essar oil – analysts’ meet – may, 2008 meet/100134_20080331.pdf · vodafone essar 45 million...

Essar Oil – Analysts’ Meet – May, 2008

Strictly Private & Confidential

Confidential

2

Disclaimer

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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

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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

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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

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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

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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

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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.

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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

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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

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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

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End to End Infrastructure in Place with Ability to Ramp Up Capacity

SBM

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COT

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Main Refinery

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Water Intake

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Captive Power Plant

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CDU / VDU

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20VBU Treaters


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NHT / CCR

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FCCU


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23Diesel Hydro Desulphurization (DHDS)


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24Aromatics Recovery Unit / Sulphur Recovery Unit (ARU / SRU)


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Dispatch Area

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Truck Gantry

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27Rail Loading Gantry


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Product Jetty

Exploration and Production Business

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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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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

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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

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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

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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.

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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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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.

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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.

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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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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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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

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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 (%)

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Macro Trends: Shift to Cleaner Fuels


Gasoline Sulphur Specs (ppm)

Tighter products specs force higher desulphurization requirements

Diesel Sulphur Specs (ppm)


-

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

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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)


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

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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

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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

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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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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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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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…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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.. 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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n

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

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