haldia refinery project appraisal report

Sub: Detailed Feasibility Report on "Installation of Facilities for Improvement in

Diesel Quality and Distillate Yield (Hydrocracker) Project at Haldia Refinery.

This Project Evaluation Committee of the Board considered the subject item in its

meeting held on 12th November, 2005.

After deliberations, the Project Evaluation Committee recommended the proposal with

the following resolution to the Board for consideration and approval:-

"RESOLVED THAT approval of the Board be and is hereby accorded to the proposal for

installation of facilities for Hydrocracker Project at Haldia Refinery at an estimated cost

of Rs. 1876 crore (as of July, 2005)."

xxxxxxxxxxx

Sub: Detailed Feasibility Report on "Installation of Facilities for Improvement in

Diesel Quality and Distillate Yield (Hydrocracker) Project at Haldia Refinery.

1.0 Background

1.1 The Board of Directors in its meeting held on 29th November 2000 had accorded 'in-

principle' approval for setting up of facilities for improvement in Diesel Quality and

Distillate Yield at Haldia Refinery at an estimated cost of Rs. 1518 cr. inclusive of foreign

exchange component of Rs. 357.8 cr. based on April 2000 prices, subject to obtaining

Environmental Clearance from MoE&F. The Board had also sanctioned and amount of

Rs. 44 cr. inclusive of a foreign exchange component of Rs. 18 cr. for carrying out pre-

project activities pending Environmental Clearance.

Three major process units, vis., Once Through Hydrocracker Unit (OHCU), Hydrogen

Generation Unit (HGU) and Sulphur Recovery Unit (SRU) were envisaged in the subject

proposal.

Environmental Clearance for the project was received in May'02.

1.2 Subsequently, the Board in its meeting held on 24th April'03 approved the road-map

to meet the quality requirements of HSD & MS and suggested deferment of completion

of Hydrocracker Project at Haldia till January 2010 so as to match with the quality

requirements of April 2010 onwards. Hence, all activities relating to the project were kept

on hold.

1.3 As against the installed crude processing capacity of 6.0 MMTPA

at Haldia Refinery, the operation of last three years has been as

follows.

Particulars 2002-032003-042004-05

Crude Intake, MMTPA 4.51 4.52 5.41

Distillate Yield (excluding LOBS), %w63.23 63.76 62.26

LOBS, TMTPA 124 154 187

(%w on crude) (2.75) (3.41) (3.45)

FO, TMTPA 723 777 961

Bitumen, TMTPA 310 313 415

Fuel & Loss (%w) 10.02 9.98 8.90

As can be seen from above, the distillate yield in the refinery is about 62-63% w on

crude (without LOBS), which is on lower side and needs improvements.

2.0 Quality Road-Map

2.1 As per road-map approved by the Board for quality improvement, the quality of

MS/HSD would have to be upgraded from BS-II/Euro-III levels to Euro-III/Euro-IV levels

by April 2010.

2.2 The refinery would be able to meet the above requirements in respect of MS after

commissioning of the on-going MS Quality Upgradation Project at Haldia. The facilities

are likely to be commissioned by October 2005.

2.3 For meeting HSD quality requirement beyond April 2010, it is

necessary to initiate activities for installation of facilities for HSD

quality improvement. Comparison of key HSD specifications

conforming to the three emissions norms are tabulated below:

Specification BS-II

Eqv.

Euro-III

Eqv.

Euro-IV

Eqv.

Density @ 150C, kg/M3 820.860 820.845 820.845

Sulphur Content, ppmw (max) 500 350 50

Cetane No. (min) 48 51 51

Distillation, 95% vol. (0C max) 370 360 360

Polycyclic Aromatic Hydrocarbons (PAH), %mass

max.

No spec 11 11

2.4 Accordingly, necessary facilities are required to be set up to meet the future

specification of HSD.

3.0 Options for Diesel quality improvement

3.1 The improvement in diesel quality to Euro-III/Euro-IV emission norms can be

achieved by installing a Diesel Hydrotreating (DHDT) Unit. Since the refinery has to

produce Euro-III/Euro-IV conforming diesel w.e.f. April 2010, facilities such as DHDT,

HGU, SRU, GT and other offisite facilities shall be required to be installed at the installed

crude processing capacity, i.e., 6.0 MMTPA.

3.2 The objective of producing HSD meeting Euro-III / Euro-IV equivalent quality

requirements can alternatively be met by installing OHCU and associated facilities, 'in-

principle' approval for which was obtained from the Board in Nov. 2000. This option has

been studies in detail in the present context at a crude throughput level of 7.5 MMTPA

and would facilitate higher crude processing and better distillate yield in addition to

improvement in diesel quality to Euro-III/Euro-IV emission standards.

3.3 Accordingly, a detailed study of the following cases has been carried out:

Installation of DHDT and associated facilities at 6.0 MMTPA (Base Case)

Installation of OHCU and associated facilities at 7.5 MMTPA (Project Case)

3.4 The project cost for DHDT case has been estimated as Rs. 1175

cr. as against Rs. 1876 cr. for OHCU case based on study by the

consultant M/s Lurgi India. A comparison of major facilities envisaged

in the two cases is furnished below:

S. No.Unit Capacity

DHDT CaseOHCU Case

1. OHCU, MMTPA -- 1.7

2. DHDT, MMTPA 1.0 --

3. HGU, TMTPA 18 75

4. AAU/ARU, TPH 77 272

5. SWS, TPH 6 25

6. SRU, TPD 1x60 2x80

7. CDU-II revamp, MMTPA-- from 2.5 to 4.0

4.0 APPROACH FOR TECHNO-ECONOMIC EVALUATION (INTEGRATED

PLANNING MODEL)

The above cases (DHDT and OHCU) were evaluated by integrating with Global IOC

Refining, Pipeline and Marketing networks based on Integrated Planning (IP) Models of

Corporate Optimization (Report attached as Appendix).

4.1 To carry out the above economic evaluation, following Integrated Planning (IP)

Models were developed:

a. Haldia Refinery with DHDT and Crude processing at 6 MMTPA (Base Case)

b. Haldia Refinery with OHCU and Crude processing 7.5 MMTPA (Project Case)

4.2 In all the above models following common considerations were made:

Panipat refinery at 15 MMTPA capacity (P-15)

Koyali refinery at 13.7 MMTPA with Residue Upgradation Project

Mathura with capacity limit of 8.4 MMTPA having Diesel Hydrotreater (DHDT)

and MS Quality Improvement (MSQ) Project in place.

Barauni with capacity limit of 6.0 MMTPA

Chennai with capacity limit of 10.0 MMTPA

North East Refineries operating at existing level

KBPL on crude service

Paradip-Haldia crude Pipeline

Koyali-Dahej Pipeline

Branch lines from KVSS to Ajmer and Chittorgarh

Chennai-Bangalore Pipeline

Panipat-Tikrikalan Pipeline and

Koyali-Ratlam-Itarsi-Khapri with branches to Indore and Nishatpura (with rail

loading facilities at Koyali. Ratlam and Khapri)

Further, since Paradip refinery (15 MMTPA) and the proposed Paradip-Rengali-Korba-

Raipr product PL with the branch from Rengali to Bundu could have an impact on the

subject proposal, impact of the same was also studied. Since the yield of Paradip

refinery also included petrochemicals, the same was however configured as an extreme-

point refinery (fixed Crude processing and fixed yield pattern) in the IP model with crude

mix, product pattern and prices for petrochemicals (IPP as well as EPP) as provided by

Ref. HQ Project.

4.3 Basis Adopted

(A) Demand

Product-wise demands were considered under following scenarios:

Scenario-1 & 4 (Low Demand)

Product-wise demand was considered at the same levels as in the Low-Demand

scenario considered for Gujarat Residue Upgradation Project and P-15, basis of which

was as below:

The demand numbers under this scenario are close to the levels per the outlook

for the year 2005-06.

Demand of Naphtha and FO have been substantially reduced considering the

projections by Corporate Planning regarding switch-over by major customers to

Natural Gas.

As regards LSHS, it has been assumed that the switch-over to gas would not be

major.

Demand of SKO is about 6.7% lower than the current outlook for the year 2005-

06.

Scenario-2 (High Demand)

Demand for 2011-12 for all products as currently projected by Planning Dept., Mktng

HO.

Scenario-3 & 5(Moderate Demand)

Product-wise demand level is similar to the High-Demand scenario considered for the

Gujarat expansion and P-15 study, basis for which is as below:

Growth rite of 10% for HSD and 15% for MS has been applied oil the demand

nos. per Scn-1.

In addition, ATF has also been escalated at 18% over and above the level in

Scn-I

The level of product-wise demand considered under the various

scenarios is provided in the table hereunder. Marketing HO's latest

outlook of product-wise demand for the year 2005-06 has also been

provided therein for the purposes of comparison.

Product

2005-06 Outlook

Demand Adopted in the Study

Scenario-1&4 Scenario-2Scenario-3&5

Comparative level Low High Moderate

MS 3818 3893 5353 4477

HSD 21032 21920 27151 24112

SKO 6313 5888 5211 5888

ATF 2174 2185 2936 2579

Naphtha 2574 907 873 907

FO 4300 3556 5482 3556

LSHS 3413 2571 1274 2571

LDO 667 657 582 657

Bitumen 2323 2475 3143 2475

Flexibility was kept in the model under all the scenarios in respect of meeting of the

LSHS demand, i.e. the model had the option in all cases of not meeting the LSHS

demand (Min. limit of LSHS kept as zero). In other words, LSHS production at the

refineries was based on economics.

(B) Product Exchange & Purchase

For all Scenarios it has been assumed that HPC's proposed Mundra-Delhi

product PL as well as BPC's proposed extension of its Mumbai-Manmad -Indore

product PL to Loni/Piyala would be in place. Gives to HPC and BPC ex-Koyali,

Mathura and Panipat have accordingly been reduced from normal levels

No takes by HPC ex-Haldia has been envisaged under any scenario/case since it

was observed under all the cases and scenarios that the subject expansion of

Haldia refinery/commissioning of the proposed Paradip-Raipur PL/

commissioning of Paradip refinery result in substantial reduction in IOC's takes

(vis-a-vis current levels) ex-HPC's Vizag refinery.

Subject to the above, gives to BPC & HPC ex-all refineries in each scenario are

based on the refinery-wise numbers finalized per the MoU for the quarter Jan-

Mar'06 duly annualized and escalated by the product-wise demand growth rates

adopted for IOC & Associates under the concerned scenario. Exchange of SKO

has been assumed on a tonne-to-tonne basis since no company would be

interested in taking additional SKO from another company.

Refinery-wise takes from BPC & HPC as well as purchases from RIL and ONGC

have been retained at economic levels under all scenarios.

(C) Product Import & Export

Options for imports/ exports kept open at refineries/ ports in the IP

model under all scenarios are detailed hereunder:

Product HaldiaParadipCPCLDahejBarauniPanipatMathuraKandla/IOTL

Export Options

MS √ √ √ √

Naphtha √ √ √ √ √ 000000000000000000000000000000000000000000000000000

ATF √ √ √ √

HSD √ √ √ √ √ (Pak)

FO √ √

Bitumen √

Petchem √

Import Options

FO √ √

(D) Price

Crude prices considered as per average for last 3 years: April'02-March'05

adjusted for changes in duty (Post-Budget 2005-06).

Product RTPs, assessable values and transaction values considered at the

average of the actuals during the 3-yr period, April 02 - March 05, duly adjusted

For changes in pricing methodology as per the Industry agreement during 2004-

05 as well as for the changes in duty rates (Post-Budget 2005-06). Necessary

adjustments have also been made for the changes in quality of MS & HSD.

Price sensitivity of higher LS-HS spread and product cracks broadly inline with

the latest long term IT forecast have also been carried out under following

scenarios:

Scenario-4: Price sensitivity for Scenario-1 (low demand) with higher LS-HS

spread and Product cracks

Scenario-5: Price sensitivity for Scenario-3 (moderate demand) with higher LS-

HS spread and Product cracks.

A comparison of the 3-year average crude spreads and product cracks considered for

Scenarios-l, 2 & 3 vis-a-vis those considered for Scenarios-4 & 5 are provided

hereunder:

(figs. in $/bbl)

Scenario Scenarios-1, 2 & 3Scenarios-4 & 5

Pricing basis Apr 02-Mar 05 IT forecast

Brent-Dubai 3.04 5.00

MS (S'pore)-Dubai8.22 13.80

HSD-Dubai 5.67 9.84

Naphtha-Dubai 2.30 4.49

SKO-Dubai 6.86 12.34

FO-Dubai (-)5.76 (-)10.00

No change has, however, been effected (from the 3-year average) in any

scenario as regards the selling price of SKO in the market place, since the same

continues to be controlled by the Govt.

As regards Paradip Refinery, petrochemicals price realization from tile domestic

as well as export market, and the input cost for Benzene have been considered

based on the 3-year average for the period Apr'02-Mar'05 (as worked out by Ref.

HQ).

(E) Crude Choice & Crude Mix

All regular crude oils being currently processed at Refineries have been kept open for

the model for economic selection.

(F) Cases Studied

Under each Scenario as defined at para 4.3 (A) above, 8 cases with

different configuration (i.e. with/without Paradip refinery, with/without

Paradip-Raipur PL and with/without subject project) were also

examined as described hereunder:

Case Paradip

Refinery

(PDRP)

Paradip-Raipur

Product

pipeline

(PRPL)

OHCU

Project at

Haldia

Case-

1

Yes Yes Yes

Case-

2

Yes Yes Yes

Case-

3

Yes No Yes

Case-

4

Yes No No

Case-

5

No Yes Yes

Case-

7

No Yes No

Case-

6

No No Yes

Case-

8

No No NOo

4.4 Results Summary

Considering Paradip Refinery and Paradip-Raipur pipeline in place,

the results of economic evaluation of the subject project for all of

above scenarios for Case-1 and Case-3 is summarized below:

Cases Objective Function* Rs. Cr./Yr (Profit)

Scenario-1 Scenario-2 Scenario-3 Scenario-

4

Scenario-

5

Demand level Low High Moderate Low Moderate

Pricing basis Apr 02- Apr 02- Apr 02- IT forecast IT forecast

Mar'05 Mar'05 Mar'05

Project case with Paradip

(Case-1)

21092 25272 22802 30120 32432

Base case with Paradip

(Case-3)

20930 25064 22626 29874 32203

Delta Objective Function,

Rs Cr/Yr

162 208 176 246 229

*Objective Function = Product Realization - Raw Material Cost - Catalyst & Chemical

Cost - Logistic Cost

The scenario-wise projected incremental margin (i.e. delta in the LP Objective Function

vis-a-vis the corresponding Base case) from commissioning of tile expansion of Haldia

refinery under the various cases, i.e. with/ without Paradip refinery, with/ without Paradip

product PL, is provided at Aanexure-1.

As can be seen from the above table, even after commissioning of Paradip Refinery and

Pipeline, IOC's margin on a global basis improves by installation of OHCU at Haldia as

compared to Base Case, i.e., installation of DHDT.

Under the low demand scenario (scenario-1), overall incremental margin is Rs. 162

Cr./year over the base case. This further improves to Rs. 246 Cr./year under Scenario-4

(price sensitivity for scenario-1).

Under a moderate demand level scenario (scenario-3), overall incremental margin is Rs.

176 Cr./year over the base case. This further improves to Rs. 229 Cr./year under

Scenario-.5 (price sensitivity for scenario-3)

Under tile high demand scenario (scenario-2), overall incremental margin is Rs. 208

Cr./year.

4.5 Product Pattern of Haldia Refinery for Scenario-1 and Scenario-5 are given in

Annexure-2

4.6 Refinery-wise capacity utilization under Scenario-1 and Scenario-5 is Presented in

Annexure-3.

5.0 FACILITIES ENVISAGED

5.1 The process units envisaged under Hydrocracker Project are

given below:

S. No.Unit Capacity

1. OHCU, MMTPA 1.7

2. HGU, TMTPA 75

3. AAU / ARU, TPH 272

4. SWS, TPH 25

5. SRU, TPD 2 x 80

6. CDU-II revamp, MMTPAfrom 2.5 to 4.0

5.2 In addition to the above, certain utilities and off-site facilities such as Gas Turbine

(20MW), ETP, Tankages, etc., have also been envisaged, which have been enumerated

at Annexure-4. No additional facilities have been considered for product evacuation as

the existing facilities are found to be adequate for despatch of incremental products.

6.0 PROJECT COST

Based on the study by M/s Lurgi India, the capital coat of the Project with facilities as

mentioned in Para 5.0 above is estimated m he Rs. 1876 crore inclusive of a Foreign

exchange component of Rs. 308 crore (1 USD = Rs. 43.8) and financial cost of Rs.104

crore (based on July,'05 price level). The accuracy of cost estimates is -/+l0`%. The

details of the capital cost are given in Annexure-5. Estimated cost of DHDT case is Rs.

1175 cr (July'05 prices), as estimated by Lurgi and considered in the base case.

7.0 FINANCIAL ANALYSIS

7.1 It is seen from the Integrated Planning Model Output, incremental GRM between the

base case and the configured case varies with the following:

Product demand

Spread between Brent-Dubai prices and Product Cracks.

7.2 IRR has been worked out based on the incremental GRM considering the following:

Scenario-1, i.e., lower product demand with LS-HS spread of $3.04/bbl for first

10 years of the project life of 15 years. This implies that the demand of major

products like MS, HSD and ATF approximately at the level of 2005-06 outlook till

the first ten years of operation and last 3 years' average Brent-Dubai FOB spread

of $3.04/bbl also remains constant for the first ten years of operation.

Subsequently, for balance 5 years out of 15 years, Scenario-5, i.e., moderate

product demand with spread of 5.00$/bbl has been considered.

Debt to equity ratio of 1:1 and

Interest on long term loan has been considered as 9%.

7.3 The above basis is in line with the basis adopted for financial analysis of recently

approved proposal for Residue Upgradation and MS/HSD Quality Improvement Project

at Gujarat Refinery.

7.4 IRR based on the above is 17.52%. The sensitivity cases are as

under:

Sl.

No.

Sensitivity cases IRR

(%)

1. With 10% increase in capital cost 16.05

2. With 10% increase in operating cost 17.47

3. With 90% sales realization 15.63

4. With 10% increase in capital cost, 10% increase in operating cost and 90%

sales realisation

14.24

5. With no demand growth and 3.04 $/bbl spread over entire 15 years of

project life

16.63

6. Simultaneous occurence of 1, 2, 3 & 5 above 13.30

7. With 10% reduction in capital cost of DHDT case keeping Capital cost of 14.36

OHCU case unchanged

7.5 From the above analysis, it is evident that even in the most conservative scenario of

simultaneous occurrence of 10'% increase in capital cost, 10% increase in operating

cost, 90% sales realisation and considering no demand growth and 3.04$/bbl spread

over entire 15 years of project life, IRR for the project works out to 13.30%, which is

higher than hurdle rate of 11%. This indicates the robustness of the proposed project.

7.6 In addition to the attractive IRR, the installation of' OHCU has following advantages

over DHDT:

i. In case OHCU and associated facilities are installed, the expenditure incurred so

far on process design / royalty for OHCU & HGU will get utilized.

ii. Process Design of major units (except SRU) is readily available. SRU licensor

selection has already been done. So installation of OHCU alongwith associated

facilities will take much less time as compared to that for DHDT.

8.0 FINANCIAL APPRAISAL:

The financial appraisal for the project has been carried out by M/s. Industrial

Development Bank of India (IDBI). As per their findings, the subject project is viable. The

relevant excerpts from the appraisal report is enclosed as Annwure-6.

9.0 LAND

The facilities are proposed to be installed within the refinery premises after dismantling

of six tanks (three crude oil tanks, one tank for holding surface run-off and two fire-water

tanks). LPG Bottling Plant and Old Flare Stack etc. It is worthwhile to note that a

proposal for installation of a new LPG Bottling Plant of M/s IPPL is under approval.

10.0 PROJECT SCHEDULE

The project will take about 38 months for mechanical completion from the date of

approval and 3 months thereafter for commissioning. The activity chart is enclosed as

Annexure-7.

11.0 PHASING OF EXPENDITURE

Phasing of expenditure has been considered to be as follows:

Year Amout (Rs. Lakh)

1st Year 9060

2nd Year54777

3rd Year 84478

4thYear 39246

Total 187561

The details are enclosed as Annexure-8.

12.0 PLAN PROVISION

The pre-project / construction activities of the project are to be started in X plan period

and the project is proposed to be completed during XI plan period. The provision under

Budget Estimates (BE) for the year '05-06' is Rs. 1.0 cr.

13.0 ENVIRONMENTAL ASPECTS

On commissioning of these facilities, there will not be any increase in the SO2 emission

from the refinery in excess of 1466 kg/hr, the maximum limit imposed by West Bengal

State Pollution Control Board (WBSPCB) while granting 'No-objection' to the Project.

An estimated amount of Rs. 185 crore has already been earnmarked in the total project

cost towards the Installation of ETP, SRU, AAU/ARU, SWS, etc. units under the project.

Environmental Clearance to the project was received front the Ministry of Environment &

Forest (MOE&F) in May '02. NOC obtained From WBSPCB in July 01 was valid till May

05. Extension of validity upto 31.12.09 has been now obtained from them.

14.0 PROJECT MANAGEMENT

14.1 Process packages of OHCU including SWSU & AAU (Licensor-Axens) and HGU

(Licensor- Technip Benelux) are available- Basic Envu. for CDU-II revamp has been

completed in-house.

For SRU, M/s KTI S.p.A, Italy were selected as the licensor and SIA approval was

obtained, but the job of preparation of process package was not pursued further. In view

of the need to go ahead with the project, action has now been initiated for preparation of

process package.

14.2 A reputed consultant who has experience in project management of OHCU shall be

engaged as PMC whose services shall be utilized for preparation of' process package

for ARU and Off-site/Utilities. The project is envisaged to be implemented on Lump Sum

Turn Key (LSTK) basis for licensed units, offsites / utilities and all open art units except

the revamp of CDU-II which is envisaged to be implemented in conventional mode.

15.0 Pre-Project Activities

Break- up of expenditure made for pre-project activities out of

sanctioned amount of Rs. 44.0 crore is summarized below:

(Rs Lakh)

S.No.Description Amount

1 Fees for preparation of DFR Cost

Estimates (In-Principle Approval)

41.8

2 Fees for Plant Cost Estimates for

Licensor selection

5.7

3 Fees for Fin. Appraisal (in-

principle approval)

10.0

4 Site Development 69.8

5 License and Engg Fees for OHCU617.3

6 Know-How Engg Fees for

Reformer/PSA

1635.8

7 Consultant's Fees for preparation 37.9

of DFR Estimates (Investment

Approval)

8 Fees for Financial Appraisal

(Investment Approval)

15.0

Total 2433.3

Say. Rs. Cr. 24.0

16.0 Delegation of Authority (DOA)

As per the Clause No.9 (i) of Enclosure - I of Delegation of Authority, this proposal

requires approval of Board of Directors.

17.0 Proposal

It is proposed to obtain the approval of the Board of Directors for final investment

approval for installation of facilities for Hydrocracker Project at Haldia refinery at an

estimated cost of Rs.1876 cr. (as of July 2005) inclusive of a foreign exchange

component of Rs.308 cr and financial cost of Rs. 104 cr.

18.0 Resolution

It is proposed that the Board of Directors may consider the above proposal and pass the

following resolution with or without modifications as may deem fit.

"Resolved that the approval of the Board of Directors be and is hereby accorded to the

proposal for installation of facilities for Hydrocraker Project at Haldia Refinery a an

estimated cost of Rs.1876 crore (as of July 2005) inclusive of a foreign exchange

component of Rs.308 crore and financial cost of Rs.104 crore."

Director (F) has concurred in the proposal.

====

Annexure - I

Scenario-wise projected overall incremental margins from

commissioning of the OHCU at Haldia vis-a-vis the base case

Scenario No....> Scenario -

1

Scenario -

2

Scenario -

3

Scenario -

4

Scenario -

5

Demand Level ... > Low High Moderate Low Moderate

Price ....> 3-Yr Avg 3-Yr Avg 3-Yr Avg IT F cast IT F cast

With PDRP & PRPPL 162.4 208.5 176.3 246.2 229.3

With PDRP and w/o

PRPPL

158.0 192.0 179.1 244.7 225.1

W/o PDRP with PRPPL 213.7 314.3 282.3 254.6 233.5

W/o PDRP & w/o PRPPL 186.8 330.7 260.3 253.6 229.0

PDRP : Paradip Refinery Project

PRPPL : Paradip-Raipur Product Pipeline

Annexure - 2

Product Pattern

1) Under Scenario - 1

(Figures in

TMTPA)

Case -3 (Base

Case)

Case - 1 (Project

Case)Difference

LPG 183 248 65

Naphtha 548 598 50

MS-Normal 165 150 (-) 15

MS-Premium 130 130 0

Total MS 295 280 (-) 15

SKO 224 392 168

ATF 280 371 91

JBO 37 37 0

HSD-Normal 1182 1732 550

HSD-UL 628 628 0

HSD-HF 189 189 0

Total HSD 1999 2549 550

Sub-Total (%) 3566 (61.2%) 4475 (64.2%) 909

FO 834 895 61

Bitumen 632 630 (-) 2

Sulphur 30 55 25

MCW 3 3 0

LOBS 244 244 0

F&L 514 667 151

Total 5823 6969 1146

LPG 184 254 70

Naphtha 464 598 134

MS-Normal 150 167 17

MS-Premium 227 149 (-) 78

Total MS 377 316 (-)61

SKO 264 706 442

ATF 360 449 89

JBO 37 37 0

HSD -Normal 1193 1740 547

HSD-UL 742 742 0

HSD-HF 208 208 0

Total HSD 2143 2690 547

Sub total distillate

(%)3829 (63.98) 5050(67.33) 1221

FO 721 805 84

Bitumen 632 630 (-) 2

Sulpher 30 56 26

MCW 3 3 0

LOBS 244 244 0

F & L 526 712 186

Total 5985 7500 1515

Annexure -3

Refinery-wise capacity utilization under different scenario (T puts in TMT)

i) Scenario - 1

Case-1 Case-2 Case-3 Case-4 Case-5 Case-6 Case-7 Case-8

Gujarat 12374 12374 12548 12589 12377 12308 12855 12722

Panipat 15000 15000 15000 15000 15000 15000 15000 15000

Mathura 8353 8351 8286 8301 8368 8355 8400 8400

Barauni 3177 3178 3141 3141 3179 3182 3494 3739

Haldia 6969 7155 5823 5869 7325 7495 6000 6000

Guwahati 800 800 800 800 800 800 800 800

Digboi 600 600 600 600 600 600 600 600

BRPL 2350 2350 2350 2350 2350 2350 2350 2350

CBDU 464 464 464 464 464 464 464 464

CPCL 10000 10000 10000 10000 10000 10000 10000 10000

Paradip 15205 15205 15205 15205 0 0 0 0

Total 75291 75476 74217 74318 60463 60552 59962 60074

ii) Scenario - 5

Case-1 Case-2 Case-3 Case-4 Case-5 Case-6 Case-7 Case-8

Gujarat 13700 13700 13700 13700 13700 13700 13700 13700

Panipat 15000 15000 15000 15000 15000 150000 15000 15000

Mathura 8400 8400 8400 8400 8400 8400 8400 8400

Barauni 4141 4141 4080 4090 4169 4422 5620 5750

Haldia 7500 7500 5985 5985 7500 7500 6000 6000

Guwahati 800 800 800 800 800 800 800 800

Digboi 600 600 600 600 600 600 600 600

BRPL 2350 2350 2350 2350 2350 2350 2350 2350

CBDU 464 464 464 464 464 464 464 464

CPCL 10000 10000 10000 10000 10000 10000 10000 10000

Paradip 15205 15205 15205 15205 0 0 0 0

Total 78160 78160 76584 76593 62982 63236 62933 63063

Case definition

Case Paradip Refinery Paradip-Raipur

Product pipeline

OHCU Project at

Haldia

Case

1

Yes Yes Yes

Case

2

Yes Yes Yes

Case

3

Yes Yes Yes

Case

4

Yes Yes Yes

Case

5

Yes Yes Yes

Case Yes Yes Yes

6

Case

7

Yes Yes Yes

Case

8

Yes Yes Yes

Annexure -4

Utilities and Off-Site Facilities envisaged under Hydrocraker

Project at Haldia Refinery

S.

No

Facility Capacity

1. Plant & Instrument Air System 1x4800 NM3/hr compressor

2x3600 NM3/hr Instrument Air

dryer

2. Nitrogen System 2000 NM3/hr cryogenic Nitrogen

Plant

2x100 M3 liquid nitrogen storage

2x200 NM3/hr Nitrogen vaporiser

3. Cooling Water System 3x2250 M3/hr CT cells

3x2250 M3/hr CW circulation

pumps

4. Storage System 1x400 M3/hr IFO tank + 2 pumps

1x15000 M3 OHCU feed tank + 2

pumps

1x15000 M3 OHCU bottom tank

+ 2 pumps

3x1500 M3 LPG mounded bullets

2x200 M3 Hydrogen bullets +

Top-off Hydrogen compressor of

1x3000 NM3/hr capacity

2x60000 M3 crude oil tanks

1x10000 M3 ATF Tanks + 2

pumps

5. Electrical System 20 MW GT alongwith HRSG

6. Effluent Treatment Plant with

R.O. System for generation of

DM water

New ETP of 600 M3/hr

Teritary Treatment Plant of 1275

M3/hr to generate about 700

M3/hr Cooling water make - up

and 150 M3/hr DM water

DM water pumps - 2 x 150 M3/hr

CRWS pumps - 2x552 M3/hr

DM water tanks - 1x500 M3

CRWS tank - 1x 1000 M3

7. Fire Fighting System & alarms

8. Flare System augmentation

9 DCS and instrumentation

Annexure - 5

Capital Cost (Basis: July 2005)

(Rs. Lakh)

S. No. Description F. EX Ind. Comp Total

1. Land 0 0 0

2 Site Development 0 1519 1519

3 Royalty & Know - How 1516 303 1819

4 Process Design/Engg. 2565 5013 7578

5 Plant & Machinery 25483 136571 162054

6 Roads & Buildings 0 842 842

7 Water Sply/Pub. Health 0 0 0

8 Office Equipment and furniture 0 200 200

9 Railway Siding 0 0 0

10 Construction site requirements 0 435 435

11 Const. Period Expenses 103 517 620

12 Start-up Expenses 1165 390 1555

13 Township 0 500 500

Sub Total 30832 146290 177122

14 Financial Cost 0 10439 10439

Grand Total 30832 156729 187561

Say (Rs. Cr) 308 1568 1876

Annexure -6

Excerpts from Financial appraisal Report

Conclusion

IOCL is India's flagship National Oil company accounting for 42% of the national

refining capacity, 46% of the downstream pipeline transportation network and

48% of the petroleum products market share in the country. IOCL, on its own as

well as subsidiaries, operates 10 out of the India's 18 refineries with a combined

rated capacity of 54.2 MMTPA as against the aggregate refining capacity of

127.4 MMTPA in the country is on April 1, 2004.

The petroleum refining / marketing industry in India was governed by the

Administered Price Mechanism (APM) till April 2002, which provided assured

returns to oil companies. Subsequent to the dismantling of APM, the prices of

petroleum products have been market determined, except in the case of'

kerosene and domestic LPG where the prices are still controlled by GOI.

Domestic prices of HSD & Motor spirit, although de-regulated, are yet to be

linked to global prices and continue to be subsidized by GOI due to various social

considerations. In the present deregulated scenario and dismantling of the APM,

the refining margins of oil companies have Substantially improved but in view of

the non-increase in prices of POL products in line with crude oil prices. the

marketing margins have come under tremendous pressure. IOCL has, thus,

recognized the need to Improve its profitability by debottlenccking of existing

refining capacities at minimum costs and thus adding greater value. This strategy

is being adopted in keeping with IOCL's vision, which envisages becoming a

transnational, integrated energy company, expanding its activities across the

hydrocarbon value chain into oil exploration and production, as, petrochemicals

and globalization of its core activities'.

As a part of its ongoing diversification strategies, IOCL has recently

commissioned Linear Alkyl Benzene (LAB) project at Vadodara and is presently

implementing petrochemicals projects i.e PX / PTA & Naphtha Cracker with

downstream units at Panipat. It has also ventured into Exploration and

Production of Oil and NG. It has also expanded its market to Sri Lanka, Mauritius

and UAE. It is also planning to set up an integrated refinery cum petrochemicals

complex at Paradip.

IOCL proposes to implement a scheme, at its Haldia Refinery, envisaging

revamping of existing Crude Distillation Unit - II as Well Set up additional

secondary processing facilities like Once Through Hydrocracking Unit (OHCU)

with capacity of 1.7 MMTPA, Hydrogen Generation Unit and Sulphur Recovery

Unit so as to enhance the overall crude processing capacity of the refinery form 6

MMTPA to 7.5 MMTPA, for improvement in diesel quality so at to meet the Euro

III/Euro IV norms as also to improve the distillate yield from 65.7% wt. to 69.48%

wt. The proposed project of IOCL envisages maximum utilization/revamp of

existing units and the incremental product slate can be sold in the Eastern

Region which is deficient in POL products.

The project is planned to be implemented over a period of 39 months (including 3

months of trial run period) form the zero date (November 2005) and the COD is

expected to be February 2009.

The aggregate project cost is estimated at Rs.1875 crore. The cost estimate are

based on the cost estimates furnished by Lurgi, DFR Consultant considering

price levels prevailing during July 2005 and has an accuracy levels of +/ - 10% .

The project costs could vary, on completion on final negotiations and

conventional bidding of contracts and also based on the final financing terms.

The Internal Rate of Return (IRR) of the project (base case) works out to 14.7%

as against average cost of capital of 11%. The financial viability of the project

would, however, be critically dependent upon the POL and crude prices. The

sensitive analysis shows that the project would be viable under all likely

scenarios but the IRR would be very sensitive to combined effect of increase in

project cost by 10% and decrease in gross margins by 10%. Even after taking

into account the capital expenditure of Rs 1175 crore required to be incurred for

conforming to the statutory quality requirements is not expected to yield any

significant return, the IRR, even in the most sensitive scenario, is still higher than

the hurdle rate of 11 % approved by IOCL's Board for capital investment

proposals. Debt servicing parameters are satisfactory. The proposed project is

therefore considered to be financially viable.

Annexure - 8

Phasing of Expenditure

Year PCWOFCFC Proj. CostEquityLoan ACC Loan

1st 8856 204 9060 4530 4530 4522

2nd 53137 1640 54777 27388 2738831864

3rd 79705 4773 84478 42239 4223974032

4th 35424 3822 39246 19623 1962393622

Total177122 10439187561 93780 93780

PCWOFC = Project cost without financial cost

FC = Financial Cost

ACC Loan = Accumulated Loan

Basis:

Debt: Equity = 1:1

Interest Rate = 9% PER Annum

Phasing

First Year 5%

Second Year30%

Third Year 45%

Fourth Year 20%

Annexure 9

Project Appraisal Group (Project appreciation note)

Project: Detailed Feasibility Report (DFR) on Installation of facilities for improvement in

Diesel Quality and Distillates yield (Hydrocracker) Project at Haldia Refinery.

Project at a Glance

Justification onEconomics GroundsOperating NecessitySafety Requirements

Project Cost Stage - IDFR

Total (Rs. Crores)1518 1876

FE Component 357 308

Price Base Apr 00 July 05

Completion Schedule (Stage - I)

Mechanical Completion 36 moths

Commissioning 3 months

Completion Schedule (DFR)

Mechanical Completion 38 months

Commissioning 3 months

Project Economics - IRR

State - I12.99% - Price Cycle (Apr 97 to Mar 00)

DFR 17.5% - Price Cycle (Apr. 02 to Mar 05)

Project Financing

Stage - IDFR

Debt: Equity 1:1 1:1

Capacity (TMT)

Crude 6.0 7.5

Technology/Facilities

1. CDU - II revamp : 2.5 to 4.0 MMTPA

2. New units:

OHCU : 1.7 MMTPA

HGU : 75 TMTPA

AAU/ARU : 272 TPH

SWS : 25 TPH

SRU : 2 x 80 TPD

3. Gas Turbine : 20 MW along with HRSG

4. New ETP of 600 M3/hr, Cooling water system (3x 2250 M3/hr), Nitrogen system,

Storage system etc.

1.0 Proposal

1.1 The proposal seeks final approval of DFR from the Board of Directors for:

Installation of Hydrocracker facilities at Haldia Refinery at an estimated cost. of Rs. 1876

crore (as of July 2005) inclusive of foreign exchange component of Rs. 308 crore.

2.0 Background

2.1 Vide agenda item No. R/936 dated 29.11.2000, Board has accorded i principle

approval for installation of facilities for improvement in Diesel Quality and Distillate Yield

at an estimated cost of Rs. 1518 crore inclusive of foreign exchange component of Rs.

357 crore based on April 2000 price level subject to obtaining statutory environment

clearance from MOE&F. Board has also accorded expenditure approval of Rs. 44 crore

inclusive of a foreign exchange component of Rs. 18 crore for carrying out pre - project

activities pending Environmental Clearance.

2.2 Subsequently vide agenda item No. R/1005 dated 24.4.2003, Board has approved

the road map to meet the quality requirement of HSD and MS and suggested deferment

of completion of Hydrocracker Project at Haldia Refinery till January 2010 so as to match

with quality requirement of April 2010 onwards. Hence, all activities relating to the project

were kept on hold.

2.3 As per auto fuel quality road map, it has been stipulated that Euro IV specification for

MS and HSD shall be implemented in Metros and Other Seven Cities from 1st April 2010

while rest of the country will have Euro III equivalent specification on that date.

To meet the future quality norm of HSD, it is proposed to install Hydro - Cracker facilities

at Haldia Refinery.

3.0 Technology/Facilities:

3.1 The following facilities are envisaged in the proposal:

CDU-II revamp from 2.5 to 4.0 MMTPA.

New OHCU of capacity 1.7 MMTPA.

New AAU/ ARU of capacity 272 TPH.

New SWS of capacity 25 TPH

New SRU of capacity 2 x 80 TPD

One Gas Turbine of 20 MW with HRSG

New ETP with RO system of 600 M3/Hr

Cooling water system of 3 x 2250 M M3/ Hr CT cells

Cryogenic Nitrogen System of 200 N M3/ Hr

Plant and Instrument Air System

4.0 Project Cost

Estimated cost of the project is Rs. 1876 crore (as of July 2(305) inclusive of foreign

exchange component of Rs. 308 crore. The accuracy of the cost estimates is ±10%. The

operating cost of the proposed facilities is Rs 26.5 crore / year.

5.0 Economics:

Optimization Group has carried out the economic evaluation of the proposed proposal

using Integrated Planning (IP) Model. The project has been studied considering five

demand scenario and two pricing scenario. The summary of economic evaluation as per

IP model is as under:

Objective Function Rs. Cr/Yr (Profit)

Scenario 1 Scenario 2 Scenario 3 Scenario

4

Scenario

5

Demand level Low High Moderate Low Moderate

Pricing level Apr 02 - Mar

05

Apr 02 -

March 05

April 02 to

March 05

IT forecastIT forecast

Project case with

Paradip (Case - 1)

21092 25272 22802 30120 32432

Base case with Paradip

(Case - 3)

20930 25064 22626 29874 32203

Delta Objective

Function, Rs. Cr/Yr

162 208 176 246 229

Objective Function = Product Realization - Raw Material Cost - Catalysts & Chemical

cost - Logistic Cost

Case - I : with Hydrocracker configuration

Case - III: with DHDT configuration

6.0 Manpower:

Additional manpower of 97 nos. has been proposed

7.0 Phasing of Expenditure of the project is as follows:

(Figs. in Rs./crores)

1st year2nd Year3rd Year4th YearTotal

91 548 845 392 1876

8.0 Financial Appraisal :

The financial appraisal of the Project has been carried out by M/s. IDBI. It has been

concluded that the proposed project is financially viable. The financial viability of the

project would, however be critically dependent on the POL and Crude Prices.

9.0 Points for consideration:

9.1 The IRR based on incremental Gross Refinery Margin and project

cost differential (Rs.1876 - 1175 = 701 crore) is as under:

Sl.

No.

Attributes IRR (%) Hurdle rate

(%)

1. Base case 17.52 11.0

2. With 10% increase in capital cost 16.05

3. With 10% increase in operating cost 17.47

4. With 90% sales realization 15.63

5. With 10% increase in capital cost, 10%

increase in operating cost and 90% sales

realization

14.24

6. With no demand growth and 3.04 $/bbl

spread over entire 15 years of project life

16.63

7. Simultaneous occurrence of 1,2,3, & 5

above

13.30

8. With 10% reduction in capital cost of

DHDT case keeping Capital cost of

OHCU case unchanged

14.36

Note :

Base Case - Lower product demand scenario with LS-HS crude spread of $ 3.04/bbl (3

years average) for first 10 years of project life and balance 5 years with moderate

product demand with spread of 5.00 $/bbl (IT projection) has been considered.

It may be seen from above, that the project is economically viable. The Break Even IRR

of 11 % will be achieved with the investment of about Rs. 893 Crore in DHDT case.

9.2 An amount of Rs. 176 Crore (approx) has been considered if, the base case (Le with

DHDT option) for procurement of 20 MW Gas Turbine. Presently Haldia Refinery has a

generating capacity of 92 MW (4 TGs and 2 GTs) and the requirement of power with

DHDT option will be 54 Mw (approx). In this case the requirement at GT in DHDT option

may hot be required and hence the total cost will be Rs. 1000 Crore (excluding GT cost).

In this scenario the IRR of the project will be reduced from 17.5% to 12.8%.

9.3 While working out the economics of the proposal it has been projected that in the low

and moderate demand scenario the throughput of Barauni Refinery will be in the range

of 3.2 to 4.2 MMTPA level post Hydrocracker and PDRP project. In view of the low

throughput operation at Barauni the necessity for the third reactor of DHDT at Barauni at

an estimated cost of Rs. 63 Crore at this stage .way be reviewed.

9.4 An additional manpower of 97 numbers has been proposed to operate the new

facilities. A detailed manpower study is required to be carried out before separate

approval of manpower requirement.

9.5 An amount of Rs. 5.00 Crore has been provided for the township in the cost

estimate. In view of the present housing scenario there is a need to review the

requirement of houses.

9.6 A new ETP of 600 M3/ Hr is proposed in addition to the existing ETP. Division may

explore a combined ETP operation instead of two ETP operation.

9.7 While working out the economics. it has been projected in the IP model that 1.5

MMTPA diesel is being exported to Pakistan from Panipat Refinery. If the same is not

materializes there will be an impact on margins.

9.8 After implementation of the Hydrocracker project there is an improvement in the

distillate yield 3.0% to 3.4% wt (excluding LOBS yield).

9.9 It has been proposed to implement the project by LSTK mode for all units except

revamp of CDU-II. An amount of Rs.79 Crores has been provided for LSTK mode of

execution.

The agenda may be considered for submission to the Board of Directors at an estimated

cost of Rs. 1876 crore as per DOA clause of 9 (i) of Enclosure-I

xxxxxxxx

Sub: Installation of facilities for Improvement in Diesel Quality

and Distillates Yield at Haldia Refinery

Summary of the reply given by Refineries Division to the queries

raised by Chairman's Office In seriatim is as under:

1. The major variation in project cost (DFR V/s in-principle i.e 1876 vs

1518 crore) is as under:

Sr.No.Attributes Variation

1. FE variation (-) 48.0

2 Impact of pricing index (WPI/CPI-escalation)(+) 188.0

3 Change in Scope

Revamp of CDU-II (+) 43.0

Higher capacity of Effluent Treatment Plant (+) 39.0

Addition of Tertiary Treatment Plant (+) 26.0

2 Nos. crude tank* (+) 25.0

4. Impact of high steel price over WPI/CPI (+) 19.0

5 Site development charge (+) 13.0

6 Financial cost (change in interest rate) (-) 8.0

7 others including inaccuracy of estimates (+) 61.0

8 Total (+) 358.0

* Discussion with Pipelines Divisions is on for sparing of tanks at HBCPL tank farm

area. Based on the feed back from Pipelines Division, final view will be taken on

construction of two crude tanks for which provision has been kept in Capital Cost

Estimate.

2. With regards to completion period, it has been stated that actual completion including

commissioning is 43 - 47 months in conventional mode and in case of Panipat

expansion, it is 45 months (approx.) in LSTK mode as against 41 months proposed for

Hydrocracker project in LSTK mode.

3 As stated by Optimization Group, in the post Panipat Expansion, Hydrocracker at

Haldia and Paradip Refinery scenario, the projected throughput at Barauni is likely in the

range of 3.2 to 3.7 MMTPA level with existing HB capacity and considering high LS - HS

crude differential of last 3 years average of $3.04/ bbl which is expected to continue in

future. In view of this, further investment (third reactor in DHDT) at this stage at Barauni

is to be kept under hold and can be reviewed at a later stage..

4. The proposed hydrocracker facility will be installed in the existing refinery premises.

5. Considering investment approval in November, 2005 and 41 months of completion

schedule, the facility is expected to be ready by April, 2009 as against requirement of

completion of project by Jan, 2010 by earlier Board decision.

xxxxxx

Sub: Study of Installation of facility at Haldia Refinery for Improvement in Diesel

Quality and increase in Capacity

Background:

HSD quality requirement beyond April 2010 cannot be met by Haldia refinery with its

existing configuration/facilities various alternatives for meeting the twin objectives of

upgrading the diesel quality as well as the feasibility of processing crude up to 7.5

MMTpa at Haldia were evaluated by Refy HQ through LP modeling and installation of a

Once Tarough-Hydrocracker (OHCU) was selected as the best option. Optimisation

Dept. was accordingly requested to carry out a study through the Integrated Planning

(IP) model and arrive at the savings from installation of the OHCU at Haldia refinery.

The study was to compare the savings between the following two configurations at

Haldia:

A. Crude processing at 6 MMTpa with DHDT- necessary for meeting Diesel specs

(BaseCase)

B. Crude capacity at 7.5 MMTpa with OHCU (project Case)

The concerned RMPS models were accordingly developed and tuned along with the

representative from Haldia refinery. Since by the time of completion of the subject

project, Panipat expansion to 15 MMTpa, Gujarat Resid Upgradation Project and

expansion to 13.7 MMTpa would also be in place, the RPMS models of Panipat and

Gujarat included in the IP model for the subject study were as utilized earlier for the

respective studies. Further, since Paradip refinery and the proposed Paradip-Rengali-

Korba-Raipur product PL with the branch from Renglai to Bundu could have an impact

on the subject proposal, impact of the same was also studied. Since the yield of Paradip

refinery also included petrochemicals, the same was however configured as an extreme

point refinery in the IP model with crude mix, product pattern and prices for

petrochemicals (IPP as well as EPP) as provided by Refy EQ.

As desired, the scenarios studied, details of the basis adopted and the summary of the

findings thereform are provided hereunder:

Scenarios Studied:

Scenario-1 : Low-Demand scenario as considered for Gujatrat expansion and P-15

study (and utilized in the IRR workings for years 1 to 10 of the said study).

Scenario-2: Demand for 2011-12 for all products as currently projected planning Dept.

Mktng HO.

Scenario-3 : Growth rate of 10% for HSD, 15% for MS and 18% for ATF applied on the

demand nos. per Scn-1, i.e. similar to the High-Demand scenario as considered for

Gujarat expansion and P-15 study (and utilized in the IRR workings for years 11 to 15 of

the said study).

Scenario-4: Price sensitivity for Sen-1 with higher LS-HS spread and product cracks

9per details at Table-E of Attachment-A).

Scenario- 5 : Price Sensitivity for Sen-3 with higher LS-HS spread and product cracks.

Under each Scenario, 8 cases with different configuration (i.e. with/without Paradip

refinery, with/without Paradip-Raipur PL and with/without Haldia expansion) were also

examined as described at Table-1 hereunder:

Table:1: Cases Studied under each Scenairo

Case NumberParadip Refy.Paradip PLHaldia Project

Case 1 Y Y Y

Case 3 Y Y N

Case 2 Y N Y

Case 4 Y N N

Case 5 N Y Y

Case 7 N Y N

Case 6 N N Y

Case 8 N N N

Basis Adopted:

Details of the basis adopted are provided at Attachment-A.

Findings:

Details of the optimal crude thoughput levels at refineries, arrived at on a global basis

through the IP model, under various scenarios and cases in provided at Tables-2 & 3A

hereunder:

Table-2: Crude Thruput Levels-Scn-1,2 & 3 (MMTPa)

Scenario No Scn-1 Scn-2 Scn-3

Demand Level Low High Moderate

Case No. Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8

Paradip Refy & PLY Y N N Y Y N N Y Y N N

Haldia Expansion Y N Y N Y N Y N Y N Y N

Haldia 7.0 5.8 7.5 6.0 7.2 6.0 7.5 6.0 7.0 5.7 7.5 6.0

Barauni 3.2 3.1 3.2 3.7 3.9 3.9 4.7 5.7 3.5 3.5 3.7 4.3

Paradip 15.0 15.0 0.0 0.0 75.0 15.0 0.0 0.0 15.0 15.0 0.0 0.0

IOC Total 75.1 74.0 60.6 60.1 77.5 76.2 63.6 63.1 75.6 74.2 62.5 61.6

It can be seen from Table-2 above that based on the average prices during the 3-year

period April 02 - March 05:

The Commissioning of Paradip refinery has an impact on the optimal thruput of Haldia

refinery . Under scn-1 to 3, Haldia refinery achieves its maximum thruput post

expansion of 7.5 MMTPa in cases where Paradip refinery has not been commissioned

whereas post-commissioning of Paradip refinery, the optimal thruput of Haldia post-

expansion on a global basis is about 7 MMTpa.

Expansion of Haldia has an impact on the thruput of Barauni (which basically acts as the

swing refinery based on the demand level, especially consequent to additional

availabilities ex-Gujarat, Panipat and Paradip).

Table-2 : Crude Thruput Levels-Scn-4&5 (MMTpa)

Scenario No Scn-4 Scn-5

Demand Level Low Moderate

Case No. Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8

Paradip Refy & PLY Y N N Y Y N N

Haldia Expansion Y N Y N Y N Y N

Haldia 7.5 6.0 7.5 6.0 7.5 6.0 7.5 6.0

Barauni 4.0 3.6 4.2 3.9 4.1 4.1 4.4 5.8

Paradip 15.0 15.0 0.0 0.0 15.0 15.0 0.0 0.0

IOC Total 77.8 75.9 62.9 61.2 78.0 76.4 63.2 63.1

It can be seen from Table-2A above that based on pricing as per the latest IT forecast

for the year 2010 (i.e. higher LS-HS spreads and higher product cracks vis-avis the 3-

year average during '02-05 considered for scn-1 to 3):

Haldia refinery achieves its maximum thruput post expansion under both the scenarios

irrespective of the status of the commissioning of Paradip refinery.

Barauni's thruput also increases due to higher product cracks and the viability of exports

ex-other refineries. Barauni almost achieves its maximum throughput in case-8 w/o

Paradip & Haldia project) of Sen-5 (price sensitivity for Scn-3 Moderate Demand Level)

Details of the product-wise and location-wise exports under various scenarios and cases

are provided at Annexure-I.

Details of the product pattern at Haldia refinery pre and post-expansion under the

various scenarios/cases is provided at Tables-3 & 3A hereunder:

Table3: Product Pattern-Scn-1,2&3 (TMTpa)



Case No. Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8

Paradip Refy & PLY Y N N Y Y N N Y Y N N

Haldia Expansion Y N Y N Y N Y N Y N Y N

LPG 248 183 256 186 252 186 258 187 254 185 257 188

Naphtha 598 548 599 587 576 493 523 455 598 536 603 550

MS-K 150 165 174 155 228 218 223 223 136 122 155 167

MS-P 130 130 130 130 98 131 170 170 149 149 149 149

Total-MS 280 295 304 285 326 349 393 393 285 271 304 316

SKO 392 224 610 359 279 121 126 73 433 109 532 263

ATF 371 280 350 259 421 403 412 402 386 335 352 332

JBO 37 37 37 37 37 37 37 37 37 37 37 37

N-HSD 17321182198912861674949 217312241569103619491293

UL-HSD 628 628 628 628 787 787 796 787 691 691 691 691

HFHSD 189 189 189 189 272 272 234 119 208 208 208 168

Total-HSD 254919992806210327332008320321302468193528482152

Distillate Yield % 63.7 60.6 65.7 63.0 63.4 59.3 65.6 60.7 63.4 59.7 65.8 63.4

FO 895 834 884 758 10361014935 931 960 817 886 729

Bitumen 630 632 630 632 582 582 582 582 571 628 598 632

Sulfur 55 30 57 30 58 31 57 31 58 30 58 30

MCW 3 3 3 3 3 3 3 3 3 3 3 3

Lubes 244 244 244 244 244 244 244 244 244 244 244 244

Fuel & Loss % 9.6 8.9 9.6 8.7 9.6 8.9 9.7 8.9 9.8 9.2 9.7 8.8

Table 3A: Product Pattern -Scn-4 & 5 (TMTpa)



Case No. Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8

Paradip Refy & PLY Y N N Y Y N N


LPG 260 181 259 185 254 184 255 187

Naphtha 598 501 598 515 598 464 598 480

MS-K 173 222 176 215 167 150 182 225

MS-P 134 129 130 129 149 227 132 149

Total-MS 307 351 306 344 316 377 314 374

SKO 790 327 794 438 706 264 536 301

ATF 429 290 427 271 449 360 443 352

JBO 37 37 37 37 37 37 37 37

N-HSD 17381309173412801740119319851278

UL-HSD 628 628 628 628 742 742 691 691

HFHSD 189 189 189 220 208 208 208 208

Total-HSD 25552126255121282690214328842177

Distillate Yield % 65.9 63.0 65.8 64.7 66.9 63.4 67.1 64.5

FO 794 754 794 653 805 721 794 659

Bitumen 704 632 706 632 630 632 623 632

Sulfur 63 30 63 29 56 30 55 30

MCW 3 3 3 3 3 3 3 3

Lubes 243 244 243 244 244 244 244 245

Fuel & Loss % 9.6 8.8 9.6 8.8 9.5 8.9 9.6 8.8

It can be seen from the above that in addition to increase in the crude processing

capacity, the project also results in an improvement in the distillate yield at Haldia

refinery.

Product-wise details of the levels of additional gives to EPC & BPC and purchase from

ONGC & RIL under the various scenariors and cases are provided at Tables-4 & 4A

hereunder.

Table-4: Addl. Given & Purchases - scn-1,2&3 (TMTpa)



Case No. Cs-1Cs-3Cs-6Cs-8 Cs-1Cs-3Cs-6Cs-8 Cs-1Cs-3Cs-6Cs-8

Paradip Refy &

PLY Y N N Y Y N N Y Y N N

Haldia

ExpansionY N Y N Y N Y N Y N Y N

Addl Gives to

HPC

WS 241 242 221 221 259 254 27 38 228 230 160 167

HSD 730 730 730 730 947 947 257 257 800 803 803 778

Addl Gives to

BPC

WS 472 472 472 472 568 555 390 412 539 539 532 532

HSD 14841484148414841878187815351535 1633162916291633

Purchase-

ONGC

WS 93 93 93 93 150 150 150 150 107 107 141 117

SKO 316 316 757 815 279 279 737 732 342 351 815 815

HSD 494 494 494 494 722 722 722 722 544 544 544 544

Purchase-RIL

WS 25 25 25 25 104 104 140 140 67 67 78 78

SKO 258 258 650 650 158 158 650 650 215 562 650 650

HSD 217 217 217 217 269 269 402 676 239 239 239 239

Table-4A: Addl Gives & Purchases-Scn-4&5 (TMTpa)



Case No. Cs-1 Cs-3 Cs-6 Cs-8 Cs-1 Cs-3 Cs-6 Cs-8

Paradip Refy & PL Y Y N N Y Y N N


Addl Gives to HPC

WS 242 242 242 242 278 278 227 254

HSD 733 733 733 733 803 803 800 800

Addl Gives to BPC

WS 502 502 502 502 543 543 543 543

HSD 1485 1485 1485 1485 1629 1629 1633 1633

Purchase-ONGC

WS 93 93 93 93 107 107 107 107

SKO 314 333 426 815 350 356 815 815

HSD 494 494 494 494 544 544 544 544

Purchase-RIL

WS 25 25 25 25 29 29 67 29

SKO 265 550 650 650 220 565 650 650

HSD 217 217 217 217 239 239 239 239

The scenario-wise projected savings (i.e. delta in the LP Objective Function vis-a-vis the

corresponding Basecase) from commissioning of the expansion of Haldia refinery under

the various case, i.e. with/without Paradip refinery, with/without Paradip product PL, is

provided at Table-5 hereunder:

Table-5 : Saving from Haldia Expansion (Rs. Crores pa)

Scenario No. Scn-1 SCN-2 SCN-3 SCN-4 SCN-5

Demand Level Low High ModerateLow Moderate

Price 3-Yr Avg3-Yr Avg3- Yr AvgIT F' castIT F' cast

With Paradip Refy&Pl 162.4 208.5 176.3 246.2 229.3

With Paradip Refy, w/o Pl 158.0 192.0 179.1 244.7 225.1

w/o Paradip Refy, With PL213.7 314.3 282.3 254.6 233.5

w/o Paradip Refy & PL 186.8 330.7 260.3 253.6 229.0

Note: LP Obj. Fn. = Product Realization minus Raw material costs minus Catalysts and

Chemical costs minus Fuel & Loss minus Logistic costs.

The impact on the savings from the subject project due to the commissioning of Paradit

refinery and PL is minimal under Scn-4 &5 due to lower differential in the overall thruput

levels and higher utilization of Barauni in the concerned basecases (since the forecasted

increase in product cracks vis-avis 3-year average is higher than the forecasted

increase in LS-HS spreads:

It can be seen from Tables-5 above that:

With pricing based on the 3-years average, savings on global basis from

commissioning of the subject project varies from about Rs.160 to Rs.330 Crores

per Annum based on the demand level/commissioning of Paradip Refinery.

With pricing based on the long term IT forecast, savings from commissioning of

the subject project varies from about Rs.230 to Rs.255 Crores per Annum.

Attachment-A

Basis Adopted

Demand

Scn-1 & 4:

Product-wise demand was considered at the same levels as in the Low-Demand

scenario considered for Gujarat expansion and -15 study (and utilized in the IR workings

for years 1 to 10 of the said study).

The demand numbers under this scenario are close to the levels per the outlook of the

year 2005-06. However, demand of Naphtha and FO have been substantially reduced

considering the projections by Corporate Planning regarding switch-over by major

customers to Natural Gas. As regards LSHS, it has been assumed that the switch-over

to gas would not be major. Further, demand of SKO is about 6.7% lower than the current

outlook for the year 2005-06.

Scn-2:

Product-wise demand has been considered at the levels per the latest projections by

Planning Dept Mktng HO for the year 2011-12.

Scn-3 &5:

Product-wise demand level is similar to the High-Demand scenario considered for the

Gujarat expansion and P-15 study land utilized in the IRR workings for year 11 to 15 of

the said study), i.e. growth rate of 10% for HSD and 15% for MS has been applied on

the demand nos. per Scn-1. However, in addition, ATF has also been escalated at 18%

over and above the level in Scn-1.

The level of product-wise demand considered under the various scenarios is provided at

Table-A hereunder. Marketing HO's latest outlook of product-wise demand for the year

2005-06 has also been provided therein for the purposes of comparison.

Table-A: Scenario-wise Demand Numbers (TMTpa)

Product05-06

Outlook

Sc-1&4 Low

Demand per P-

15 Study

Scn-2 Projections for 11-12

per Mktng HO

Scn-3&5 High Demand

per P-15 Study plus

ATF Growth

Comparative LevelLow High Moderate

MS 3818 3893 5353 4477

HSD 21032 21920 27151 24112

SKO 6313 5888 5211 5888

ATF 2174 2185 2936 2579

Naptha 2574 907 873 907

FO 4300 3556 5482 3556

LSHS 3413 2571 1274 2571

LDO 667 657 582 657

Bitumen 2323 2475 3143 2475

Flexibility was kept in the model under all the scenarios in respect of meeting of the

LSHS demand, i.e. the model had the option in all cases of not meeting the LSHS

demand (Min limit of LSHS kept as zero). In other words, LSHS production at the

refineries was based on economics.

The CARG adopted by Planning Dept Mktng HO for arriving at the demand numbers for

the terminal years of the Plans (number for 2011-12 adopted for Scenario-3) is provided

at Table-B hereunder:

Table-B: CARG adopted by Planning Dept Mktng HO

Product'06-7-08090809-11121112-16171617-2122

MS 5.2% 5.2% 5.0% 4.0%

HSD 3.8% 3.8% 4.0% 3.0%

SKO -4.0% -4.0% -1.8% 0.1%

ATF 4.1% 5.0% 5.0% 5.0%

Production:

The maximum crude processing capacities at various refineries considered for the Study

are provided at Table-C hereunder:

Table-C: Max, Crude Capacities at Refineries (TMTpa)

GujaratPanipatMathuraBarauniHaldiaGujaratDigboiBRPLCBDUCPCL Paradip

13,700 15,000 8,400 6,000 7,500 800 600 2,350 517 10,00015,000

Exchanges & Purchases

For all Scenarios it has been assumed that HPC's proposed Mindra-Delhi product PL as

well as EPC's proposed extension of its Mumbai-Manmad-Indore product PL to

Loni/Piyala would be in place. Gives to HPC and BPC ex-Koyali, Mathura and Panipat

have accordingly been reduced from normal levels as detailed at Table-D hereunder

(based on the OMC 's current & takes from IOC at their future ToPs):

Table-D: % Redn in Gives to HPC & BPC due to their PLS

Refy % Redn from normal level

HPC BPC

HSD MS HSD MS

Koyali 65% 47% 45% 39%

Mathura52% 43 39% 36%

Panipat 14% 5% 10% 4%

Further, since it was observed under all the cases and scenarios that the subject

expansion of Haldia refinery / commissioning of the proposed Paradip-Raipur

PL/commissioning of Paradip refinery result in substantial reduction in IOC's takes (vis-

a-vis current levels) ex-HPC's Vizag refinery, no takes by HPC ex-Haldia has been

envisaged under any scenario/case.

Subject to the above mentioned adjustments, gives to BPC & HPC ex-all refineries in

each scenario are based on the refinery-wise numbers finalized per the MoU for the

quarter Jan-Mar'06 duly annualized and escalated by the product-wise demand growth

rates adopted for IOC & Associates under the concerned scenario. Exchange of SKO

has been assumed on a ton-to-ton basis since no company would be interested in taking

additional SKO from another company.

Refinery-wise takes from BPC & HPS as well as purchases from RIL and ONGC have

been retained at economic levels under all scenarios.

Prices:

Prices of Crudes and Products RTPs, Assessable Values and Transaction Values were

considered at the average of the actuals during the 3-year period Apr'02 - Mar'05, duly

adjusted for changes in the pricing methodology as per the Industry agreement for the

year 2004-05 as well as for the changes in the rates of Customs and Excise Duty per

Budget for the year 2005-06. Necessary adjustments have also been made for the

changes in quality of MS & HSD.

Price sensitivity of higher LS-HS spread and product cracks (broadly in line with the

latest IT forecast) on the results of Scn-I (Low demand) and Scn-3 (Moderate demand)

has also been examined vide Scenarios 4 & 5 respectively. A comparison of the 3-year

average crude spreads and product cracks considered for Scenarios-1, 2 & 3 vis-a-vis

those considered for Scenarios-4 & 5 as well as the forecast by IT Dept for the year

2010 are provided at Table-E hereunder:

Table-E: Comparison of Crude Spreads and Product Cracks

(Figs in US$/bbl)

Scenario Basis IT F'cast 2010Scn-1, 2 & 3 '02-'05 AvgScn-4 & 5

Brent-Dubai 4.55 3.04 5.00

MS (Sing)-Dubai13.14 8.22 3.80

HSD-Dubai 9.84 5.67 9.84

Naphtha-Dubai 4.49 2.30 4.49

SKO-Dubai 13.38 6.86 12.34

FO-Dubai (10.43) (5.76) (10.00)

No changes has however been effected (from the 3-year average) in any scenarios as

regards the selling price of SKO in the market place, since the same continues to be

controlled by the Govt.

As regards Paradip refinery, as also mentioned earlier, petrochemicals price realization

from the domestic as well as export market, and the input cost of Benzene have been

considered per workings provided by Refy HQ (based on 3-year average price data

during the period Apr'02 - Mar'05).

Imports & Exports:

Options for imports / exports kept open at refineries / ports in the IP model under all

scenarios are detailed at Table-F hereunder:

Table-F: Imports / Exports Option in IP mode-I

Product HaldiaParadipCPCLDahejBarauniPanipatMathuraKandla/IOTL

Exports

MS √ √ √ √

Naphtha √ √ √ √ √

ATF √ √ √ √

HSD √ √ √ √ √ (Pak)

FO √ √

Bitumen √

Petrochem √

Imports

FO √ √

Pipelines:

KBPL has been considered as on crude service. The Paradip-Haldia crude PL has been

considered to be operational.

The following other proposed product pipelines have been considered as operational:

Koyali-Dahej, Branch lines from KVSS to Ajmer and Chittorgarh, Chennai-Bangalore,

Panipat-Tikrikalan and Koyali-Ratlam-Itarsi-Khapri with branches to Indore and

Nishatpura (with rail loading facilities at Koyali, Ratlam and Khapri) under all scenarios.

Further, for cases 1, 3, 5 & 7 under each scenario the proposed Paradip-Jatni-Rengali

(Sambalpur+Rourkela) - Korba (Eilaspur+Bishrampur)-Raipur product PL with branch

line from Rengali to Bundu (Tatnagar+Namkum) has also been considered to be

operational with a variable operating cost of Rs. 125/MT.

haldia refinery project appraisal report

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