ANTI QUE STOCK BROKI NG LI MI TED 26 December 2013 | || || 1 FROM THE RESEARCH DESK

Amit Rustagi
+91 22 4031 3434
amitr@antiquelimited.com
Sabri Hazarika
+91 22 4031 3447
sabri.hazarika@antiquelimited.com
SECTOR UPDATE
Oil & Gas
Indian oil demand growth slows down to 10 years low
Latest data implies YTDFY14 oil demand growth at just 0.5% YoY
India's YTDFY14 oil products demand growth has slowed down to 0.5% YoY against 10
years CAGR (FY03-13) of 4.2% as per PPAC's latest Nov-13 data. This significant slowdown
can be attributed to 0.7% YoY decline in diesel demand which has a 43% share. Further
kerosene, naphtha and FO witnessed negative growth of 4%, 8% and 22% YoY respectively.
LPG consumption growth has also slowed down to 1.8% YoY in YTDFY14 against 10 years
CAGR of 6.4%. In the last 10 years, India's oil demand was weak only in FY06 and FY11
when it grew by 1.4% and 2.3% respectively. At other times demand growth ranged from 3-
7% with FY13 witnessing a robust 6% YoY growth with diesel demand up 6.7%.
Price hikes, improved power availability and general slowdown dent diesel demand
Oil demand growth was impacted as general slowdown and seasonal factors affected
industrial fuel sales. Diesel demand was hit by lower consumption from commercial vehicles,
improved power scenario and shift by industrial customers to alternate fuels due to price
hikes. Bulk diesel deregulation also lowered consumption in cement and mining industries
which switched over to fuels like petcoke. Other industrial fuels like FO and naphtha also
witnessed similar weak demand as prices rose due to sharp rupee depreciation. LPG was
affected by weeding out of multiple connections through the de-duplication exercise and cap
on number of cylinders per connection. However petrol demand saw robust 10% growth
aided by 2 wheeler sales, though de-stocking/re-stocking by retailers has been a major
factor on reported numbers.
Latest estimates point to flat oil demand in FY14
PPAC in its latest FY14 forecasts revised oil products demand growth down to 0.3% YoY
against earlier estimate of 4.1%. While the estimate is largely in line with YTDFY14 trend,
higher than expected petcoke consumption is likely to be offset by lower FO demand. We
however expect some demand uptick going forward from winter demand, reversal of bulk
diesel deregulation and election led demand in 4QFY14. IEA in its latest monthly report has
also lowered CY13 demand growth estimate to 1% YoY against almost 3% 6 months ago.
The agency expects growth to pick up to ~3% in CY14 due to a better economic scenario.
Continuing diesel price hikes to rationalize consumption pattern, entail savings
We believe continuing monthly diesel price hike has also contributed to rationalization of
demand pattern among customers. Industrial users have switched over to market priced
alternative fuels as seen in case of petcoke which has clocked sharp demand growth in
FY13/YTDFY14. We estimate that with every 1% diesel demand growth in FY14 YoY, under-
recoveries would rise by INR7bn. Against 6.7% demand growth recorded in FY13, potential
saving in FY14 due to flat diesel consumption would be INR47-48bn. LPG and kerosene
consumption slowdown/decline has also helped in controlling under-recoveries to some extent.
Indian oil demand growth: YTDFY14 demand growth slows down to 0.5% YoY
(%) FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 YTDFY14
Petrol 8.0 4.3 4.5 4.8 7.4 11.3 9.0 13.9 10.7 5.6 5.0 10.0
Diesel 0.3 1.2 6.9 1.4 6.7 11.1 8.5 8.8 6.8 7.8 6.7 (0.7)
Kerosene (0.3) (1.7) (8.2) 1.6 (0.4) (1.5) (0.7) 0.0 (4.0) (7.8) (8.8) (4.4)
LPG 8.1 11.4 10.1 2.1 3.8 10.7 1.5 7.7 9.1 7.1 1.6 1.8
Naphtha 1.8 (0.8) 17.9 (12.9) 13.9 (4.3) 4.6 (27.1) 5.3 5.1 9.5 (8.2)
FO/LSHS (1.9) 1.6 4.6 (5.3) (1.6) 0.8 (1.0) (7.6) (7.2) (13.7) (17.7) (21.9)
ATF 0.4 9.4 13.3 17.3 20.7 14.1 (2.6) 4.6 9.7 9.0 (4.8) 4.6
Bitumen 15.6 13.0 (1.0) 5.1 9.2 17.6 5.3 3.9 (8.1) 2.3 0.8 8.6
PetCoke 42.6 12.2 8.8 57.5 10.4 9.4 3.6 6.8 (24.4) 23.2 65.1 18.3
Total 3.7 3.5 3.6 1.4 6.7 6.8 3.6 3.2 2.3 5.0 6.0 0.5
Source: PPAC, Antique
ANTI QUE STOCK BROKI NG LI MI TED 26 December 2013 | || || 2 FROM THE RESEARCH DESK
PPAC has lowered FY14 demand growth estimate from 4.1% to 0.3%
YoY (%) FY14E R.E FY14E O.E 8MFY14A
Petrol 8.6 4.5 10.0
Diesel 0.0 6.3 (0.7)
Kerosene (4.6) (4.0) (4.4)
LPG 1.6 3.9 1.8
Naphtha (12.0) 0.6 (8.2)
FO/LSHS (15.9) (10.0) (21.9)
ATF 1.9 4.2 4.6
Bitumen 4.3 0.8 8.6
PetCoke 11.8 14.2 18.3
Total 0.3 4.1 0.5
Source: PPAC, Antique
IEA has lowered Indian oil demand growth for CY13
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
IEA India CY13e YoY growth 2.8% 2.8% 2.6% 1.5% 1.4% 1.0%
Source: IEA, Antique
Bulk diesel consumption: Currently at 10% of total diesel sales
Source: PPAC, Antique
Share of oil products in total consumption (FY13)
Source: PPAC, Antique
PPAC's revised estimate
is in line with YTDFY14
numbers
IEA lowered India's CY13
oil demand growth
estimate from 2.8% to 1%
in the last 6 months
Diesel accounts for bulk
of total oil products
consumption at 43-44%
followed by petrol and
LPG at 10% each and
naphtha at 8%
17%
15%
10%
0%
5%
10%
15%
20%
25%
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Share of bulk diesel (%)
Diesel
44%
Naphtha
8%
PetCoke
6%
Kerosene
5%
LPG
10%
Bitumen
3% ATF
3%
FO/LSHS
5%
Petrol
10%
Others
6%
ANTI QUE STOCK BROKI NG LI MI TED 26 December 2013 | || || 3 FROM THE RESEARCH DESK
Recent price trend of petrol, diesel, ATF and non subsidized LPG
Source: IOCL, Antique
Recent price trend of LSHS, naphtha and FO
Source: BPCL, Antique
Long term petrol and diesel prices
Source: IOCL, Antique
Monthly diesel price
hikes continued, while
other products also
witnessed price rise due
to rupee depreciation
Petrol and diesel prices
up ~2.5x in the last 10
years
0
10
20
30
40
50
60
70
80
90
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1000
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Petrol (INR/ltr) Diesel (INR/ltr) ATF (INR/ltr) Non. Sub. LPG (INR/cy) - RHS
0
10000
20000
30000
40000
50000
60000
70000
80000
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LSHS (INR/mt) Naphtha (INR/mt) FO (INR/mt)
29
32
37
42
45
44
47
44
53
65
68
69
19
20
24
30
31 31
33 33
38
40
45
51
0
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80
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Petrol price (INR/ltr) Diesel price (INR/ltr)
ANTI QUE STOCK BROKI NG LI MI TED 26 December 2013 | || || 4 FROM THE RESEARCH DESK
Under-recoveries on diesel, kerosene and LPG
Source: PPAC, Antique
Gross under-recoveries
for FY14 estimated at
INR1,438bn as per
industry estimates
10.5
36.2
543
0
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15
20
25
30
35
40
45
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HSD/ltr (LHS) SKO/ltr (LHS) LPG/cy (RHS)
ANTI QUE STOCK BROKI NG LI MI TED 26 December 2013 | || || 5 FROM THE RESEARCH DESK
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