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Realizing the Petrochemical Vision

4th IndianOil Petrochemical Conclave Gurgaon, 12th February 2015

2

Agenda

India – A Growth Perspective

Petrochemicals – A Vehicle for Growth

• Petroleum Refining – An Overview

• Eastern India – Observations

• Paradip Refinery – An Overview

• IndianOil in Petchems & Future Plans

• Imperatives for Growth

Summary & Conclusion

3

Agenda









4

Political & Regulatory

Emerging Opportunities

Cultural

Growth Functions

Growth Team

Growth Process

Career Development

Non Customer

Demo- graphics

Behavior

Competitor’s Customers In-Direct

Competition

Competitive Strategy

Competitive Benchmarking

Emerging Competition

Country Risk

Economic Trends &

Issues

Economic Threats

Economic Trends

Emerging Technology

New Applications

Disruptive Technologies

Industry Expansion Potential

Industry Convergence

Industry Shifts

External Industry Impact

Industry Integration

India

TECHNOLOGY

BEST PRACTICES

INDUSTRY

GLOBAL

CUSTOMER

ECONOMIC

COMPETITIVE

India – Perspective of the Complex Business Universe

India’s growth recovery dilemma

5

•Limits policy space for monetary stimulus

• Yet to achieve critical mass

•High borrowing costs although business sentiment is improving

• Currency not yet fully stabilized, risks not over

External pressures

Investment slump

High inflation

Structural reforms

Towards Manufacturing Growth

Regulatory

Support

Local Products for

Global End-users

Investments across

the Value chain

Human

Capital

Management

R & D to

increase

efficiency

Cultural &

Mindset

Shifts

Growth

through

Innovation

Tectonic Shift in Manufacturing

Traditional/Current

Future

8

Agenda









Petrochemical Industry - Value Addition Opportunities

10

Economies of Scale

Domestic Demand Supply Situation

Downstream and upstream Integration

Infrastructure Global Demand Supply Situation

Costs( Feedstock and fixed costs)

Critical Success Factors Affecting the Indian Petrochemical

Industry

Indian Petrochemical Industry - Critical Success Factors

11

Agenda









Major Global Refinery Expansions - 2014

Pengzhou, Petrochina, 200 Quanzhou, Sinochem, 240 Jiujiang, Sinopec, 100

Tokuyama, Idemitsu Kosan, 120 Muroran, JX Nippon, 180

Kumell, Caltex, 125 Geelong, Shell, 105

Yanbu, Saudi Aramco/Sinopec, 400

Paradip, IndianOil, 300

‘000 bpd

• Net planned CDU capacity expansion: 880,000 b/d in 2014

Additions - mainly in East of Suez (Saudi Arabia, China, India)

Europe and OECD Asia – intentions of further outages

Capacity additions to exceed incremental product demand in near term

Source: JBC Refining Outlook, Jan’14

India: Refining capacity

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IOC/CPCL

31%

BPC/NRL/

BORL14%

HPC/HMEL

11%

ONGC/

MRPL7%

RIL

28%

ESSAR

9%

Capacity Share

Capacity (IOC): 54.2 MMTPA Capacity (CPCL): 11.5 MMTPA Group Capacity: 65.7 MMTPA India Capacity: 215.1 MMTPA

India: POL Scenario

13 16 18 26

39

48

68 77 80

100

140 144 143

2 2 2 3 6 9 15 14

7 11 14 13 12

2 2 4 7 11

18

28 27 31 43

59 59 61

12 15 17 23

34 40

56 63

56

68

95 98

95

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

20

13

-14

POL – Imports/Exports US$ billion

Imports-Crude oil

Imports-Petroleum Products

Exports-Petroleum Products

Net

10

0 10

4 10

8 11

2

11

3

12

1

12

9 13

4 13

8

14

1 1

48

15

7

15

8

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

09

-10

20

10

-11

20

11

-12

20

12

-13

20

13

-14

POL Consumption India - MMT

Refining Capacity of 215 MMT vs Consumption of 158 MMT – Surpluses Exist

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2011-12 2012-13 2013-14

7.1 6.2 6.3 6.7

0.9 0.2

5.0

1.4

4.6

Segment-wise Growth (%)

Services Industry Agriculture8.6 8.9

6.7

4.5 4.9

3.2

2.3

5.0

6.0

0.7

2009-10 2010-11 2011-12 2012-13 2013-14

GDP Growth (%) POL Cons. Growth (%)

• GDP growth – dominated by agriculture and services • POL growth – lowest in five years, in line with the lowest growth in industry, de-growth in vehicle sales and reducing power deficit

Domestic Economy vis-à-vis POL Demand

Source: PPAC/ MoSPI

NAPHTHA DEMAND SUPPLY SCENARIO IN INDIA

(Mn Tons)

19

24

12

18

0

5

10

15

20

25

30

2014 2019 (E)

PRODUCTION

CONSUMPTION

Advantages

• C3-C6 based streams available

• Aromatics can be produced from Naphtha

cracker Py- gas

• Py-gas is primarily used for gasoline blending

in India.

• Toluene and higher aromatics can be

extracted from py-gas stream from naphtha

cracker, India is significantly short in these raw

materials

• Styrene needs (100% imports currently) can

be met through naphtha crackers

• Ability to target specialty products/niche

grades for import substitution

Concerns

• Single site feedstock availability -pooling

• Competing in the C2 stream with ethane

based producers

• Polypropylene already surplus in India – need

to find new outlets/products.

Naphtha Demand Estimates for FY19 as per MOPNG

Naphtha Surplus but will naphtha crackers be cost competitive?

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Agenda









31%

22%

26%

21%

India -Population Vs Petrochem Demand

18 Source: IOCL Analysis

21%

11% 47%

21% Demand

Popln

•Low percapita consumption •Regional Imbalance •Increase Manufacturing Capacity in North & East

Eastern India – Opportunity Knocks

Source: IOCL Analysis

Potential for various Petchems–

Paradip

50% 50%

Development of Eastern India

8%

22%

32%

1980 2000 2010 2020 2040

West of the Kanpur-

Chennai line

East of the Kanpur-

Chennai line

Chennai

Kanpur-

IndianOil’s Paradip Refinery will be a major driver of growth in Eastern India

*Middle Class – Income Group above $4000/year

Percentage of Indian *Middle Class….

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Agenda









Paradip Refinery – From Aspirations to Reality

One of the most modern refineries in the world

Crude Mix: 100% HS; 40% Heavy

• Ability to process toughest crudes

Distillate Yield: 81%

• Even with high % of heavy crudes

Complexity Factor: 12.2

• Superior secondary processing

Energy Consumption (MBN): 50

• Among the best in the Industry

On the verge of completion

Capacity: 15 MMTPA; Approved Cost: US$ 4970 Million

Paradip Refinery: Product profile

Feedstock Capacity (KTA)

Crude Oil 15000

Products Capacity (KTA)

LPG 870

Ethylene Potential 200

Propylene Potential 700

MS 3400

ATF/ SKO 1200

Diesel 5750

Pet coke 1250

Sulfur 200

Internal Fuel & Loss 1430

Total Products 15000

Feedstock for Chemicals

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Agenda









25 25

IndianOil - Petrochemicals Capacity Growth

2004 2006 2010 2013 Total

120 120

553 553

1250 1250

325 325 138 138 60 60 155 155

Figures in KTA

LAB PTA Polymers Glycols Butadiene SBR Others

2601

2nd largest petrochemicals player in the country Capacity share: LAB – 24%; PTA - 14%; Polymers – 18% and Glycols – 25%

India’s 1st SBR Plant

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Initiatives Planned for Future Growth

A. DEVELOPMENT OF PETROCHEMICAL HUB AT PARADIP

• 700 kta Polypropylene Unit based on FCC propylene under implementation

• Planning for C2 Derivatives

• Integrated pX/PTA units being examined • Accelerated development of downstream petrochemical

industry for polymer processing like packaging, fibre & filament, automotive, health care & personal care

• Creation of employment opportunities • Impetus to petrochemical demand growth in Eastern India

where petrochemical consumption is the lowest.

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B. UTILISATION OF UNCONVENTIONALS FOR CHEMICALS/PETROCHEMICALS

• Acetic Acid from Petcoke Gasification

• Synthetic Ethanol from Petcoke Gasification

• Targeting Olefin Generation from Petcoke/Lean Gas

• Recovery of Styrene from PyGas

C. UTILISATION OF STRANDED MOLECULES FOR SPECIALTIES

• Acrylates/Oxoalcohols/SAP from Propylene

• Cumene/Phenol/IPA from Propylene

• MMA/PMMA from C4’s

• DCPD/Piperlene/HCR from C5’s

• Specialty chemicals currently imported in the country

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D. DEVELOPMENT OF GAS BASED PROJECTS

• Major transition in global landscape for petrochemical feedstock post development of shale gas and availability of cheap feedstock/fuel in US.

• IndianOil examining opportunities for collaboration with petrochemical players for setting up shale gas based, cost competitive Petrochemicals Complexes in US.

• Alternatively possibility of setting up petrochemical plant in India, on a coastal location, being explored by sourcing shale gas from USA – transportation remains a concern

• Objective – to enhance availability of low cost polymers in India

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Agenda









Imperatives for Promotion of Growth

• For balanced growth of Indian economy, measures need to be taken to increase the share of manufacturing in GDP to grow from current 15% to 25% by 2022.

• Key Commercial & Fiscal Issues

VAT/GST: India has one of the highest indirect tax incidences. Indirect Tax reforms required to bring in uniformity in rates across India and also to put a

check on cascading effects of existing Central and State VAT system would be imperative to support investment.

Key petrochemical inputs such as Naphtha should also fall under a national level VAT/GST regime at uniform rate across states, with complete input tax credit.

Duty rationalization going up the petrochemical value chain – Tariff level differntials for each link of the chain should be positive.

• Duality in fiscal structure has resulted in a high cost economy that discourages local investment

• Compelling reasons to remove duty anomalies prevailing in this sector so that

domestic investment becomes financially viable. • FTA’s – De novo re-assessment to facilitate a level playing field for domestic producers

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• Infrastructure

Critical enabler in enhancing competitiveness of industry to be able to produce and distribute goods both for the domestic market and for exports.

As a result of under-developed trade and logistics infrastructure, the logistics cost of the Indian economy is over 13%of GDP, compared to less than 10%of GDP in almost the entire Western Europe and North America.

• Regulatory initiatives

Mandatory standardization of products Promoting energy efficient building codes Aseptic packaging Mandatory unitized packaging of oil and other food products susceptible to

adulteration Overall interest of the economy and the society.

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• R&D Key factor for growth of the chemical industry Typically petrochemicals being a basic chemical industry the main focus will be

on Process optimization to reduce cost and Application Development to boost demand.

Huge amount of effort is also needed towards energy management since energy is a significant element of conversion cost.

• Alternative Feedstock Production from alternate sources like coal, bio-mass etc. These alternative

routes need to be explored with due incentivization from the Government.

• Human Resource Development Sustainable growth is not possible without trained human resource. Training

measures and facilities like Centers of Excellence need to be conceptualised and implemented

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Agenda










• Significant opportunity in domestic and neighboring market

• Petrochemical Projects would aim to achieve competitiveness by: Leveraging existing strengths in refining, marketing & supply chain Employing state of art technologies Building world scale capacities close to low cost feedstock/ demand centres Low cost revamps/Creation of grassroots integrated complexes Exploiting synergies available by integration with refineries

• Emphasis on C3/C4/C5 feed streams available from cracker • Enter into Niche segments in specialty chemical/elastomers • Development of Alternate sources of petrochemical feedstock like

Coal/Petcoke gasification, MTO/MTP, Deep Catalytic Cracking etc. • Explore opportunities for participation in international projects with

competitive feedstock pricing • IndianOil is looking for opportunities.….

Thanks !!

Documents

Realizing the Petrochemical Vision - …petrochemconclave.com/presentation/2015/Mr.SMitra.pdf · Realizing the Petrochemical Vision ... ‘000 bpd •Net planned CDU ... 0.9 0.2 5.0