Kartikay Sharma, Analyst at Beore, had been invited to speak at the “Argus East of Suez Products Conference 2013” in Singapore. Kartikay spoke on India’s Energy Independence – Role of Upstream & Downstream. This covered - India’s Energy Consumption and Production Pattern, Trends in India’s oil exports and imports, Need and significance for energy independence and India’s Refining scenario and prospects as a future export hub.

1. Indian Products Market, India as an Export
Hub: Myth or reality?
Argus East of Suez Products Conference
2013, Singapore
26th June 2013

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Footprint

3. Agenda
3
Global Crude
Oil Demand
Scenario –
Emergence
of Asia
Rising
significance of
Indian E&P
sector
Trends in
Petrochemicals
& Refinery
sector in India
Rise of
exports of
petroleum
products
Adoption of world
class operational
best-practices and
KPIs for
downstream
Industries

4. Global Oil & Gas Scenario
Asia constitutes a significant part of Global spend, while India constitutes a important
part of Asian spend
4
Oil & Gas Spend in 2012 (in USD billion)
Global ASIA INDIA
Exploration | Development
Upstream
1230 238 80
Refining | Petrochemical 770 160 60
Downstream

5. Emerging Demand Pattern in Asia
China & India are leading the way in consumption of crude oil, as demand in these
regions are forecasted to be 4-8 times the global average
5
Strategic Shift in Demand of Crude Oil
4.1 %
By 2035
Demand
1.9 %
By 2035
Demand
1.2 %
Source: IEA, World Energy Outlook, 2012
By 2035
Demand
1.6 %
By 2035
Demand
1 %
By 2035
Demand
• Asia is steadily emerging as the global leader in crude oil consumption, primarily due to the fast growing
economies like China, India, Indonesia and Middle East Countries.
• Going forward crude oil dynamics would be dictated by the demand patterns in Asia, as it gains
significance both in supply and demand of crude oil.
Global
Demand
By 2035
0.5 %

6. Comparing India’s O&G Sector with Similar Developing
Economies
6
2613
267
559
3835
421
14641.61%
1.92%
4.09%
0%
1%
2%
3%
4%
5%
0
1000
2000
3000
4000
5000
China Brazil India
CAGR(%)
CrudeOilDemand(mtoe)
Crude Oil Demand & CAGR of China, Brazil & India (2011 & 2035)
2011 2035 Growth Rate
China’s economy will mature at a faster rate than India
India’s Growth: Rapid industrialization, increasing purchasing power and regulatory changes
The per capita energy consumption is one of the lowest in India, growing at a very rapid pace
Source: BP Statistical report, Beroe Analysis

7. India’s Energy Consumption – Overview
India's Energy Consumption is an indicator of its status as a developing economy
showing continuous growth.
• .
7
Coal
41%
Petroleum
23%
Solid
Biomass &
Waste
23%
Natural
Gas
8%
Renewable
Sources
5%
Source: EIA, Beroe Analysis
Major Constraints:
• Poor penetration of civil infrastructure
• Bureaucratic inertia
• Development not being even among
regions
Major Drivers:
• Steady Industrial and economic growth
• Easing FDI norms, resulting in increased
investment
• Higher standards of living
• Expected to rise to about 20% by
2025
• Will result in comparatively
cheaper feedstock for
petrochemical
• Usage of Biomass is slowly
decreasing as urbanization is
increasing
• Power sector continues
to dominate the coal
usage
• Having steady growth
due to increased
demand from across
industries

8. Indian Upstream Scenario
8

9. Indian Upstream Sector – On Upward Growth
9
18%
13%
10%
9%6%
6%
17%
17%
4%
India Crude Oil Import - 2012
Saudi Arabia
Iraq
Kuwait
UAE
Iran
Other Middle East
Africa
Western Hemisphere
Other
56%
16%
14%
12%
1% 1%
India Crude Oil Production by Region
Offshore
Gujrat
Rajasthan
Assam/Nagaland
Andhra Pradesh
Other
80% Imported 20% Domestic
0
1000
2000
3000
4000
1980 1984 1988 1992 1996 2000 2004 2008 2012
Thousandbarrels/
day
India - Crude Oil Production vs.
Consumption
Crude Oil Production Crude Oil Consumption
Net Imports
80%
• Rapid Industrialization
• Growing economy
• Easing Government regulations
Increasing Oil Consumption
60% Imports from
Middle East
Source: MoPNG, Beroe Analysis

10. Increase in Exploration Activities
10
56%
23%
17%
3% 1%
Crude Oil Reserves in India - 2008
West Offshore
Assam
Gujrat
East Offshore
Tamil Nadu
45%
22%
18%
11%
4%
Crude Oil Reserves in India - 2009
West Offshore
Assam
Gujrat
Rajasthan
East Offshore
PresentPast
44%
22%
22%
12%
Indian Basins - Status of Exploration
(2012)
Exploration Initiated
Moderately Explored
Poorly Explored
Unexplored
Increased E&P expenditure:
• NELP, CBM Policy, Shale Policy
• Increasing participation of private
players
• Easing FDI norms, leading to global
E&P majors brining in latest technology
• Moving from shallow to deep and ultra
deep-water exploration
Source: DGH, Beroe Analysis

11. Indian Downstream Scenario – Potential Export Hub
11

12. India – Asia's Leading Producer of Products
12
26%
49%
11%
1%
3%
3%
7% Production Pattern
Light Distillates
Middle Distillates
Total Fuel Oils
Lubes
Bitumen
Others
RBF & Losses/inventories
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010 2011
millionTonnes
Petroleum Products Throughput - By
Type
Light Distillates Middle Distillates Heavy Ends
• World’s 6th largest refining capacity
• India has a huge geographical advantage
• The refinery capacity addition recently has
been instrumental in India being a top exporter
in Asia
• New refineries match the global stringent
environmental and quality norms
• Introduction of PCPIR initiative by Government
• In the last 10 years that the change in mix of
products has not changed significantly
• Middle distillates, dominated by diesel and
industrial fuels comprise of about half of the
petroleum products, due to robust economic
growth
• The entry of private players have been
instrumental in this growth
Source: MoPNG, Beroe Analysis

13. Indian Refineries – Key Highlights
13
0
10
20
30
40
50
60
0
500
1000
1500
2000
2500
3000
3500
4000
2004 2005 2006 2007 2008 2009 2010 2011 2012
India Product Carrier Tonnage & No
of Tankers
DWT('000' tonnes) No. of tankers
28%
26%10%
9%
7%
7%
7%
6% 1%
Petroleum Products - Share by
Manufacturer (2012)
RPL IOC
BPCL EOL
HPCL MRPL
JV CPCL
NRL
Nelson Complexity Index amongst the highest
globally
Refineries being integrated to also produce
petrochemicals
Modern refineries being built with large capacities,
leading to competiveness by economies of scale
The products exported in last 6 years have become
1.5 times
Source: MoPNG, Beroe Analysis
In last 3 years India refineries had more than 100%
utilization rates
Private players are using the latest technology in
modern refineries & public players revamping the
older ones

14. Product Consumption Trend in India
14
Power
51%
Transport
17%
Process heat
11%
Feedstock
11%
Others
10%
Product Consumption in India
40%
30%
20%
10%
Commercial
Agriculture
Domestic
Industry
40%
20%
15%
15%
10%Kerosene
LPG
PNG
OtherLiquidFuel
DomesticCoal
Products in bold indicates
subsidized by government
Total Petroleum Products Consumption in India (2012): 510 mtoe
60%
25%
10%
5%CNG
ATF
Petrol
Diesel
Source: MoPNG, Beroe Analysis
Total Under recovery due to subsidy:
USD 30 billion
Gradual deregulation is decreasing
the losses

15. Increasing Exports of Petroleum Products
15
16%
15%
11%
10%8%
7%
7%
6%
20%
India Product Export - 2012
Singapore
UAE
Indonesia
Bahamas
Taiwan
Japan
South Korea
USA
Other
Recent capacity additions
Use of latest technology
Entrance of private players
Investment in port infrastructure
Oil & Gas industry contributes 64% of gross
revenues of Government through Taxes
0
50
100
150
200
250
1980 1984 1988 1992 1996 2000 2004 2008 2012
mmtpa
Indian Petroleum Refining Capacity
0
100
200
300
2004-05 2006-07 2008-09 2010-11
Thousandtons/year
India - Petroleum Products Exports Vs.
Imports
Imports Exports
Net Exports
Excess Capacity
Source: EIA, Beroe Analysis
40 mmtpa
80%

16. Downstream Sector – Risks & Mitigation Methods
16
16
Risk Impact Reason Latest Practice Risks Mitigated
Land Acquisition
 Preventing project delays
 Cost over runs avoided
Quality Concerns  The FEED stage technical
consultants are now
selected on Quality-Cum-
Cost-Basis instead of L1
approach
Procurement
 Cost Savings
 Consolidating of categories
Labor Availability
 Collaborating with agencies
 Proper Training
 Availability of reserve labor
 Cost
 Schedule
 Legal Disputes
 Cost
 Schedule
 Rework
 Costly Material
 Quality Concern
 Quality Concern
 Work Stoppages
 Legal Disputes
 Under Valuation of Land
 State Government
Dependence
 Ambiguity in ROU &
ROW
 Project plans are of poor
quality, leading to scope
changes and variations.
 Most of the public sector
firms source locally
produced materials and
do not consider Chinese
materials.
 Government employment
scheme reduces
migration of labor.
 30 % reduced skilled
labor
 Projects now go out
for tendering with 50-
60% acquisition of
land
 To reduce the overall
cost in house team
works on most of the
projects.
 Most of the sourcing
for executing projects
in India is done
locally.
 Escalation is Indexed
 More labor is
deployed in sites to
complete work.
 10 – 15 % escalation
used as a benchmark
for planning.
Following risks are now being effectively mitigated using the latest practices
Risk Impact Reason Latest Practice

17. KPIs for Oil & Gas Downstream Projects
17
The KPI helps to monitor, rate and report the performance of the supplier in
proactively managing the project.

18. Export Oriented Enablers for Indian Products Market
Low cost of construction and
local sourcing for greenfield &
brownfield projects
Investments in ports
infrastructure along the East &
West coast – Proximity to Gulf
Increasing Investment from
Public & Private Sector
18
Cheap and Easy Availability of
Labor
Low and favorable export duties
on petroleum products
20-25% over capacity of refining
products due to recent capacity
addition

19. 2006-07 (mmtpa)
2012-13F
(mmtpa)
2012-13F Change
Refining Capacity 135 230-245 +95-110
Naphtha Supply 13.5 26-28 +11-13
Trends in Naphtha Usage
Petrochemicals 7
Fertilizers 3 60% Naphtha required for Fertilizer & Power
to reduce by 2.5 mmtpa
Power 2 40%
Net Exports 1.5 Exports will potentially rise
Indian Petrochemical Scenario
19
Projected Feedstock Availability (2012-13)
Note: Naphtha supply assumed 10% of refined products
Per Capita
Consumption
of Plastics
7 kg
45 kg
65 kg
Source: Beroe Analysis

20. Appendix
20

21. Features of the Indian Petrochemical Sector
21
• The close linkages between the
international and domestic market prices
• Adoption of the state-of-the-art
technology and high investment in the
R&D High elasticity of demand
• The country has 5 naphtha, 4 gas
cracker and 4 aromatic production
facilities
• The export duties on petrochemical
products are one of the lowest
• Feedstock availability
• Recent Economic Slowdown
• Capital intensive

22. Drivers & Constraints – Downstream Sector
22
Recovering
Economy:
Peaking out of
Interest Rates
Investment:
Huge allocation of
funds by government
Fiscal Deficit
Issues,
Persistent
Inflation
Increasing Input Costs
(Coal, Diesel, etc.)
End User:
Steady Industrial
growth is supported
by oil and gas
investment
High
Procurement:
To improve quality, Government
planning to introduce
department of procurement
Low
High
Impact
Low
High
Drivers
Restraints
Escalation
The Labour Wage
rate and material
price escalation
Average Project
Planning
Impact

23. Thank You