essar oil – analysts’ meet – may, 2008 · essar oil limited – an integrated energy company...
TRANSCRIPT
Essar Oil – Analysts’ Meet – May, 2008
Strictly Private & Confidential
Confidential
2
Disclaimer
Confidential
3
Table of Contents
Refining ExpansionRationale
Project parameters
Project Cost & Financing
Management Team
Market Overview & Operation Performance
Essar Group Overview
Essar Oil Limited Refining Business Overview
Exploration & Production Business
Marketing and Distribution Business
Essar Group Overview
Confidential
5
Essar: Amongst the Leading Indian Business Houses
Essar Global Limited
Essar Shipping & Logistics Limited
Essar Steel Holdings Limited
Essar Energy Holdings Limited
Essar Communications Holdings Limited
EssarPower Holdings
LimitedEssar
Projects Limited
Essar Steel
4.6 MTPA IntegratedSteel Plant (‘ISP’)
Essar Steel - Hazira
4 MTPA ISP *
Essar Steel Orissa
6 MTPA Pellet Plant*
Algoma Steel, Canada
4.0 MTPA ISP
Minnesota Steel, US•6 MTPA Pellet Plant*•1.4 biliion tonnes Iron Ore Reserves
P T Essar Indonesia0.4 MTPA cold rolling Complex
Essar Steelhypermart
Essar Oil
Refining
Refinery Complex - 10.5 MMTPA
Expanding capacity to 34 MMTPA
Oil Retail Marketing
1274 Retail Outlets
Exploration & Production Blocks:
▪ Ratna, India ▪ Mehsana, India▪ Raniganj, India▪ Assam▪ Madagascar (1)
▪ Nigeria (1)
▪ Vietnam(1)
Vodafone Essar
45 million subscribers
Telecom Tower & Infrastructure
3,000 towers
Essar Telecom Retail
Chain of over 750 retail outlets
Aegis - BPO
Amongst the largest BPO’s in India, with 9 centers in India and 9 centers in USA
BPL Mobile
1 Million subscribers
Kenyan Mobile License
Essar Shipping
Fleet of 24 vessels, DWT of 1.3 mn
Vadinar OilTerminal
Terminal facility of 33 MMTPA – Liquid Cargo being expanded to 96 MMTPA
Essar Oilfields A drilling company with 13 rigs
Essar Logistics
Owns and operates transshipment assets
Essar Bulk Terminal
Dry bulk port facilities
Essar Power / Bhander Power Existing
1015 MW combined cycle
ExpansionEssar Power (MP) Limited – 1200 MW Essar Power (Gujarat) Limited – 1200 MW Essar Power Jharkhand Limited –1200 MW
Vadinar Power (2)
• Power Generation Capacity of 77MW being expanded to 1200 MW in two phases.
Essar Construction
▪ Engineering▪ Fabrication▪ Construction
Fully geared to execute turnkey EPC jobs in India and Overseas
Global Supplies (UAE)FZE Global procurement company
(1) Under transfer(2) In the process of owning a majority stake of upto 74%* Projects under implementation
Confidential
6
With A Long-Term Growth Vision For The Energy Sector
Vision to be a fully integrated energy group with global footprint
Setup Indian retail network Setup Indian retail network of 5,000 outlets and of 5,000 outlets and establish footprint in establish footprint in
important export marketsimportant export markets
Crude Oil Crude Oil -- 30% of 30% of refining capacity refining capacity
Gas Gas –– 100% of group feed 100% of group feed stock requirementstock requirement
Target refining capacity Target refining capacity ––1 million bpd with state of 1 million bpd with state of
the art technologythe art technology
Significant Presence throughout hydrocarbon
value-chain
Confidential
7
Essar Oil Limited – An Integrated Energy Company
Essar Oil Vadinar Ltd.
• Capacity Expansion Train 2 – 16 to 34 MMTPA (Train – II)
Refining Marketing & Distribution
Network
Exploration & Production
Blocks
• Develop & Maintain well spread out distribution network
• Presently 1274 retail outlets
• 7 Terminals & 9 Depots • Ratna• Mehsana• Raniganj• Assam
Essar Oil Limited
Existing (EOL)
• 10.5 MMTPA Refinery
• Capacity Expansion from 10.5 to 16 MMTPA (Train-I)
* Under transfer
IndianEssar Exploration & Production Limited
(Mauritius)*
• Madagascar• Vietnam
EEPL - Nigeria
• Nigeria Block
Essar Energy Holding Limited
Essar Oil: Refining Business Overview
Confidential
9
Strategically Located World Class Refinery
● Commenced Commercial Production (from May 1, 2008) and operating at well above rated capacity of 10.5 mmtpa● Designed as a cracking refinery utilising FCC as major conversion technology with complexity of 6.1● Location advantage at Vadinar, Gujarat● Internationally acclaimed technology from process licensors (ABB- Lummus, Axens, Shaw Stone & Webster, Stork Comprimo, Merichem) ● Currently producing Euro II/III Products, processed about 67 million barrels of crude till 30/4/08● Significant tax benefits – Income Tax & Sales Tax● Home market demand (PSU and private refiners) providing strong market for our products
Refinery is up and running with key captive infrastructure in place
Operational Highlights
Euro II / III Markets Globally
Suppliers
Customers
Vadinar
Domestic Demand
Confidential
10
Existing Refinery – Configuration
January, 2008Axens, France3.7
Diesel Hydrodesulphurisation Unit (DHDS)
6
December, 2007ABB2.02
Amine Regeneration Unit7
February, 2008 Jacobs422 tpd
Sulphur Recovery Unit8
2.9
0.9
1.6
1.9
10.5 /7.2
MMTPA
Shaw – Stone & Webster, USA
Axens, France
Axens, France
Axens, France
Open Art (ABB Lummus)
Technology Licensor
December, 2007
February, 2007
February, 2007
January, 2007
November, 2006
Commissioning Date (Trial)
Fluid Catalytic Cracking Unit (FCCU)5
Continuous Catalytic Reformer (CCR)4
Naphtha Hydrotreating Unit (NHT)3
Visbreaker Unit (VBU)2
Crude & Vaccum Distillation Unit (CDU)/ (VDU)
1
UNITS.N.
Confidential
11
Refinery Trial Run Operations
● Processed about 67 mln barrels of crude since inception
● Processed about 21 types of crude with a wide variety of assays: Gravity, Sulphur content & TAN
● No unplanned outages of the Crude Unit.
● Secondary Units ( FCCU, DHDS, Sulphur Block ) are operating stably beyond name plate capacity.
● Utilities have operated reliably throughout the period and have supported the increase in throughput.
● Dispatch facilities have ensured smooth evacuation of products even at higher rates
● Lost Time Injury Frequency Rate during first year was 0.2 per million hours, which is world class.
Refinery currently operating at 12.5 MMTPA
Confidential
12
Tax Benefits
Income Tax Benefit100% income-tax exemption on refinery profits for 7 years under section 80-IB
Sales Tax/ VAT Deferral Benefit Gujarat High Court vide its Order dated April 22, 2008 has restored the benefits by
extending the time limit for production to 02/04/2007
Further GHC directed that the following conditions shall be stipulated provided the final
eligibility certificate is issued within one month from the date of receipt of judgment :
Benefit of deferment of Sales Tax / VAT on Sales made upto 14th August, 2020
No refund of Sales Tax / VAT already paid by the petitioner
Reduction of Rs. 700 crore from the total value of incentive
Based on above, estimated Sale Tax Deferral is approx. USD 2 billion
Confidential
13
Township
Refinery
Essar Construction
Vadinar Power Plant
Essar Steel
Essar Shipping
..And Ability to Leverage Synergies with Group Companies
Vadinar Oil Terminal Limited
SBM Port Handling Tank Farms
Confidential
14
End to End Infrastructure in Place with Ability to Ramp Up Capacity
SBM
Confidential
15
End to End Infrastructure in Place with Ability to Ramp Up Capacity
COT
Confidential
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End to End Infrastructure in Place with Ability to Ramp Up Capacity
Main Refinery
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End to End Infrastructure in Place with Ability to Ramp Up Capacity
Water Intake
Confidential
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End to End Infrastructure in Place with Ability to Ramp Up Capacity
Captive Power Plant
Confidential
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End to End Infrastructure in Place with Ability to Ramp Up Capacity
CDU / VDU
Confidential
20VBU Treaters
End to End Infrastructure in Place with Ability to Ramp Up Capacity
Confidential
21
End to End Infrastructure in Place with Ability to Ramp Up Capacity
NHT / CCR
Confidential
22
FCCU
End to End Infrastructure in Place with Ability to Ramp Up Capacity
Confidential
23Diesel Hydro Desulphurization (DHDS)
End to End Infrastructure in Place with Ability to Ramp Up Capacity
Confidential
24Aromatics Recovery Unit / Sulphur Recovery Unit (ARU / SRU)
End to End Infrastructure in Place with Ability to Ramp Up Capacity
Confidential
25
End to End Infrastructure in Place with Ability to Ramp Up Capacity
Dispatch Area
Confidential
26
End to End Infrastructure in Place with Ability to Ramp Up Capacity
Truck Gantry
Confidential
27Rail Loading Gantry
End to End Infrastructure in Place with Ability to Ramp Up Capacity
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28
End to End Infrastructure in Place with Ability to Ramp Up Capacity
Product Jetty
Exploration and Production Business
Confidential
30
E&P Assets
Madagascar *● 100% interest in 3
exploration blocks
Nigeria *● 63% interest in offshore
block OPL 226
Ratna● 50% joint operators interest
in Ratna & R series blocks ● Certified 2P Reserves of
161 mmboe
Gujarat● 70% operatorship interest
in Mehsana block CB-ON/3● Certified 2P Reserves of
2.7 mmbbl of oil in one discovery alone
Assam● 100% interest in 2
exploration blocks
West Bengal● 100% interest in RG(East)-
CBM-2001/1 block in Durgapur, WB
Strong E&P footprint with plans to expand Globally* Under transfer
● 100% interest in Offshore block 114.
Vietnam *
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31
E & P - Performance
180 Sqkm of 3D seismic acquired and 10 wells drilled in block CB-ON/3, Mehsana. Currently producing from one field with certified 2P of 2.7 mmbbls and 2 additional discoveries under appraisal.
Produced and sold more than 17,000 bbls of crude oil.
15 core holes drilled and coal tested for permeability, gas content, etc. in CBM block in Raniganj.drilling of 15 test wells and acquisition of 120 LKM of seismic under progress.
Spent about US$ 75 Mn on Exploration & Production during financial year 2007-08.
Committed work programme in the current phase of existing blocks is to the tune of US$ 290 Mn of which US$ 130 Mn will be spent in current financial year. Work programme includes:
G&G evaluation and seismic programmes in Assam, Madagascar, Nigeria & VietnamDrilling of wells in Raniganj and MehsanaDevelopment of Ratna fields
Scanning and evaluation of E&P opportunities Globally, focusing on Middle East, South East Asia, Central Asia, Africa, Australia, China, Indian-Sub Continent, South America, Eastern Europe and Russia.
Marketing and Distribution Business
Confidential
33
0
2
4
6
8
10
Canad
aUSA
Saudi
Arabia
Austra
lia
Russia
France
South
Korea
German
y
Japa
nU.K
.
Spain Ita
ly
Ukraine
South
Africa
Iran
Mexico
China
Brazil
Indon
esia
India
Worl
d
India: Amongst the world’s fastest growing energy consumers
Per Capita Consumption of Energy (kgoe)In per-capita consumption India ranks 20th
Source: IEA
Petroleum Products Demand
Source: Government of India and Crisil
0
20
40
60
80
100
120
140
160
1997
-9819
98-99
1999
-0020
00-01
2001
-0220
02-03
2003
-0420
04-05
2005
-0620
06-07
E20
07-08
E20
08-09
E20
09-10
E20
10-11
E
(Mto
n)
LPG Gasoline Naphtha Kerosene Diesel Fuel Oil Others
Petroleum Demand Supply trends
Source: Government of India and CrisilRefining Capacity excluding committed exports
Source: Government of India and EOL estimate.
Demand & Supply of OilConstrained supply builds pressure on additional capacity...
50
70
90
110
130
150
170
190
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
milli
on to
nnes
pa
Consumpion Refining Capacity
30 30 40
80
120
70
120
170190
360
0
50
100
150
200
250
300
350
400
1990-00 2001-02 2006-07E 2011-12E 2024-25E
(mill
ion
tons
)
Production+Oil Equity Demand
Confidential
34 Designed to optimize profits as well as balance short and long term objectives
Oil Distribution and Marketing
Own Supply Points spread all across India
16 supply points - 7 terminals and 9 depots 73
8
19
30
2
1
2
187
53
30
69
35
44
163
1103
3
33
53
93
1
59
1
175
8
37
1
First private company in India to enter petro-retailing sector (2003) through a franchisee model
Existing platform can be rapidly ramped up after emergence of favorable regulatory policy
Presence across India with 1,274 retail Outlets
Existing government subsidies for transportation fuelsunfavorable for development of retail marketing
Focus on exports / OMC & bulk domestic sales in prevailing pricing regime
MoU with some Oil Companies for product offtake and infrastructure sharing
Market Overview & Operational Performance
Confidential
36
Key Driving factors
FY 2007-2008 Nymex WTI Price
50
60
70
80
90
100
110
120
130
140
Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08
Period
Pric
e ($
)
● Crude oil prices touched a record high of $135 in May’08.
● Price outlook for the FY 2008-2009 remains bullish but extreme volatility cannot be ruled out.
● Geopolitical developments in the Middle East and supply disruptions in Nigeria.
● The weakening US dollar and economic uncertainty added to market volatility.
● Signs of healthy demand in China, India and Middle East.
● Speculation in the futures market fueling price rally.
Confidential
37
Product Cracks Scenario
Product Cracks on Dubai
-35
-25
-15
-5
5
15
25
35
45
55
Apr
il-07
May
-07
June
-07
July
-07
Aug
ust-
07
Sept
embe
r-07
Oct
ober
-07
Nov
embe
r-07
Dec
embe
r-07
Janu
ary-
08
Febr
uary
-08
Mar
ch-0
8
Apr
il-08
May
-08
Period
$/bb
lSing Gas Oil DubaiJet DubaiNaphtha DubaiMogas 92 RON DubaiFuel Oil - Dubai
Peak Driving season in U.S pushes Mogas-Dubai cracks higher.
Structural Shift
1. Middle distillate crack soar to historic highs
2. Gasoline crack below middle distillate during peak summer driving period
3. Fuel oil crack falls to historic lows
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38
Product Market Overview….
● The gasoline margins have been negatively impacted by the high level of inventories in the US and arbitrage flows into Asia from Europe.
● Naphtha crack in the Asian market was weighed down as higher Naphtha prices led to weakening regional demand, owing to petrochemical units switching to other alternative feedstock's like liquefied petroleum gas.
● The middle distillate market sentiment was underpinned by tight regional supply due to seasonal refinery maintenance schedules, higher demand and imports from China. In addition to gasoil, the jet / kero market also remained strong, largely on back of high demand and stronger prices.
● In the Fuel oil market arena, the crack and the cash market continued to weaken amid higher supply and lack of demand from the Asian market.
Confidential
39
Product Market Overview
● Gasoline stock-draws during peak driving season in the US along with the tight distillate markets in Europe and Asia should support the product market, lifting refining margins across the globe.
● The current sentiment prevailing in the product market may support crude oil prices further, providing support for crude prices as the peak driving in U.S approaches.
● Meanwhile, with limited switch in the refinery mode to favor middle distillate production, the current tightness in middle distillates components might persist, supporting the higher prices in the market over the coming months.
● The persistent mismatch between the product demand pattern and the regular refinery outages is further expected to put upward pressure on light crude prices.
To sum up, we can expect bullish refinery margin in FY 08-09.
Confidential
40
Comparative Yearly Financial Results
( Rs in Crore)
Sr.No. Particulars Year ended Year ended 31.03.2008 (Unaudited)
31.03.2007 (Audited)
1 Net Sales / Income from operations 562.42 473.982 Other Income 14.37 10.393 Total Income (1+2) 576.79 484.374 Expenditure
a) (Increase)/ Decrease in Stock in trade 98.92 (96.86)b) Purchases of Trading Goods 492.36 566.70c) Employees Cost 2.29 12.32d) Selling and distribution expenses 4.90 35.41e) Depreciation / Amortisation 2.52 4.51f) Other Expenditure 17.47 14.32g) Total expenditure 618.46 536.40
5 Interest 2.01 2.526 Profit / (Loss) before tax (3)-(4+5) (43.68) (54.55)7 Tax Expenses
a) Income Tax ( Including deferred tax) (2.09) 12.35b) Fringe Benefit Tax 0.06 0.59
8 Profit / (Loss) for the period (6-7) (41.65) (67.49)
Refining Expansion ( 10.5 MMTPA to 34 MMTPA )
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42
Refining Sector: Rationale
Strong Macro Dynamics and Consolidation
Sustained Demand
Capacity Considerations
Capacity growth is expected mostly in India, Middle East & ChinaDeveloped world expected to invest primarily in upgrading existing refineriesGlobal refining capacity stretchedAgeing global assets
Strong global economic growth driven by BRIC nations fuelling energy demandShift to heavier and sourer crudeClean fuel norms & compliance costsIncreased dependence on complex refining capacities
Global demand to grow from 83 mmbpd in 2005 to 117 mmbpd in 2020Product demand for lighter distillates and cleaner fuelsPotential anchor market in India
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43
Macro Dynamics: Oil Demand Appears Robust
Developing nations such as India and China amongst the lowest oil consumption / GDP nations.
Source: IMF, CIA factbook, 2007
Developing Nations
Developed Nations
World
US
UK
Thailand
Sweden
RussiaMexico
Korea Japan
Italy
Indonesia
India
Germany
China
Canada
Brazil
Australia
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
0.0 10.0 20.0 30.0 40.0 50.0 60.0
GDP per capita (US$ '000)
Oil
Con
sum
ptio
n P
er c
apita
(bbl
/day
per
'000
peo
ple)
Taiwan
Confidential
44
Macro Dynamics: Global Crude Oil Availability Trends
Source: OPEC World Oil Outlook 2007
Global Crude Oil Availability Trends (2005 – 2020)
Global crude oil basket is likely to become heavier and sourer, thus favouring higher complexity refineries
33.0
33.1
33.2
33.3
33.4
33.5
33.6
33.7
2005 2010 2015 2020
API G
ravi
ty (D
egre
es)
1.10
1.15
1.20
1.25
1.30
1.35
1.40
1.45
Sulphur Content (%
)
API Gravity Sulphur (%)
Confidential
45
Macro Trends: Shift to Cleaner Fuels
Source: OPEC World Oil Outlook 2007
Gasoline Sulphur Specs (ppm)
Tighter products specs force higher desulphurization requirements
Diesel Sulphur Specs (ppm)
Source: OPEC World Oil Outlook 2007
-
100
200
300
400
500
600
2005 2010 2015 2020
ppm
North America Latin America Western Europe
FSU and E. Europe Asia Pacific Middle East
Africa
-
500
1,000
1,500
2,000
2,500
2005 2010 2015 2020
ppm
North America Latin America Western Europe
FSU and E. Europe Asia Pacific Middle East
Africa
Confidential
46
Capacity Trends: APac / Middle East Leading Growth
Source: BP Statistical Review of World Energy 2007
1996 – 2006 Regional Capacity Increases
Asia Pacific and the Middle East are leading refining capacity growth
Regional Capacity Additions (2007F – 2020F)
Source: OPEC World Oil Outlook 2007
2.9%
2.2%
1.1% 1.1%1.0%
(0.1%)
(0.5%)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
AsiaPacific
MiddleEast
Africa NorthAmerica
South &CentralAmerica
Europe &Eurasia
1996
- 20
06 C
apac
ity In
crea
se C
AG
R (%
)
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Asia-Pacific
MiddleEast US &Canada
Africa LatinAmerica
FSU EuropeD
istil
latio
n C
apac
ity (m
bbl/d
)
Existing Projects - total 7.4mbbl/d Additional Requirements - total 5.6mbbl/d
Confidential
47
Capacity Trends: Global Refining Capacity Stretched
-
20
40
60
80
100
120
140
160
Jan-97 Nov-98 Sep-00 Jul-02 May-04 Mar-06 Jan-08
Bre
nt (U
S$/b
bl)
Rebased GRM ($/bbl) Brent ($/bbl)
Source: Broker Research – (September 2007 – January 2008), Factset
Utilization and Refining Margins heading North
Positive Correlation between oil price and global average refining margin also likely to contribute
Global outlook for returns in refining remains Positive
-
2
4
6
8
10
12
1993 1996 1999 2002 2005 2008E 2011E
Glo
bal R
efin
ing
Mar
gin
($/b
bl)
86%
88%
90%
92%
94%
96%
98%
100%
102%
Utilization R
ates (%)
Utilization Rate Global Average Margin
Mid-Cycle
Confidential
48
Capacity Trends: Ageing Global Capacities
Source: Based on data from BP Statistical Review of World Energy 2007
~90% of current global refining capacity is above 25 years of age
10%
1%
5%
21% 21%
43%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
<10 Years 10-25 26-30 31-35 36-40 >40
Age of Refining Capacity (Years)
% o
f Glo
bal R
efin
ing
Cap
acity
Confidential
49
Demand Trends: Home Market Bolstering Demand
Petroleum Products – Domestic Demand Supply
Note: Excludes committed export capacities
IOCL
HPCL
BPCL
HPCL
IOCL
Kochi
IOCL
CPCL
IOCL
Bongaigaon
IOCL
IOCL
Numaligarh
CPCL
MRPL
IOCL
Reliance
ONGC
Capacity MMPTA
33.0
12.0
9.7
1.0
3.0
8.0
6.0
2.4
13.7
9.5
6.0
7.5
1.0
7.5
12.0
5.5
0.7
0.1
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0
2001
1999
1998
1996
1993
1993
1982
1975
1974
1965
1965
1964
1963
1962
1957
1955
1954
1901
50
60
70
80
90
100
110
120
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
milli
on to
nnes
pa
Consumpion Capacity
Ageing Refinery Profile
● Domestic demand coupled with demand from refiners could offer potential market for Essar
● Domestic capacity comprises ageing refineries which leaves new and complex refiners in a sweet spot
Source: Ministry of petroleum
Source: Petroleum planning and analysis cell
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50
India Emerging As The Next Global Refinery Hub
High complexity resulting in premium product while processing cheap opportunity crude, low capex and low opex driving competitiveness
Current Hub
US Gulf Coast●Current US capacity of
857 MMTPA●Gulf coast home to
~50% of all US refining capacity
●Accounts for significant share of all US refined products exports
Netherlands●Current capacity of
63 MMTPA● Integrated
petrochemicals plants and refineries
●Current total Europe and Eurasia capacity of 1,236 MMTPA
Middle East●Leveraged their crude supply / reserves to
emerge as a strong export hub ●Current capacity of 354 MMTPA●Significant exports with a large part of exports to
Asia & Far East
Singapore●Export Hub●Refining capacity: 60
MMTPA●Key Markets: ASEAN
countries, Japan and China
India●Over 90 MMTPA refining capacity at a single
location at Vadinar●Modern high complexity refineries with Euro IV
and Euro V product capabilities●Amongst the lowest capital and operating costs●Export hub anchored with growing regional
marketNote: Assumes 1 bbl oil = 0.1345 tonnes of oil Source: BP Statistical Review of World Energy June 2007, Oil and Gas Journal
Refining Expansion: Project Parameters
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52
Refinery Details
Upto Euro V / US Specs/CARBSUpto Euro IIIProduct Grades
2.0%
35.5
BaseRefinery
2.97%Sulphur %, Avg.
24.8API (Density), Avg.
Total Capacity post Expansion
Particulars
Designed to handle high acidity crudes upto 2 TAN
Ramping up Capacity to 34 MMTPA with Complexity of 12.8
12.8 Complexity,34.0 MMTPA
6.1 Complexity,10.5 MMTPA
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53
Euro V90%
Euro IV10%
Euro V61%
Euro II11%Euro IV
28%
..With Capability to Produce 16 MMTPA Euro V Products
6.6
11.3 11.2
7.2 5.3
5.43.42.9
7.66.0
8.1
28.2
5.0
31.235.9
24.7
● Largest producer of EURO V MS & HSD from a single refinery location● Euro V/ US specs grade maximised at 90% in MS pool ● Euro V grade maximised at 61% in HSD pool ● Swing flexibility between light & middle distillates.● Flexibility to produce petrochemical feed stock
10.5 MMTPA * 34 MMTPA
Diesel: 12.2 MMTPA
Gasoline: 9.6 MMTPA
Gasoline
Diesel
Aviation Turbine
Fuel & Loss Residue
Others
Kerosene
Note: Products as % of total
** Expected and could change from time to time depending on market dynamics
PropyleneLPG
Fuel Oil Pet Coke
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54
…and Leverage Light Heavy Differential
● Since January 2007 the monthly average differential between Bonny Light and Maya has been between $13.47/bbl and $20.12/bbl
● Light heavy differential expected to remain high
Ability to Process Wide Range of Crudes
Light / Sweet30%
Medium / Sour 40%
Tough10% Heavy Sour
20%
Tough75%
Light / Sweet
0%
Medium / Sour15%
Heavy Sour10%
Leverage Processing
34
10.5
Crude Processing Capacity (MMTPA)
35.5
24.8
API (Av.)
And Leverage Light Heavy Differential
Source – Bloomberg
30405060708090
100110120130140
Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08
Valu
e - U
S$ /
bbl
Bonny Light Arab Light Arab Heavy Maya
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55
.. Leading to High GRM Potential
Note: GRM’s are for a 6 month period ending September 2007 for Indian Refiners and 9 month period ending September 2007 for Global Refiners Source: filings and investor presentations
Positive correlation between Complexity and Gross Refining Margin* Expected
R2=0.8
Essar – 10.5 MMPTA (6.1)
Essar – 34 MMPTA (12.8)*
3.0
5.0
7.0
9.0
11.0
13.0
5.0 7.0 9.0 11.0 13.0 15.0
GRM ($/bbl)
Com
plex
ity
R-9
R-7
R-8
R-2
R-4
R-6R-5
R-3
R-1
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Expansion Scheduled to Come On-stream in 2010
Activity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Refinery Expansion10.5 to 34 MMTPA
Basic Engineering
Detailed Engineering
Procurement of Long lead Items
Delivery of Equipment/ Material
Construction/ Erection
Mechanical completion
Oil in
2007 2008 2009 2010
UOP Mandated Development Train I Optimization
Train II Expansion
● Processing heavy, sour acidic crude
● Maximize Euro V products● Petchem Flexiblity ● Minimize energy use
● UOP developed LP model and carried 300 LP runs
● Final configuration for Train I and II
● 10.5 MMTPA to 16.0 MMPTA
● Revamps, modification and addition of new process units
● 18 MMTPA capacity● Similar units repeated● Integration with Train I
Project is On Track to Complete Expansion as per Schedule
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On Track with Support from World Class Partners
Basic Engineering
Detailed Engineering Procurement Construction
● Order placed with Managing Licensor UOP and other leading players.
● Overall Basic Engineering Completion Status - 98% - Balance by Q2 2008
● LLI Datasheets generated on high priority to kick start procurement
● Fixed price contract with Essar Engineering
● Overall Detailed Engineering Completion Status – 33% - Balance by Early Q2 2009.
● Overall Plot Plan Layout frozen & Unit wise layout of most units including OSBL completed – fronts and drawings released to commence civil work
● Fixed price contract with Global FZE & Essar Construction
● 87% of enquiries for the equipment and bulk materials already floated
● All LLIs to be ordered by Q2 2008.
● 75% of Balance Equipment/Materials also to be ordered by Q2 2008
● Fixed price contract with Essar Construction
● Site already mobilised● Site Grading
commenced● Foundations for Main
E-W Piperack commenced
Leverage ESSAR project execution capabilities & existing vendor relations for rapid execution of expansion
Engineering
Construction
Refining Expansion – Project Cost & Financing
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Current financing structure provides adequate flexibility for future requirements and growth capital
Planned to be Financed through a D/E of 1.3:1.0
Key Highlights● Configuration,technology,schedule & cost budgets certified by Lenders Technical consultant● Fixed priced contracts placed spanning EPC &PMC● Competitive Capital Cost compared to upcoming other refineries● Capital infusion of US$ 2bn by promoters in two tranches● Fresh debt of upto US$ 4.5 – 5 bn to be raised through ECB and INR Loans● In principle commitment from lenders – US$ 4.3 bn● Debt Equity Ratio within 1.3
Estimated Project Cost for ExpansionCost Head US$ milllion (%)
Land & Buildings 50 1%
Plant & Machinery 4,614 77%Project Management & Engineering Fees 246 4%
Preliminary & Preoperative Expenses 105 2%
Financing Cost 656 11%
Contingency 329 5%
Total Project Cost 6,000 100.00
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Low Capital Cost
22892108
2261
1339 13331123 1037
0
500
1000
1500
2000
2500
R1 R2 R3 R4 R5 R6 EOLUpcoming Refineries
USD
/bpd
/Com
plex
ity
(34MMTPA)
Amongst the lowest capital cost, to provide competitive advantage
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Refinery Business: Set to Deliver Strong Value
Strategic Location, Proximity to Materials, Access to End
Markets
Strategic Location, Proximity Strategic Location, Proximity to Materials, Access to End to Materials, Access to End
MarketsMarkets
One of the Largest Single Location Refineries Globally –Economies of Scale Benefits
One of the Largest Single One of the Largest Single Location Refineries Globally Location Refineries Globally ––Economies of Scale BenefitsEconomies of Scale Benefits
High Complexity, Cost Competitiveness,
Product Flexibility and High GRM Potential
High Complexity, Cost High Complexity, Cost Competitiveness, Competitiveness,
Product Flexibility and High Product Flexibility and High GRM Potential GRM Potential
Refining Industry Outlook Remains Strong
Refining Industry Outlook Refining Industry Outlook Remains Strong Remains Strong
India Emerging as a Global Refining Hub
India Emerging as a Global India Emerging as a Global Refining HubRefining Hub
Leverage Existing Project Execution Capabilities and
Infrastructure
Leverage Existing Project Leverage Existing Project Execution Capabilities and Execution Capabilities and
InfrastructureInfrastructure
Building an Environmental Friendly “Green Merchant Refinery”
Management Team
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Experienced Management Team
Senior ManagementNaresh K NayyarManaging Director
Chartered Accountant and IIM, Ahmedabad Alumnus33 years of experience in Oil & Gas sector including development of multi billion dollar project, new markets and global operations in Oil & Gas IndustryWas on the Board of reputed companies like IOC, ONGC, IBP and Petronet LNG
Suresh MathurWhole-time Director
Chartered Accountant with over 40 years of experience mainly in Oil & Gas sectorWas the CEO & MD of Petronet LNG Limited, which under his leadership set up India’s first LNG import and regasification terminal of 5 MMTPA capacity at Dahej and was Director Finance at IOC
S. R. AgrawalHead of the E&P division
Chartered Accountant with over 25 years experience in oil & gas
Eion TurnbullHead – Refinery
Over 27 years of experience in operations, research and technology and projects
Sourcing Refining E&P MarketingMr. ThangapandianHead - Marketing
Over 25 years of experience in the Oil and Gas industry in Sales & Marketing
Adi ShroffCIO – System Engineer
Over 36 years of IT experience
V SureshCFO – Refinery
Qualified Chartered Accountant & Company SecretaryOver 25 years experience across IB/ consultancy/ Industry across verticals
Mohan KumarHead – HR
Post Graduate from XLRICertified instructor for Blake and Mounton’s GRID Management programs
Raj VermaHead - Buss. Development
47 years of experience in Indian oil industry
Strong and Experienced Management Team in Place
Sheikh ShaffiCompany Secretary
Over 30 years of experience in Legal, Secretarial, Compliances
Radha MohanHead – IST
B.Tech – Chemical Engineer, over 23 years of experience in International trading, supply & operations with IOC & Reliance Ind.
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Strong and Experienced Project Implementation Team
Gordon ClarkeProject Director – PMC Group
B.Sc. (Hons) from Salford UniversityOver 31 years of rich experience, 9 years as Project Director at Foster Wheeler and 4 years as Head of Central Planning at Shell BruneiWorked with LASMO, Kerr McGee Oil, Davy Offshore Ltd., Heerema/Lewis Offshore, Shell Expro
B. K. MukherjeeTechnical Head
Chemical Engineer with an illustrious experience of more than 38 years with IOCL as Executive Director of Gujarat Refinery for 2 years & the Executive Director of Haldia Refinery for 3 yearsResponsible for completion & commissioning of Base Refinery after restart in 2005
Shyam BagrodiaPresident – Refinery Expansion
B. Tech (Hons.)- IIT, Kharagpur ; MBA from University of Rochester, NY 37years experience in Chemical, Cement, Edible Oil and Petroleum Industries; including setting up of Green Field ProjectsWorked with the refinery since inception; managed Commercial, Financial & ABB
Shailesh SawaCFO – Refinery Expansion
Chartered Accountant & Cost AccountantMore than 25 years of experience into Corporate Finance having worked with Gujarat Ambuja and SEBI
Eugene SchmelzerConsultant - Technical Services
B.S.(Chemical) from Case Institute of Technology and a certified Six Sigma Green BeltRecently retired as Director of Engineering after a career that spanned more than 38 years of rich experience with UOP overseeing Refinery process technology, R&D and process design engineering areas
Robert KuiperiSr. Vice President - Commercial
Master of Law from University of Leiden,Holland30 years of experience with ABB Lummus Global where he was Director for the Commercial & Legal department
D.K. ShuklaHead – Refinery Execution (ISBL)
PG Diploma MBA from I.I.Sc, Bangalore and B.Tech (Chemical) from HBTI, Kanpur30 years experience and has previously worked with Reliance Industries as a Sr. VP leading the process engineering for 6 yearsWorked earlier with Engineers India Ltd., MW Kellogg (Houston), BOC Gases
D.K. JhaHead – Refinery Execution (OSBL)
MBA from IIPM, Gurgaon and B.Tech (Chemical) from IIT KanpurOver 25 years of experience including Reliance Industries where he was heading Economics Planning & Scheduling for 3 yearsChief Operator for UOP at NNPC Nigeria and has worked with IOC, Barauni Refinery
Albert RolnikConsultant - Refinery Expansion
MBA from Northwestern University and B.S. (Chemical) from Carnegie Mellon University38 years of rich experience, has retired as Project Director - Engineering from UOP and has overseen detailed engineering
Proj
ect L
eade
rshi
pPr
ojec
t Exe
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Mr. Dean SonntagConsultant - Refinery Expansion
BS ChE from Purdue University, USA37 yr of experience in design, construction and operation of petroleum refining and chemical facilitiesPreviously worked with Worley Parsons Engineers, Egypt Ltd. UOP, Safety Kleen Corporation, Amcec Corporation, Davy McKee Inc., United Conveyor Corporation, and Copeland Systems
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Investor/Media contacts
Analysts contactsMr V Suresh CFO, Essar Oil LimitedTel #: 66601237/98197-30288e-mail: [email protected]
Mr Sudip RungtaHead – Strategic Initiatives, Oil & Gas, Essar GroupTel #: 66601406/98197-30243e-mail: [email protected]
Media contactMr Mohan NairGeneral Manager- Corporate Communications, Essar GroupTel #: 66601321/98339-45779e-mail: [email protected]
Thank You