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 position Political interference
Advanced technology High degree of competition
Professional management Gap between demand and supply
Good location Changing government policies

SWOT
Increased competition in the petroleum
Consequent growth for petroleum products sector
Locational advantage of being a coastal Reduced availability of Mumbai High
Refinery Crude oil
Additional opportunities due to the special Incidence of entry tax in neighboring
Global investment Meet organized by the States
Government of Kerala.