Challenges for an Exporting Refinery

Reliance Industries Limited

P Raghavendran

President (Refinery Business) New Delhi 3rd October 2008

India:from a Net Importer to Exporter

1998-99 2001-02 2007-08SKO (2100) (391) (2352)HSD (10231) 2860 10222MS (251) 2406 3593

LPG (1722) (659) (1927)

Figs in KTPA

With the commissioning of Reliance’s first Refinery in 1999, India turned from a major importer to a significant

exporter of HSD, MS & ATF

Gulf of Kutch: Emergence as a Refinery Hub

Refining Hub Production Demand Imports Exports Supply Zone

Rotterdam 38 18 27 47 Europe, US 

M iddle East 189 171 34 52 Asia Pacific, Europe

Singapore  29 5 17 39 Asia Pacific

Gulf of Kutch 51 6 - 45 Asia Pacific, Europe, Africa

Gulf of Kutch emerges as the largest source of HSD, MS & ATF for inter regional global trade with the commissioning of Reliance’s Second Refinery

Figs for MS. HSD, Kero/ATF in MMTPA

Global Traded Volumes

Global

Trade

J amnagar

Production

% of global

trade

MS 119 13 11%

HSD 220 24 11%

ATF 50 5 10%

Figs in MMTPA

The two refineries at Jamnagar become the single largest source of MS, HSD and ATF for global markets

Shrinking of the Globe

Hydroskimming Vs Cracking ~ 35 USD/MT

Hydroskimming Vs Coking ~ 75 USD/MT

Distance to Markets (Nautical Miles)

Product freight at different Parcel Sizes (USD/MT)

  40 KT 80 KT 120 KT 250 KT

2000 20 13 12 6

4000 31 20 18 10

6000 42 27 25 14

8000 53 34 32 17Note : TC rates at 3 yr Charter

Inter regional movement from a coking or cracking refinery, moved in a larger vessel will be able to compete

with local HSK refineries

Gasoline

Gas oil

ATF

Travails of an Exporting Refinery

Market Competing

Refineries

Competitive Disadvantage

Europe, US & Africa

Middle East Lower Marginal Cost (Opportunity Value) of Natural Gas for ME Refinery

Far East & Australia

Singapore Lower freight for Crude for Singapore vs products for Jamnagar Lower freight for crude vs product freight ex Jamnagar Tariff and Non Tariff Barriers

Deficit Markets

Local

Reliance believes it can compete with the Best in the World despite the above handicaps.

Disadvantage vis-à-vis PSUs in the Indian home market

NIL access to Domestic Market (TPP vs. Export Realisation and double taxation on MS and HSD)

No Upstream assistance or Oil Bonds to meet cash losses on domestic sales

Denial of access to cross country pipeline or Airport Hydrants even against payment of charges

Due to huge losses, Reliance forced to withdraw completely from the domestic market for MS & HSD

Assistance sought from GoI

Removal of Residual Export Restrictions Facilitate exchange of streams amongst

Refineries for value addition with taxes only for removal into Domestic tariff area

Eliminate double taxation for Domestic removals

GoI Support crucial for developing India as a successful Export Hub.

Back Up Slides

North America

Middle East Africa Asia

Latin America FSU

Med Europe

NW Europe

2006 (48) - - (1) 0 (0) 13 28 2007 (49) - - 3 0 (0) 13 30 2008 (45) - - 6 3 (0) 15 31 2009 (49) - - 10 3 3 16 33 2010 (50) - - 14 3 3 16 32 2011 (39) - - 16 3 3 16 32 2012 (42) 2 - 9 3 3 17 33

Source: ESAI report for RIL April 2007

MMTPA

Global Gasoline Trade flows

Euro IV + Euro V

RIL gasoline targeted at North America will compete with European gasoline. RIL gasoline targeted at Middle East will compete with the Med gasoline. RIL gasoline targeted at Oceania

will compete with Singapore and the Far East gasoline surpluses.

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Source: ESAI report for RIL April 2007

MMTPA

Global Gasoil Trade flows

North America

Middle East Africa Asia

Latin America FSU

Med Europe

NW Europe

2006 (1) 14 (15) 3 3 35 (17) (9) 2007 (3) 13 (16) 6 5 33 (17) (8) 2008 (3) 13 (17) 10 5 32 (18) (9) 2009 1 13 (17) 18 4 33 (19) (9) 2010 1 12 (18) 13 3 32 (20) (11) 2011 4 15 (19) 16 3 31 (22) (12) 2012 5 20 (20) 25 3 31 (23) (13)

Jamnagar would be competing with the surpluses from Middle East and the FSU for the deficits of 10 ppm diesel in the Med and the ARA. There are serious doubts with regard to the timing of the required additional hydrotreating facilities in these regions in order to meet the EU specification

requirements providing an opportunity for Jamnagar to meet these deficits for a fair period of time.

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Source: ESAI report for RIL April 2007

MMTPA

Global ATF Trade flows

U.S.Middle East Africa Asia Rest

Med Europe

NW Europe

2006 (7) 13 1 3 1 (3) (12) 2007 (5) 13 1 (2) - (3) (13) 2008 (4) 14 1 (2) - (4) (15) 2009 (3) 14 1 (3) - (4) (14) 2010 (3) 15 1 (3) (1) (4) (15) 2011 (2) 16 1 (3) (1) (4) (16) 2012 (2) 18 1 (4) (2) (4) (17)

ATF from Jamnagar will compete with sources in the Middle East for deficits in Europe and the US while Africa and rest of Asia are roughly in balance.

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