ECONOMIC ANALYSIS &

INDUSTRY ANALYSIS –

indian refinary

Sachin

ECONOMIC ANALYSIS

▪ The Central Statistical Office estimates that the economy will

grow by 6.2%. RBI expects the same to be 5.7%

▪ Nineteenth largest exporter and the 10th-largest importer 

▪ The IIP (Index of Industrial Production) growth for the April-

December 2013 period was a negative 0.1% while the

manufacturing growth was a negative 0.6%.

▪ Fiscal deficit of US$ 88 billion (4.8% of GDP) in the year 2012–13

▪ Inflation

Wholesale price index and Consumer price index are decreasing from

November 2013 onwards

Consumer price inflation down to 6% by early 2016

Expected growth of WPI to average 5.8% and 5.7% in FY 2014 and FY2015

High prices and sluggish growth presents a gloomy picture at global front

▪ Foreign Trade

Exports declined in Q1 2013

But, it registered a double digit growth in July (11.64%) and October

(13.47%)

Lower Gold demand declined the total imports of the economy

On the lower imports and healthy exports, trade deficit got narrowed,

helped curb CAD

▪ Current Account Deficit

▪ Gold imports and crude imports are major factors

▪ Three times hike in gold import duty to 10% in 2013 and other import

restrictions curb gold import

▪ Current Account Deficit (CAD) dropped to 0.9% in Q3 from 4.9% in Q1 of

2013

▪ Tighter lending norms, weak domestic demand and an increase in exports

have improved current account deficit

▪ Current Account Deficit was its lowest in three years at 2.6% of GDP from -

5.0% in 2012

▪ Passenger vehicle sales were down 5.7% while

commercial vehicle sales were down 18.4% in the April-

December 2013 period on a year on year basis.

▪ January 2014 saw passenger vehicle and commercial

vehicle sales down 7% and 21% respectively year on

year.

INDIAN ECONOMIC DATA

INDUSTRY ANALYSIS - refinery

▪ An oil refinery or petroleum refinery is an industrial process plant where crude

oil is processed and refined into more useful products such as petroleum

naphtha, gasoline, diesel fuel, asphalt base, heating oil, kerosene and liquefied

petroleum gas.

▪ Indian refining industry has done exceedingly well in establishing itself as a

major player globally.

▪ The country’s refining capacity has increased from a modest 62 Million Metric

Tons Per Annum (MMTPA) in 1998 to 215.066 MMTPA at present, comprising of

22 refineries - 17 under Public Sector, 3 under private sector and 2 in Joint

Venture (JV).

GROWTH STRUCTURE OF REFINERY INDUSTRY

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

• 18 out of the total 20 refineries in India belong to PSUs.

• Projected capacity by 2017 is 302 MMTA.

CHALLENGES

▪ Crude Oil Sourcing

– NEW EXPLORATION LICENSING POLICY (NELP)

– 206 oil and gas exploration blocks awarded

– 68 major discoveries reported

– World’s biggest deep water gas discovery made in 2002 (K-G Basin)

– INDIA HYDROCARBON VISION 2025

– 100% exploration coverage of all sedimentary basins by 2025

▪ Margin Improvement

– Input cost reduction

– Product mix development

▪ Environmental Issues

– Reducing GHG emission

– Efficient energy consumption

– Quality upgradation

▪ Funding for New Projects

– Majority of available funds are getting diverted in development of

national infrastructure like power generation, roads, railways, airports

etc

MAJOR PLAYERS

▪ Reliance

▪ BPCL

▪ HPCL

▪ Cals Refineries

▪ Essar oil

▪ Chennai petro

COMPETITION IN REFINERY INDUSTRY

▪ In India the market of refinery is oligopoly.

▪ Price rigidity exists

▪ India has 18 refineries -- 17 in the public sector and one

in the private, with an installed capacity of 127.37

MMTPA.

GOVERNMENT POLICIES

▪ To attract private investment in exploration, the government has

announced that any company investing nearly US$400 million (Rs20

billion) in exploration and production or other specified avenue, would be

eligible for marketing rights for petroleum products in India. This will allow

the international oil majors to enter into the lucrative marketing sector.

▪ In September 1997,the government has decided to dismantle

Administrative Pricing Mechanism (APM) in phased manner. By April, 2002

it will be fully dismantled and prices of petroleum products will be

determined on the basis of import parity system.

▪ No custom duty on imports required for petroleum operations.

▪ No minimum expenditure commitment during the exploration period.

▪ No mandatory state participation.

▪ No carried interest by National Oil Companies

▪ Freedom to sell crude oil and natural gas in domestic market at market related prices.

▪ Biddable cost recovery limit unto 100%

▪ Royalty payment: 12.5% for on land areas,10% for offshore and 5% for deep water areas.

▪ Liberal depreciation provisions

▪ Seven years tax holidays from the commencement of production.

RESEARCH AND DEVELOPMENT

▪ The R&D works in collaboration with esteemed institutions like

Indian institute of Petroleum, Dehradun and Indian institute of

Technology, Chennai.

▪ Optimization and innovative improvements in the process

operations and undertaking exploratory research to find out

new avenues for growth and diversification are the other

objectives of R&D Centre.

▪ R&D center is equipped with facilities for evaluation of crude oil

Strong financial positionAdvanced technology

Professional managementGood location

Political interferenceHigh degree of competition

Gap between demand and supplyChanging government policies

Consequent growth for petroleum products

Locational advantage of being a coastal Refinery

Additional opportunities due to the special Global investment Meet organized by the Government of

Kerala.

Increased competition in the petroleum sector

Reduced availability of Mumbai High Crude oil

Incidence of entry tax in neighboring States

SWOT