BUSINESS GROWTH PLANS Of ONGC Group

BUSINESS GROWTH PLANSOf

ONGC Group

Presentation toHon’ble Secretary (P&NG)

30.07.2004

Benchmarking with global players

Upstream Midstream Downstream

E&P LNG NG Refining Power Petchem

BP

Shell

Exxon-Mobil

(limited)

ONGC (limited) (inhouse) (Limited)

ONGC – Power Background

Already Producing = 1000 MW

Gas Based

Part Sent to Grid

From 1984 onwards

ONGC’s Gas Business - 15%

ONGC’s Value Added Business - 15%

ONGC’s Refining - 20%

Chemical / Petrochemical Business

Naphtha (Paraffinic Aromatics)

C2-C3 URAN (Supplies to IPCL)

Rich Gas (Supplies to Gail)

Gas Processing Uran Hazira

LPG Since 1981

NGI

Kerosene

Objectives of Integration

To capture higher values in Product chain

To provide more stable revenue / margins

Benchmarking with global players

Upstream Midstream Downstream

E&P LNG NG Refining Power Petchem

BP

Shell

Exxon-Mobil

(limited)

ONGC

(limited) (inhouse) (Limited)

Strategy

SynergisticGroup Level

Integration Global Level

Based on

• existing resources

•Existing experiences/

relationships

-Nationally

- internationally

Based On

• proven global directions

• in line with market

requirements

• if required in association with top global players

Leading to

Being the lowest cost producer

• For atleast seven years

Being one of the top market player in various segments

A World of OpportunitiesPower

Relative Power Consumption

Country Per Capita Consumption (KWH)

US 8747

Australia 6606

China 939

Global Average 768

India 401

Power SectorPresent Demand – Supply

Scenario

All in MW

Country / State

Demand Supply / Generation (Gas based

%)

Surplus (Deficit)

All India 109000 96900 (10.7%)

(13100)

Karnataka 6440 4140 (Nil) (2300)

Tamil Nadu 8000 7200 (6%) (800)

Projected Power Scenario Tamil Nadu

Current Deficit

Deficit 2006-2007

Deficit 2014-2015

800 2000 7800

Key Drivers: -

• Rapid industrialization in couple of centres e.g. Coimbatore, Guddalore.

• No new generation projects on the anvil.

Central Electricity Act 2003

• Separation of Generation, Transmission and Distribution

• Power producers can market directly on Open Access

• Fiscal incentives for Mega power Plant (> 1000 MW)

A World of OpportunitiesPetrochemicals

Petrochemicals – Per Capita Consumption

Country KGs

Taiwan 99

US 90

S. Korea 69

Singapore 64

Japan 116

UK 80

Malaysia 49

China 10

India 3.8

Domestic – Production / Consumption Present Scenario

Capacity Production

Consumption

Polymers 4.20 3.95 4.06

Synthetic Fibre

2.00 1.62 1.67

Fibre Intermediate

2.35 2.38 2.41

Surfactant 0.31 0.35 0.32

Synthetic Rubber

0.11 0.06 0.12

Total 6.62 6.00 6.17

CARG %

06-07/00-01 11-12/06/07

LLD/HDPE 14 12

PVC 10 10

PP 18 13

PS 15 15

PX 8 8

LAB 8 6

Demand Projection of Major Commodity Polymers - INDIA

1176 1025

25862767

4557

6330

0

1000

2000

3000

4000

5000

6000

7000

2001-02 2006-07 2011-12LLD/HDPE PP

PBDIT as % of operating income

Company 97-98 98-99 99-00 00-01 01-02 2-03

Crude Refining Companies

1 Indian Oil 4.92% 6.28% 6.61% 4.22% 6.66% 8.15%

2 BPCL 10.21%

7.21% 5.57% 4.09% 5.49% 5.10%

3 HPCL 4.47% 3.78% 5.38% 7.15% 8.89% 5.79%

4 Reliance Petroleum

10.77%

7.77%

Petrochemical Companies

1 Reliance 21.74%

21.39%

18.18%

19.16%

18.05%

2 IPCL 26.78%

24.45%

23.48%

15.73%

23.61%

A World of synergiesONGC Group

A World of Synergies

ONGC• Hazira (around 1.4 MMTpa of high aromatic naphtha)• Uran (around 300,000 Mtpa of high grade paraffinic naphtha)Petronet LNG• LNG Terminal• Extraction of C2-C3 (10 MMTpa) and further integration• Dahej SEZMRPL• Highly paraffinic naphtha (500,00 Mtpa)• Pleating in aromatics• Easily upgradeable for higher valuechain• High bottomsOVL Sudan operations• Nile blend based MRPL kerosene – a gold mine for LAB• Precursors for additional projects in Sudan and neighbouring

countries

A World of Synergies

Mangalore Port All weather Port with 15 Meter Draft & Break Water MRPL already has two dedicated jetties One more jetty for LNG imports committed Plant Locations in / around Port Area committed

MHB Pipeline Possibility of connecting west-coast to east – coast

exists, catering to growing market demand of all southern states

Operationalisation of Opportunities

(through synergistic integration) At two base hubs Mangalore Dahej

Base

Dahej

Mangalore

Composition of LNG

Lean C1 Power / Fertilizer

Rich C1 Power / Fertilizer

C2 Petrochem

C3 Petrochem / LPG

C4+ LPG/petrochem

ONGC Business Growth Plan at Dahej HUB

1. C2/C3 & LPG extraction project2. Basic Petrochemical Complex3. 1000 MW Mega power plant (C1)4. Dahej Special Economic Zone Development

project

C2-C3 Extraction – linked to PLL’s LNG terminal at Dahej

LNG being in very cold liquid state (-160°C), to save energy and attendant cost thereof, it is desirable to extract C2, C3 & C4+ components in liquid state itself

C2-C3 & LPG extraction at Dahej Design

Capacity & Product quantities

Feed capacity LNG Products 10.0 MMTpa

1. LPG 634 KTPa

2. C2-C3 1035 KTpa

3. Lean LNG 8.2 MMTPA

4. No. of stream days / pa 330

5. No. of trains Two

C2-C3 & LPG extraction at DahejProject economics

PARAMETER Capacity 10.0 MMTPA

CAPEX (Rs Crores) 1127

IRR – Before Tax - After Tax

15.4%12.0 + %

Break Even Point 38.6%

Financial Appraisals by SBI Caps

IRR Post Tax 24.85% Increase in Project cost (10%) 23.01% Increase in FOB Cost of LNG

o by 10 cents 23.18%o by 30 cents 19.65%

Increase in OPEX by 5% 23.5% Increase in C2C3 price to Rs. 10500/MT

37.64% Max Range in all scenarios 14.41% to

37.64%

Basic petrochemical Complex at Dahej

Project Economics

CAPEX (Rs Crores) 8933.40

IRR – On Total Capital

Before Tax 17.5%

After Tax 16.1%

IRR – On total Equity

Before Tax 22.8%

After Tax 21.0%

Payback period on Total Capital 5.1 yrs

Break Even point 36.4%

Stage wise – Value addition

Stage Basic cost of Prodn

Addl. Con. Cost

Total Cost

Avg. Sale Price

Gross VA%

1 C2-C3 8000 N.A. 8000 ~ 8000 Nil NA

2 Ethylene Propylene

- 7000 15000 20000 5000 33%

3 Polymers (AV)

- 6000 21000 ~ 41000

20000

95%

Dahej Special Economic Zone Project

Govt. of Gujarat already promulgated an ordinance. All projects to be located within Dahej SEZ. Benefits expected to ONGC: Land at reasonable and competitive rate Single Window clearance Significant Tax / Fiscal benefits Exemption of Sales Tax and Other Taxes

Marketing Plan envisaged from SEZ

Approx. 50% of Petrochemicals to be exported through tie-up arrangement with technology provider.

Approx. 50% to entrepreneur within SEZ for manufacture of Petrochemical products for export market.

Balance, if any, for domestic market

1000 MW Power Plant at Dahej

PLANT CAPACITY 1000 MW

FEED LNG REQUIVREMENT (C1) 1 MMTPA

PLANT CAPACITY – PHASE-I 300 MW

INTERNAL CONSUMTION 144 MW

PROJECT COST (Rs Cr) 3200

Projected demand-supply gap 2006-07

5000 MW

Base

- Dahej

- Mangalore

Identified opportunities

1. LNG based chain

2. MRPL & ONGC associated projects

Base

Mangalore

LNG Based Chain

Why Mangalore?

The Port All weather port with 15 meter Draft & Break water Suitable location for LNG jetty available Land and RoW available as required ONGC already own two Oil berths New Mangalore Port Trust is supportive

Why Mangalore?

The Special Economic Zone (SEZ)

Exempt from Duties and Taxes : savings on CAPEX

Single-window clearance for all requirements

Land available for downstream plants

Karnataka Government is supportive

Why Mangalore?Interlard

• No Petrochemical manufacturing unit• No immediate competition for Gas• 3 Approved Power projects (Mangalore, Ennore, Bidadi) to be assigned• Demand for Power, Fuel & Feedstock, CNG• ONGC established in Mangalore

LNG Based Business Plan at Mangalore

LNG SOURCING AND REGASSIFICATION PLANT Initial discussion held with M/s Ras Gas, LNG supplier to PLL. Ras Gas team interacted with Karnataka Govt. officials to assess demand. Initial discussion with XXX held. Demand assessment from MRPL, MCF, GMB, PPN power plants consolidated. estimated phased requirement of LNG:

5 MMTPA Q1/2008 10 MMTPA Q4/2008

• NMPT agreed to allocate a jetty and land to ONGC for degasification plant, C2-C3, power plant.• Estimated cost of the plant Rs 5000 cr.

LNG Based Business Plan at Mangalore

C2/C3 recovery and Basic Petrochemical Complex

Plant capacity similar to Dahej i.e. C2/C3 and LPG recovery plant of 2 x 5 MMTPA capacity

Above C2/C3 & Naphtha from MRPL to be used as feed for petrochemical complex.

Estimated cost: C2,/C3 & LPG recovery Rs 1100 cr. Petrochemical complex Rs 8933 cr.

Power Plants

In

Southern India

LNG Based Business Plan at Mangalore

1445 MW LNG Based Power Plant at Mangalore

Peak Power Plant deficit in Karnataka 2000 MW No gas based power plant in Karnataka Karnataka govt. proposal to set up 1500 MW imported coal based power plant at Mangalore could not be firmed up. 1445 MW power plant proposed in Mangalore SEX area which will consume 1.5 MMTPA RLNG. Estimated cost Rs. 4624 cr.

LNG Based Business Plan at Mangalore

Pipeline transportation of RLNG

Merchant sale of RLNG proposed to various consumers enroute:

Mangalore – Bangalore – Bidadi – Ennore Mangalore – Kochi Mangalore – Goa

• Estimated cost Rs. 2000 Cr.

LNG Based Business Plan at Mangalore

1100 MW power plant at Ennore

Govt. of Tamil Nadu earlier invitation to private sector for setting up 1100 MW power plant at Ennore could not fructify. Govt. of Tamil Nadu keen to assign to project to ONGC & agreed to extend payment security mechanism for power sales. Power plant to be located within Ennore SEZ area Estimated Cost Rs. 3500 cr.

Alternative Possibility of LNGTerminal At Ennore

If Sufficient LNG from different sources is available, a separate LNG Re-gasification terminal at East Cost of India (possibly at Ennore) with SEZ can be considered.

(Capacity : around 5 MMTPA)

Cost of Power with LNG Based Plant at Ennore with LNG Supply

from Mangalore

Parameters

JCC (sbbl) 18.00 21.00 24.00

R-LNG Price ($/MMBTU) 3.10 3.61 4.00

Pipeline Charges ($/MMBTU) 0.25 0.25 0.25

Delivered Price ($/MMBTU) 3.35 3.86 4.25

Fixed Cost of Power (Rs./Kwh) 0.61 0.61 0.61

Mariable Cost of Power (Rs./Kwh)

1.13 1.30 1.44

Total Cost of Power (Rs./Kwh) 1.74 1.91 2.05

Levelized Cost of Power (Rs./Kwh)

1.83 2.01 2.15

LNG Based Business Plan at Mangalore

Mangalore SEZ Development Project• Govt. of Karnataka already notified the area in

and around Mangalore• Govt. of Karnataka also agreed for ONGC to be

co-promoter of SEZ• All ONGC projects proposed to be located within

SEZ to avail various tax and fiscal benefits.• MOU with govt. of Karnataka in this regard is

finalized.

Additional petrochemical units at Mangalore linked to MRPL and

OVL’s Sudan crude

Paraffinic / LAB Complex

Background -1

MRPL feed crude mix leads to unique opportunity in Kerosene – very rich in Normal paraffins.

ONGC Nile Blend – 40% NP versus average 18 to 20%

ONGC Bombay High – 23 to 25% NP. Iran mix – 25% NP.Unique Global advantage on production cost - To start with -

High Value Addition

Price (US $ / MT)

Approx. Conversion Costs

(US$ / MT)

Kerosene 170

Normal Paraffins

480 – 550 75*

LAB 830-850 110** Including catalysts amortized

Preliminary Budget Economics

Year 2004

Total Investment (Rs. Crores)

1400

Kerosene Price (Rs./MT) 11,094

LAB Selling Price (Rs./MT) 46,000

HNP Selling Price (Rs./MT) 27,600

Gross Margin (Rs. Crores) 364.71

Simple Payback period (years)

~3.84

IRR 14.8

Further petrochemical units linked to MRPL. MRPL fuel upgradation (Euro-III/IV) and ONGC – Hazira

Naphtha

Aromatic Complex

Total Estimated Aromatics at MRPL

Feed to reformer 22500 bpd (at full capacity) Aromatic Product from reformer (81 vol%)

18250 bpd. This through available technologies, using A7

and A9 aromatics, ,can produce approximately 0.55 MMTPA of pX + Bz.

Total estimated aromatics at ONGC – Hazira

Heavy Aromatic naphtha of 11000 bpd (440 KMT pa) available

Highly competitive markets for Naphtha – low margins at present.

Can produce 240000 Mtpa of Px and 70000 Mtpa of Bz.

Additional Aromatics

Opportunities Emerge

While Meeting Euro 3 and 4 Norms

At MRPL Mangalore

Final Product Pattern

Para Xylene 1.03 MMTpa

Benzene 0.27 MMTpa

Total Aromatics 1.30 MMTpa

Preliminary Budget Economics

Case1 Case2 Case3 Case4

CAPEX (Rs. Crores) 0.000 790 1801 2686

Gross Margin (Rs. Crores)

1255 1673 2312 2728

GRM ($ bbl) 3.33 4.44 6.13 7.23

IRR% - 21.5 22.4 21

Simple Payback Period yrs

- 2.5 2.5 2.6

Case1: 11 MMTPA; ISOM & Mixed Xylenes in placeCase2: 11 MMTPA + PFCCUCase3: 11 MMTPA + Aromatic complexCase4: 11 MMTPA + PFCCU + Aromatic Complex