe – we see energy use

remaining essentially flat, even as these countries achieve economic growth and even higher living

standards. In contrast, Non OECD energy demand will grow by close to 60 percent. China’s surge in

energy demand will extend over the next two decades then gradually flatten as its economy and

population mature. Elsewhere, billions of people will be working to advance their living standard

requiring more energy. The need for energy to make electricity will remain the single biggest driver of

demand.

By 2040, electricity generation will account for more than 40 percent of global energy consumption.

Demand for coal will peak and begin a gradual decline, in part because of emerging policies that will

seek to curb emissions by imposing a cost on higher-carbon fuels. Use of renewable energies and

nuclear power will grow significantly. Oil, gas and coal continue to be the most widely used fuels, and

have the scale needed to meet global demand, making up about 80 percent of total energy consumption

in 2040.Natural gas will grow fast enough to overtake coal for the number-two position behind oil.

Demand for natural gas will rise by more than 60 percent through 2040. For both oil and natural gas, an

increasing share of global supply will come from unconventional sources such as those produced from

shale formations. Gains in efficiency through energy-saving practices and technologies – such as hybrid

vehicles and new, high efficiency natural gas power plants – will temper demand growth and curb

emissions.

48

SUPPLY CHAIN MANAGEMENT

INTRODUCTION:

Within the organization, the supply chain refers to a wide range of functional areas. These

Include Supply Chain Management-related activities such as inbound and outbound

transportation warehousing, and inventory control. Sourcing, procurement, and supply

management fall under the supply-chain umbrella, too. Forecasting, production planning and

scheduling, order processing, and customer service all are part of the process as well.

Importantly, it also embodies the information systems so necessary to monitor all of these

activities. Simply stated, “the supply chain encompasses all of those activities associated with

moving goods from the raw-materials stage through to the end user." In many organizations,

materials form the largest single expenditure item, accounting for nearly 50 to 65 % of the total

expenditure. With competition growing by the day, cost reduction in business operations and

yet making available various products to customers , as per their requirement, come into sharp

focus. Maintaining a flawless supply chain across all its operations thus becomes absolutely

necessary for any business. Importance of supply chain management need not be over

emphasized as it has become the cutting edge of business, after product quality and

manufacturing capabilities of any business firm.

49

TODAY’S SCENARIO OF SUPPLY CHAIN MANAGEMENT:

If we take the view that Supply Chain Management is what Supply Chain Management people

do, then in 1997 Supply Chain Management has a firm hand on all aspects of physical

distribution and materials management. Seventy-five percent or more of respondents included

the following activities as part of their company's Supply Chain Management department

functions:

• Inventory management

• Transportation service procurement

50

• Materials handling

• Inbound transportation

• Transportation operations management

• Warehousing management

Moreover, the Supply Chain Management department is expected to increase its range of

responsibilities, most often in line with the thinking that sees the order fulfillment process as

one co-ordinate set of activities. Thus the functions most often cited as planning to formally

include in the Supply Chain Management department are:

• Customer service performance monitoring

• Order processing/customer service

• Supply Chain Management budget forecasting

On the other hand, there are certain functions which some of us might feel logically belong to

Supply Chain Management which companies feel are the proper domain of other departments.

Most difficult to bring under the umbrella of Supply Chain Management are:

• Third party invoice payment/audit

• Sales forecasting

Supply Chain Management Tomorrow:

The future for Supply Chain Management looks very bright. Two major trends are Customer

service focus and Information technology.

51

OBJECTIVES

52

OBJECTIVES OF THE STUDY:

• To design the pipeline grid across india for smooth transportation of LPG and make a

strategy for cost effectiveness.

• To minimise the logistic cost by using pipeline grid.

• To get an exposure of the actual working environment within a multi national.

• To Study of IOC‟s LPG market share, all India supply and demand of LPG and present

LPG demand and forecasting future demand.

• To Study of supply chain of LPG including road, railway and pipeline distribution network

and suggesting improvements.

53

SOURCES:

1. REFINERIES-: There are 19 refineries in total out of which 10 are owned by IOC,2 by HPC , 3 by BPC ,ONGC holds 2 & 2 are owned by private companies i.e. Reliance & Essar Oil.

2. FRACTIONATORS:-

Only ONGC & GAIL are into exploration & production OF LPG. Thus only they own

fractionators at present there are 12 fractionators out of which 6 are owned by GAIL, 5

are owned by ONGC & 1 is owned by Oil Duliajan.

54

Jamnagar

Koyali

Mumbai

Mangalore

Kochi

Narimanam

Chennai

Vizag

Haldia

Mathura

Panipat

Barauni

BRPL

Guwahati

DigboiNRL

LPG INFRASTRUCTURE / LOGISTICS INDUSTRY

REFINERIES

Vadinar

[HPC & BPC]

Total nos. of Fractionators - 11

3. IMPORTS-:

Basically we import LPG (combination of propane & butane) from GULF Countries.

Mainly from Saudi Arabia, Malaysia. IOC has 4 ports handling LPG imports they are at

Kandla, Haldia, Vizag & Mangalore.

IOC uses “Time chartered “(TC) or Voyage charted ships to import LPG. TCs are

hired on a yearly basis or for a certain time period like 2-3 years. VC's are hired

particular voyage only- as and when sudden increase in demand these are used. These

are also used in coastal movement-transport of LPG along the coast line of India.

TRANSPORTATION OF LPG:

LPG is transported to the bottling plants by 3 modes which are as follows;

1) RAIL- fixed proportion

2) ROAD- costliest

3) PIPELINE- most reliable one

PIPELINES-:

The easiest and safest mode of transporting LPG is through pipelines. On the other hand it is

challenging as well as tough job to establish pipelines across country. As once you have

established the pipelines it is not possible to change the capacity of the pipelines.

55

Benefits of Pipelines-

• Safer mode of transportation

• Environment friendly

• Least energy requirement

• Lowest maintenance costs

• Minimal impact on land use pattern

• Negligible loss of product in transit

• High reliability

RAILWAYS:-

Rails are the cheapest mode of transporting LPG but meanwhile the availability of the tracks as

well as the stations are in the hands of the Government .LPG is loaded into containers called as

tank wagons which have capacity of 37.5 MT( for 8 wheeler tank wagons) and unloaded at the

nearest bottling plant. To unload LPG from the tank wagon, bottling plants should install

separate machinery. Not all bottling plants have this feature as not all the bottling plants have

rail availability.

56

ROAD:-

To transfer LPG through roads costs highest,as well as it is unsafe also that is high amount of security if we transfer LPG through roads. Trucks of 18 MT capacity is used to carry bulk LPG.As it is the most costly mode of transporting LPG it should be minimize to maximum.

57

COASTAL-:

Whenever there is excess an excess of production at RIL, Jamnagar. The material is moved from Jamnagar to other coastal areas like Kandla, Mangalore, Halsia & Vizag.

Pipeline transport:

It is the transportation of goods through a pipe. Most commonly, liquids and gases are sent, but pneumatic tubes using compressed air can also transport solid capsules.

As for gases and liquids, any chemically stable substance can be sent through a pipeline. Therefore sewage, slurry, water, or even beer pipelines exist; but arguably the most valuable are those transporting crude petroleum and refined petroleum product including fuels: oil (oleoduct),natural gas (gas grid), and befouls.

There is some argument as to when the first crude oil pipeline was built. However, some say pipeline transport was pioneered by Vladimir Shukhov and the Bramble company in the late 19th century.

For natural gas, pipelines are constructed of carbon steel and vary in size from 2 to 60 inches (51 to 1,500 mm) in diameter, depending on the type of pipeline. The gas is pressurized by compressor stations and is odorless unless mixed with a mercaptan odorant where required by a regulating authority.

Types by transport function:

In general, pipelines can be classified in three categories depending on purpose:

Gathering pipelines-

Group of smaller interconnected pipelines forming complex networks with the purpose of bringing crude oil or natural gas from several nearby wells to a treatment plant or processing facility. In this group, pipelines are usually short- a couple of hundred meters- and with small diameters. Also sub-sea pipelines for collecting product from deep water production platforms are considered gathering systems.

58

Transportation pipelines-

Mainly long pipes with large diameters, moving products (oil, gas, refined products) between cities, countries and even continents. These transportation networks include several compressor stations in gas lines or pump stations for crude and multi products pipelines.

Distribution pipelines-

Composed of several interconnected pipelines with small diameters, used to take the products to the final consumer. Feeder lines to distribute gas to homes and businesses downstream. Pipelines at terminals for distributing products to tanks and storage facilities are included in this group.

Construction

When a pipeline is built, the construction project not only covers the civil work to lay the pipeline and build the pump/compressor stations, it also has to cover all the work related to the installation of the field devices that will support remote operation.

The pipeline is routed along what is known as a 'right of way'. Pipelines are generally built using the following stages:

1. Route (right of way) Selection

2. Surveying the route

3. Clearing the route

4. Trenching - Main Route and Crossings (roads, rail, other pipes, etc.)

5. Installing the pipe

6. Installing valves, intersections, etc.

7. Covering the pipe and trench

Russia has Pipeline Troops as part of the Rear Services, who are trained to build and repair pipelines. Russia is the only country to have Pipeline Troops.

59

Operation-

Field devices are instrumentation, data gathering units and communication systems. The field Instrumentation includes flow, pressure and temperature gauges/transmitters, and other devices to measure the relevant data required.

These instruments are installed along the pipeline on some specific locations, such as injection or delivery stations, pump stations (liquid pipelines) or compressor stations (gas pipelines), and block valve stations.

The information measured by these field instruments is then gathered in local Remote Terminal Units (RTU) that transfer the field data to a central location in real time using communication systems, such as satellite channels, microwave links, or cellular phone connections.

Pipelines are controlled and operated remotely, from what is usually known as The Main Control Room. In this center, all the data related to field measurement is consolidated in one central database. The data is received from multiple RTUs along the pipeline. It is common to find RTUs installed at every station along the pipeline.

60

The SCADA System for pipe lines

The SCADA system at the Main Control Room receives all the field data and presents it to the pipeline operator through a set of screens or Human Machine Interface, showing the operational conditions of the pipeline. The operator can monitor the hydraulic conditions of the line, as well as send operational commands (open/close valves, turn on/off compressors or pumps, change set points, etc.) through the SCADA system to the field.

To optimize and secure the operation of these assets, some pipeline companies are using what is called Advanced Pipeline Applications, which are software tools installed on top of the SCADA system, that provide extended functionality to perform leak detection, leak location, batch tracking (liquid lines), pig tracking, composition tracking, predictive modeling, look ahead modeling, operator training and more.

Implementation-

As a rule pipelines for all uses are laid in most cases underground. However in some cases it is necessary to cross a valley or a river on a pipeline bridge. Pipelines for centralized heating systems are often laid on the ground or overhead. Pipelines for petroleum running through permafrost areas as Trans-Alaska-Pipeline are often run overhead in order to avoid melting the frozen ground by hot petroleum which would result in sinking the pipeline in the ground.

Maintenance-

Maintenance of pipelines includes checking Cathodic protection levels for the proper range, surveillance for construction, erosion, or leaks by foot, land vehicle, boat, or air, and running cleaning pigs, when there is anything carried in the pipeline that is corrosive.

US pipeline maintenance rules are covered in Code of Federal Regulations(CFR) sections, 49 CFR 192 for natural gas pipelines, and 49 CFR 195 for petroleum liquid pipelines.

In the US, onshore and offshore pipelines used to transport oil and gas is regulated by the Pipeline (PHMSA). Certain offshore pipelines

61

Used to produce oil and gas are regulated by the Minerals Management Service (MMS). In Canada, pipelines are regulated by either the provincial regulators or, if they cross provincial boundaries or the Canada/US border, by the National Energy Board (NEB). Government regulations in Canada and the United States require that buried fuel pipelines must be protected from corrosion. Often, the most economical method of corrosion control is by use of pipeline coating in conjunction with cathodic protection and technology to monitor the pipeline. Above ground, cathodic protection is not an option. The coating is the only external protection.

Pipelines and geopolitics-

Pipelines for major energy resources (petroleum and natural gas) are not merely an element of trade. They connect to issues of geopolitics and international security as well, and the construction, placement, and control of oil and gas pipelines often figure prominently in state interests and actions. A notable example of pipeline politics occurred at the beginning of the year 2009, wherein a dispute between Russia and Ukraine ostensibly over pricing led to a major political crisis. Russian state-owned gas company Gazprom cut off natural gas supplies to Ukraine after talks between it and the Ukrainian government fell through. In addition to cutting off supplies to Ukraine, Russian gas flowing through Ukraine—which included nearly all supplies to Southeastern Europe and some supplies to Central and Western Europe was cut off, creating a major crisis in several countries heavily dependent on Russian gas as fuel. Russia was accused of using the dispute as leverage in its attempt to keep other powers, and particularly the European Union, from interfering in its "near abroad".

Future Plans:

The demand for LPG (Liquified Petroleum Gas) as domestic fuel in the Northern, Central and Western regions is being met from indigenous LPG production from oil refineries and from gas processing units. Besides domestic LPG production sources, the deficit in demand-Supply is being met through import of LPG at Kandla on the West coast.

62

Increasing demand for LPG has also put tremendous pressure on the rail/road network. Accordingly, requirement of LPG pipeline starting from Kandla port up to Loni was identified and world's longest LPG pipeline was commissioned by GAIL to facilitate transportation of imported LPG and LPG production from the indigenous units at Jamnagar to the northern region.

DESIGN CAPACITY: 2.5 MMTPA

Risk Involved in transporting bulk LPG Through cross country pipeline

LPG is stored in Liquid form under high pressure conditions. When released in air it possesses the following risk:

Highly flammable

Settles and flows along ground

High liquid to vapor ratio

High increase in pressure due to temperature rise

Vaporizes rapidly, lowering temperature which may cause frost burn

Low viscosity and poor lubrication

Risk of vapor cloud explosion

Risk of BLEVE

63

METHODOLOGY

64

METHODOLOGY• Collected and organized the data for LPG demand and supply, sources of LPG and modes

of distribution with their details like costs, capacities etc.

• For ease and detail of analysis, we have divided India into four regions namely North, South, East and West.

65

• Analyzing and Interpreting the secondary data and information available with IOCL-HO (Mumbai).

• To study of new pipe line where there is mismatch of demand and supply across India.

• Applying various tools like SECONDARY DATA AND EXPERIENCED SURVEY to bring out various results. Experienced survey is like with whom we are dealing the person who are experienced and has sound knowledge on this topics.

• The proposed study is DESCRIPTIVE AND CAUSAL in nature. In this study the project is very much descriptive and cause and effect type.

• To see the cause and effect of the problem, we have independent variable”COST” and depedent variable “SAVING”.

• Analyzed LPG pipelines all over India.

FACTORS NEEDED TO SET-UP PIPELINE:

1. Availability of Source

2. Demand and Consumption Point i.e. Plant

3. Geographical area

4. Distance

5. Future Demand

6. Capital cost

7. Savings

8. Pay Back Period

66

BOTTLING PLANTS OF IOC

67

BOTTLING PLANTS OF IOC

11

7 215

36 9

10

14

15

1617

18

20

1921

22

23

2425

27

28

29

30

31

32

33

343536

37

38

3940

41

42

43

4445

46

47

48

495051

5253

58

55

57

56

59

6160

6263

64

65

54

7576

7067

69

71 72

7473

77

79

78 80

8182 83

8586

87

8889

NORTH EAST SOUTH WEST1.Allahbad

2.Kanpur

3.Lucknow

4.Trisundi

5.Varanasi

6.Aligarh

7.Etawah

8.Farukhabad

9.Lakhmipur Kheri

10.Loni

11.Mathura

12.Pattikalan

13.Shahjanapur

14.Haldwni

15.Haridwar

16.Ajmer

17.Bikaner

18.Jaipur

30.Akola

31.Manmad

32.Pune

33.Ahmedabad

34.Bhabnagar

35.Gandhar

36.Hazira

37.Rajkot

38.Baroda

39.Bhopal

40.Guna

41.Ujjain

42.Raipur

43.Coimbatore

44. Ennore

45.Erode

46.Ilayangudi

47.Madurai

48.Mannargudi

49.Myladaturai

50.Salem

51.Trichy

52.Chenglepet

53. Cpcl

54. Cherlapalli 55.Cuddapah 56.Thimmapur 57.Vijaywada

58.Vizag

59. Belgaum 60.Devanagonthi 61.Shimoga 62.Calicut

66. Budge Budge

67.Durgapur

68. Kalyani

69. Raninagar

70. Malda

71. Patna

72.Barauni

73.Bokaro

74.Jamshedpur

75.Balasore

76. Jharsuguda

77. Bishalgarh

78. Rangpo

79. Port Blair

80.Bongaigaon (Brpl)

81.Guwahati (Sarpara)

82.North Guwahati

83.Silchar

68

19.Jhunjhunu

20.Delhi

21.M’pur Khadar

22.Gurgaon

23.Karnal

24.Jalandhar

25.Nabha(Patiala)

26.Baddi

27.Una

28.Jammu

29.Leh

63. Cochin

64.Quilon

65.Pondichery

84. Duliajan

85. Gopanari(Digboi)

86. Kimin

87.Dimapur

88. Mualkhang

89.Sekmai

69

IMPORTS & REFINERIES OF IOC:

70

LPG INFRASTRUCTURE / LOGISTICS

“INPUTS” REQUIRED FOR DESIGNING PIPELINE:

Pay Back Period < 15 years

Pipeline Tariff = Rs.0.30 / MT/KM

Road Expenses = Rs.2.4/ MT/KM

Cost of Pipe line= 1 crore /KM

Projected Bottling Plant capacities in the year 2016-17.

We can also say inputs as THUMB RULE. During applying these rules, we have strictly adhered

to these inputs so as to get suitable and correct result.

SECONDARY DATA:

BOTTLING PLANT CAPACITY (TMTPA)

LocationEXISTING

(as of 01.10.11)

14-1516-17

21-22

ALLAHABAD 60 120 120 120ALIGARH 15 60 60 60ETAWAH 23 60 60 60FARUKHABAD 30 60 60 60KANPUR 120 180 240 240PATTIKALAN(KASHIPUR) 23 60 60 60LAKHIMPUR KHERI 23 30 30 30LUCKNOW 90 120 120 150LONI 120 180 180 180MATHURA 120 120 150 180

71

SHAHJAHANPUR 45 120 120 120TRISUNDI 11 11 60 60VARANASI 60 120 120 120MUZAFFARNAGAR 0 0 60 60S'PUR/M'NGAR 0 0 60 60MEERUT 0 0 0 60BAREILY/MORADABAD 0 0 0 60GORAKHPUR 0 60 60 120

SUB TOTAL 740 13011560

1800

HALDWANI 60 120 120 120HARIDWAR 60 60 60 60DEHRADOON 0 0 60 60

SUB TOTAL 120 180 240 240AJMER 60 120 120 120BIKANER 30 60 60 60JAIPUR 90 180 180 180JHUNJHUNU 15 30 30 30JODHPUR/PALI 0 60 60 60UDAIPUR 0 60 60 60ALWAR 0 0 60 60KOTA 0 0 30 30

SUB TOTAL 195 510 600 600DELHI (TIKRIKALAN) 240 240 240 240M'PUR KHADAR 180 240 300 300

SUB TOTAL 420 480 540 540GURGAON 60 120 120 180KARNAL 120 180 180 180HISAR/ROHTAK 0 0 60 60

SUB TOTAL 180 300 360 420JALANDHAR 180 180 180 180NABHA (PATIALA) 120 240 240 240BHATINDA /AMRITSAR 0 120 120 120

SUB TOTAL 300 540 540 540BADDI 30 30 30 30UNA 30 60 60 120

SUB TOTAL 60 90 90 150JAMMU 30 60 60 60LEH 5 15 15 15

SUB TOTAL 35 75 75 75

NR TOTAL 2050 34764005

4365

BUDGE BUDGE 120 180 180 180

72

DURGAPUR 120 120 120 180KALYANI 120 180 180 180RANINAGAR 60 120 120 120MALDA 15 30 60 60MURSHIDABAD 0 0 60 60

SUB TOTAL 435 630 720 780PATNA 120 120 120 180BARAUNI 60 120 120 120BHAGALPUR 0 90 120 120MUZAFFARPUR 0 60 60 120

SUB TOTAL 180 390 420 540BOKARO 30 60 60 60JAMSHEDPUR 60 120 120 120

SUB TOTAL 90 180 180 180BALASORE 60 60 60 60JHARSUGUDA 15 30 30 30BEHREMPORE 0 30 30 60

SUB TOTAL 75 120 120 150BISHALGARH 12 30 30 30

SUB TOTAL 12 30 30 30RANGPO 11 11 11 11

SUB TOTAL 11 11 11 11PORT BLAIR 11 11 11 11

SUB TOTAL 11 11 11 11BONGAIGAON (BRPL) 30 30 30 30GUWAHATI (SARPARA) 23 23 23 23NORTH GUWAHATI 60 120 120 120SILCHAR 20 60 60 60DULIAJAN 23 23 23 23GOPANARI(DIGBOI) 30 30 30 30

SUB TOTAL 186 286 286 286KIMIN 8 11 11 11

SUB TOTAL 8 11 11 11DIMAPUR 11 21 21 21

SUB TOTAL 11 21 21 21MUALKHANG 11 22 22 22

SUB TOTAL 11 22 22 22SEKMAI 15 30 30 30

SUB TOTAL 15 30 30 30

ER TOTAL 1045 17421862

2072

AKOLA (DHANAJ) 60 60 60 60MANMAD 60 60 60 60

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PUNE 30 120 120 120NAGPUR 0 60 60 60KOLHAPUR 0 0 30 60AURANGABAD 0 0 30 60

SUB TOTAL 150 300 360 420AHMEDABAD (SANAND) 120 120 120 120BHAVNAGAR 30 30 60 60GANDHAR 30 30 60 60HAZIRA 60 60 60 60RAJKOT 90 90 90 90BARODA 60 120 120 120KANDLA 0 30 30 30

SUB TOTAL 390 480 540 540BHOPAL 90 120 120 180GUNA 30 120 120 120UJJAIN 60 60 120 120JABALPUR 0 60 60 120GWALIOR 0 30 30 60

SUB TOTAL 180 390 450 600RAIPUR 60 90 90 90

SUB TOTAL 60 90 90 90

WR TOTAL 780 12601440

1650

COIMBATORE 60 120 120 120ENNORE 180 180 180 180ERODE 60 120 120 120ILAYANGUDI 15 60 60 60MADURAI 60 120 120 120MANNARGUDI 11 11 11 11MYLADATURAI 11 11 11 11SALEM 45 60 60 60TRICHY 60 120 120 120CHENGLEPET 60 120 120 120CPCL 120 120 120 120VELLORE 0 60 60 60TIRUNELVELLI 0 30 30 30VIRUDHACHALAM 0 0 60 60VIRUDHUNAGAR 0 0 30 30SRIPERUMPUDUR 0 0 60 60TIRUVANAMALAI 0 0 30 30TANJORE 0 0 30 30KRISHNAGIRI 0 0 30 30DHARAMPURAM 0 0 30 30

SUB TOTAL 682 1132 140 140

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2 2CHERLAPALLI 120 150 150 150CUDDAPAH 60 150 150 150THIMMAPUR 60 120 120 120VIJAYWADA 45 75 75 75VIZAG 60 90 90 120KAVALI 0 60 60 120KARIMNAGAR/KURNOOL 0 0 60 60

SUB TOTAL 345 645 705 795BELGAUM 60 120 120 120DEVANAGONTHI 180 240 240 240SHIMOGA 60 120 120 120MANGALORE 0 60 120 120MYSORE 0 60 60 120

SUB TOTAL 300 600 660 720CALICUT 45 120 120 120COCHIN 180 180 180 180

QUILON 60 120 120 120SUB TOTAL 285 420 420 420

PONDICHERY 30 30 30 30SUB TOTAL 30 30 30 30

SR TOTAL 1642 28273217

3367

*Green color mark place is under construction.

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OBSERVATIONS & ANALYSIS

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OBSERVATIONS & ANALYSIS

Concentration of production:

Earlier, we have seen that the production of LPG is from three sources viz. refineries,

fractionators and imports. The sources are distributed across the country and so are the

markets.

We learnt that most of the imports are from Saudi Arabia which is near to the west of India. So

obviously, LPG is imported to the ports at the west coast of India and later distributed to the

other parts by land.

Similarly, even crude is imported from Saudi Arabia and so imported at the ports on the west

coast. Observing these points, we wanted to analyze the distribution of sources across India

and if they are meeting the demands of their locality.

Broadly, we divided India into four major regions viz. North, East, West and South and

categorized all the sources of LPG (IOC, BPC, HPC, RIL, ONGC) into the four categories. On doing

so, we found a very huge imbalance in the production and demand of LPG in the corresponding

regions.

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The maximum consumption is at the north region (32%) followed by the south region (30%)

where the production is only 11% and 15% respectively. So the difference is 21 percentage

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points at north and 15 percentage points at south which is equivalent to 3348 TMT and 2852

TMT respectively. The maximum production is at the west (67%) where the consumption is only

25%. So, the material has to move from west to north and south.

These imbalances infer that the material, a total of 6200 TMT, has to be transported from the

source to the markets to meet the respective demands. With such huge imbalances, a lot of

material has to be transported which will cost millions of dollars.

Rs. 1480 is the average price to transport 1 MT of LPG for 1km and if the average distance

between the reference points of north (Delhi) and west (Kandla) is 1100 km then the average

cost of transporting 3348 TMT is

1480 * 3348 * 1000 * 1100 = Rs. 5,450,544,000,000 per annum

Similarly, the average transportation from west (Kandla) to south (Bangalore) is

1480 * 2852 * 1000 * 1800 = Rs. 7,597,728,000,000 per annum.

DETAILED EXPLANATION OF NEW DELHI- PANIPAT PIPE LINE:

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Background:

Industry transports LPG from its LPG

Refinery Facility to various bottling

plants in North India through road

and rail.

Demands in mainly New Delhi in 11-

12 is 0.42 MMT

80 % thru Road & 20 % Rail

Frequent Road Accidents

Industry on Look out for Alternate safe mode of transportation

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PANIPAT

NEW DELHI

The project aims at

• Decongesting of the roads near tikrikalan, Khadar.

• Reduce the Bulk LPG Tank truck movement.

• Improve the Safety in Road transportation

• Promote environment protection by shifting bulk LPG Movement from Road to Pipeline

transfer

• Savings in cost, transit loss & improved safety

• Provide Safe & secure mode of Transportation

Pipeline Schematic

Calculation:

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Tikrikalan(New Delhi)

Panipat96KMs14”/16” dia

TMTPA= thousand metric ton per annum

MMTPA=million metric ton per annum

KM=kilometer

Cr=crore

• Forecasted demand of Delhi (TIKRIKALAN)is extremely high i.e. 240 TMTPA.

• This proposed pipeline can help to avoid the mismatch of demand-supply in the year

2016-17.

• Can help to its nearby district like Gurgaon, Rohtak, Noida, Jind, Hisar etc.

• Analyzed the data of year 16-17 and proposed one suitable pipeline for it.

Other costs also associated in this pipe lines are -

Land & RoU

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Station mechanical, Electrical & Instrumentation

Station civil works

Miscellaneous expenses* including contingency

Interest & Misc charges

Likewise we have found other 7 feasible proposed pipe lines. Everything is calculated using

same formula and secondary data.

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FINDINGS

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PIPELINE DETAILS85

PROPOSED LINEEXISTING LINE

JALANDHAR

VIZAG

AKOLAMANMAD

CUDDAPAH

LUCKNOW

AJMER

JAMNAGAR

GUNA

KOCHI

SL No. PROPOSED LINE REMARKS APPROX LENGTH IN KMs

1 Kochi-Coimbatore-Erode-Salem-Trichy

PROPOSED LINE 458

2 Hyderabad-Warangal-Karimnagar

PROPOSED LINE 197

3 Newdelhi-Panipat PROPOSED LINE 96

4 Mumbai-Nashik-Manmad-Akola-Nagpur

PROPOSED LINE 672

5 Panipat-Muzafrnagar-Bareilly-Shahjanpur-Kheri

PROPOSED LINE 517

6 Mathura-Gwalior-Guna-Bhopal-Ujjain

PROPOSED LINE 697

7 Ennore-Tiruvallur-Cuddapah PROPOSED LINE 268

8 Guna-Bhopal-Ujjain PROPOSED LINE 321

9 Kandla – Loni – Panipat New Pipeline 1521

10 Rewari – Mathura - Allahabad New Pipeline 620

11 Koyali – Sanand – Patan New Pipeline 110

12 Vizag – SecunderabadAugmentation in existing pipeline

589

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13 Paradip – Haldia – Budge Budge - Kalyani – Durgapur

New Pipeline 673

14 Durgapur – Barauni - Varanasi New Pipeline 830

15

Mangalore – Bangalore New Pipeline 376

16

Ennore – Trichy New Pipeline 382

17 Mumbai – Chakan

New Pipeline 166

Finally we have found 8 feasible pipe lines to avoid mismatch of demand – supply in these areas

with a profit of approx. 266 Crores.

RECOMMENDATIONS

In the current scenario, these are the 8 possible LPG pipelines which are feasible according

to Thumb Rule.

If these pipe lines will be set up then almost 90% of the country will be covered by the

pipelines.

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IOC should focus on the extreme Eastern region so that whole India can get LPG easily

without any hesitation.

It should also work on the top of Northern Region like Jammu, Leh, and Srinagar etc and hill

area Himachal Pradesh.

Already it has a strong network of LPG pipelines in Southern, Northern and Eastern Region.

It should focus on the western region to make its pipeline networking more stronger.

As the taxes vary from state to state, it is not wise to calculate the “profit after tax” (PAT) to

assess the manager. Instead, “operating profit” makes a better performance measure in this

case.

As the demand varies from state to state or market to market it is not right to assess the

plant managers on the profit they make in numbers. So the performance measure to be

used here is a ratio. The ratio should be:

Operating profit/cost of goods sold

CONCLUSION

• Can easily handle the mismatch of demand- supply in the year 2021-22 if these

proposed pipe lines will function.

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• In future the projected demand will gradually decrease mostly after the year 16-17 as

the demands will be fulfilled significantly by IOC, HPC, and BPC jointly.

• a profit center empowers the plant manager to choose his/her supply sources and also

his markets or price of the material to maximize the profits of his plant. But as the price

of LPG is fixed by the government the plant manager has to reduce the cost as much as

possible.

Pricing factors of LPG:

• To know what measures a plant manager can take to reduce the price of LPG it is

necessary to study how LPG is priced.

• Free/Fuel-On-Board (F.O.B.) price: This is the actual price of LPG at the time of loading

into the ship at the port of the country exporting it.

• Ocean freight: It is the cost of transportation of LPG from the exporting country to the

importing country by ship.

• Insurance: It is the cost of shipping insurance.

• Ocean loss: A small portion of loss (0.305%) is considered during the shipping.

• Port dues & Wharfage: The price the import port charges for disporting the material.

• Import Parity Price (IPP): The sum of all the costs listed above. Even if the plant manager

wishes to procure LPG from any fractionator or refinery, he has to buy LPG at IPP of the

nearest port.

• Terminal charges: The charge for using the terminals at the port to store LPG.

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Freight charges: The cost of transportation of bulk LPG to the bottling plant. Fill cost:

The cost of bottling.

ANNEXURE

Find the attachment with it i.e. the Excel Sheet.

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REFERENCES

http://www.iocl.com

http://www.hpcl.com

http://www.bpcl.com

http://myiris.com/shares/research/motilal/INDOILCO_20100129.pdf

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http://www.google.co.in/search

en. wikipedia .org/ wiki

Indian Oil official ppt & excel sheet

Indian Oil monthly magazine (april,may & June)

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