Upload
beroe-inc
View
535
Download
0
Embed Size (px)
DESCRIPTION
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.
Citation preview
Indian Products Market, India as an Export
Hub: Myth or reality?
Argus East of Suez Products Conference
2013, Singapore
26th June 2013
About us
Beroe is unique in its exclusive focus on procurement. We enable procurement decision making
in Fortune 500 companies by providing access to category specific market intelligence, risk
management and green procurement services across the globe.
INTELLIGENCE
Deep Dive
Category Reports
Cost Models, Price
Forecasts
SOURCE
Category
Dashboards, Best
Practices
China, India, SEA
Eastern Europe,
Western Europe,
N.A
Latin America,
Middle East,
Africa
SUPPLY RISK
Supplier Risk
Assessments
Supply Chain Risk
Enterprise Risk
Management
ETHICAL RISK
Social
Responsibility
Endangered
Species
Illegal
Sourcing
GREEN
Environmental
Footprint
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
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
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 %
Comparing India’s O&G Sector with Similar Developing
Economies
6
2613
267 559
3835
421
1464 1.61%
1.92%
4.09%
0%
1%
2%
3%
4%
5%
0
1000
2000
3000
4000
5000
China Brazil India
CA
GR
(%
)
Cru
de
Oil
Dem
an
d (
mto
e)
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
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
Indian Upstream Scenario
8
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
Th
ou
sa
nd
ba
rre
ls /
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
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
Present Past
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
Indian Downstream Scenario – Potential Export Hub
11
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
mill
ion
To
nn
es
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
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
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
Other Liquid Fuel
Domestic Coal
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
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
mm
tpa
Indian Petroleum Refining Capacity
0
100
200
300
2004-05 2006-07 2008-09 2010-11
Th
ou
sa
nd
to
ns/y
ea
r
India - Petroleum Products Exports Vs. Imports
Imports Exports
Net Exports
Excess Capacity
Source: EIA, Beroe Analysis
40 mmtpa
80%
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
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.
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
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
Appendix
20
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
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
Imp
ac
t
Low
High
Drivers
Restraints
Escalation
The Labour Wage rate and material price escalation
Average Project Planning
Imp
ac
t
Thank You