Introduction to Refining Industry

Structure
What is Crude oil

Refining: Historical perspective

Global oil scenario Indian oil scenario Kochi refinery Refining industry outlook

What is crude oil

What is crude oil

Crude Oil is a liquid mixture of thousands of organic chemicals found underground. It is the result of organic matter decaying over thousands of years; hence the name fossil fuel The purpose of an oil refinery is to transform relatively low value crude oil into high value products as efficiently, profitably and environmentally sound a way as possible

Crude oil distillation

Oil refinery or petroleum refinery is an industrial process plant where crude oil is processed and refined into more useful petroleum products. Oil refineries are typically large industrial complexes with extensive piping running through out, carrying streams of fluid between large chemical processing units. An oil refinery is considered an essential part of the downstream side of the petroleum industry Oil refineries are complex plants but are relatively mature and highly integrated

Major refinery products

Petroleum products are usually grouped into three categories
Light distillates
Liquified petroleum gas (LPG) Gasoline (also known as petrol) Naphtha

Middle distillates
Kerosene and related jet aircraft fuels, Diesel fuel

Heavy distillates and residuum

Fuel oils, Lubricating oils, Paraffin wax, Asphalt and Petroleum coke

Oil refineries also produce various intermediate products such as hydrogen, light hydrocarbons, reformate and pyrolysis gasoline
These are not usually transported but instead are blended or processed further on-site

Physical and chemical processes

Physical
Distillation Solvent extraction Propane deasphalting Solvent dewaxing Blending

Chemical Thermal Catalytic

Visbreaking Delayed coking Flexicoking Hydrotreating Catalytic reforming Catalytic cracking Hydrocracking Catalytic dewaxing Alkylation Polymerization Isomerization

Flow scheme of a modern refinery

Refining: a historical perspective

History of crude oil

1840s-1850s: Processes developed for refining kerosene from crude oil 1848: First modern well dug near Baku, Azerbaijan The first oil refineries in the world were built by Ignacy ukasiewicz near Jaso, Poland from 1854 to 1856. 1850s-1860s: 90% of world oil production from Azerbaijan region

1859: Colonel Edwin Drake strikes oil near Titusville, Pennsylvania. Drakes find leads to Pennsylvania oilrush

History of crude oil

1901: Anthony Lucas, strikes oil about 10 miles south of Beaumont, Texas, birth place of oil giants like Amoco, and Humble Oil Company By 1910, significant fields were being developed in Iran Sumatra , Venezuela Peru, and Mexico 1938: Discovery of Saudi Arabian reserves 1968: Kuwait, Libya, and Saudi Arabia form OPEC 1973: OPEC embargo leads to energy crisis 1979: Second Oil crisis following Iranian Revolution 1990: Persian Gulf War

Global oil scenario

Primary Energy Consumption Pattern

World Energy Basket

6% 2% 9% 1% 25%

20% 37%

Coal

Oil

Gas

Nuclear

Hydro

Biomass

Renewables

The percentage of oil in the energy basket is expected to remain same in future years also.

Proved Oil Reserves

Figs in %

Country

consumption Production

Reserves

India China USA

3.4 9.6 22.5

0.9 4.8 7.8

0.5 1.2 2.4

Absolute reserves & R/P ratio have increased However, in last 5 years, production and consumption growth have outpaced growth of reserves Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline

Reserves - to - Production (R/P) Ratios

Reserves-to-production (R/P) ratio
Years

Source: BP stats, 2009

Focus Middle East countries

Global refining sector

Refining Capacity : 91.7 Mbpd Throughput : 74.8 Mbpd Over 600 refineries worldwide utilization rate ~85.9% Approx US $ 2,750 bn revenue generated by oil & gas sector in 2010 63% revenues generated by refining & marketing sector Europe & US together accounted for ~55% of the refining and marketing revenues

Non OECD Asia to emerge as a new demand centre (~ 32 mbpd)

Asias share of global refining capacity to increase from 27 % to 34 % by 2017 No significant expansions in US and Europe

OPEC
Saudi Arabia UAE Kuwait Qatar Iran Angola Ecuador

Iraq Libya Algeria Nigeria Venezuela

Organisation of Petroleum Exporting Countries

OPEC is a group of 12 countries that produce 36% of the worlds oil, or 32 million bpd. The biggest producer is Saudi Arabia, but Iran, UAE , Kuwait and Venezuela are also major suppliers

Other Oil Producers

Organization for Economic Co-operation and Development (OECD) produces 24% of all oil, or 21 million barrels per day. The USA is the biggest single producer in OECD but Mexico, Canada and the UK are also major suppliers Outside OECD, the states of the former Soviet Union are also major producers supplying a further 15% of global output

World Demand-Supply Scenario

Large scale trade movements happens within and across Atlantic & Pacific basins
North America
150
0

90

Europe & Eurasia

970

Figs in mtpa

1074 924

1039

Middle East

Atlantic basin
Atlantic Basin Africa
10 120 130

39 280 319

36

Asia Pacific
1148 1072

41

S & Cen. America

236 267

Pacific Basin
Production Consumption Net

Pacific basin

Source: BP Statistical review 2010

Product Yield from Various Crude Oils

Figs in % LPG MS NAPHTHA LT DIST. SK HSD MD.DIST. TOTAL LSHS FO SULPHUR HY ENDS PF&LOSS TOTAL CRUDE'S' Price $/ bbl FOB KUWAITY 5.70 8.80 8.10 22.60 11.50 19.10 30.60 53.20 -4.50 42.30 1.10 38.90 7.90 100 2.50 104.7 DUBAI 5.70 9.20 7.20 22.10 11.50 27.20 38.70 60.80 -4.40 34.90 0.90 31.40 7.80 100 2.10 106.6 BH 6.55 12.70 12.20 31.45 9.50 46.60 56.10 87.55 5.70 0.05 5.75 6.70 100 0.12 113.8 BONNY LT 4.80 8.00 6.30 19.10 9.00 53.80 62.80 81.90 11.50 0.10 11.60 6.50 100 0.11 114.6

Oil price volatility

Indian oil scenario

Primary Commercial Energy Mix (%) World Vs India

Resources World India
Indias Primary Energy Mix 2009
9 1 2.6

Oil

37.4

33.22
33 53

Natural Gas

20.3

9.34
Coal Oil Natural Gas Nuclear Hydel

Coal

25.5

53.54

Indias Primary Energy Mix 2025

6 3 43 16

Nuclear

6.5

1.04

Hydel

6.3

2.63
32
Coal Oil Natural Gas Nuclear Hydel

Source : www. Planning commission.gov.in

Refineries & Product Pipelines

Refining
Refining Capacity Capacity Utilisation : 193.3 MMT : 104 %

Product Pipelines
Product Pipelines Length Capacity Capacity Utilisation : 12017 KM : 68.17 MMT : 77 %

Industry structure: Indian Hydrocarbon Sector

Major Players/ Companies
Upstream (Exploration)
ONGC/ ONGC Videsh

Downstream

Industry bodies
Petroleum Planning & Analysis Cell

IOCL (9)

BPCL (4)

PCRA

Oil India

HPCL (2)

MRPL (ONGC)

OISD

Pvt/ Govt E& P Const.

RIL

ESSAR

Directorate General of Hydrocarbons Centre for High Technology

Pvt/ Govt Oil & Gas Mktg companies

GAIL

History of Indian oil industry

The origin of oil & gas industry in India can be traced back to 1867 when oil was struck at Makum near Margherita in Assam. Italian Engineers, commissioned by the Assam Railways and Trading Company, accidently discovered oil at Digboi, NorthEastern part of Assam The first commercially viable well in India, known as well No.1, was successfully drilled in September'1889 in Digboi First modern refinery in India was built and commissioned in December'1901 to supplant a small "batch-still" refinery in Margherita.

First Commercial Viable well in India locally known as Well No.1

History of Indian oil industry

At the time of Independence in 1947, the Oil & Gas industry was controlled by international companies. Oil sector was made a core sector industry vide Industrial Policy Resolution, 1954, ONGC was formed in 1955 became a Commission in 1956

In 1958, Indian Refineries Ltd, government company was set up.

In 1959, for marketing of petroleum products, the government set up another company called Indian Oil Company Ltd. In 1964, Indian Refineries Ltd was merged with Indian Oil Company Ltd. to form Indian Oil Corporation Ltd.

Discovery of oil in Bombay High in February, 1974 opened up new avenues of oil exploration in offshore areas.

Installed Refining Capacities, MMT

Current installed capacity : 193.4 MMT as on 1.4.2011;
Refinery IOCL, DIGBOI IOCL, GUWAHATI IOCL, BARAUNI IOCL, HALDIA IOCL, PANIPAT IOCL, MATHURA IOCL, KOYALI HPCL, MUMBAI HPCL, VISAKH BPCL,MUMBAI BPCL,KOCHI 01.04.2011 0.65 1 6 7.5 15 8 13.7 6.5 8.3 12 9.5

Capacity has grown from 62 MMT in 1998 to 193 MMT in 2011

10th largest refining capacity in the world Significant investments in capacity additions & in quality up-gradation
To comply with Euro-III/ Euro IV fuel quality specifications for auto fuels Processing of heavy & sour crude

BPCL BORL
CPCL,MANALI CPCL,NARIMANAM BRPL NRL MRPL ONGC

6
10.5 1 2.35 3 11.82 0.078 62 10.5 193.39

Refining capacity expected to reach 223 MMT by April 2012 Surplus refining capacity of 70 MMT projected in 2011-12

RPL ESSAR TOTAL

Refineries- Location Overview

Key Facts
Total refining capacity: 193 MMTPA IOC is the largest refinining company In PSU. 61.7 MMTPA cap. 33.4 % Refining Share Reliance is the largest refinery at single location 62 MMTPA New capacities are being added, Jamnagar both brown field and Greenfield Majority of the refineries are in coastal locations Potential to become a major export hub of petroleum products
Mangalore Cochin Mumbai Vizag Bina Bhatinda Panipat Bongaigaon Barauni Guwahati Digboi

Mathura

Numaligarh

Koyali

Haldia

Paradeep

Rajamundhri Chennai Narimanam

Existing Under Construction/Proposed

30

Mode of Transfer
Figs in %

12

18

39

Petroleum products marketing largely done by PSUs: IOC, HPCL, BPCL, Extensive retail network over 18000 Retail outlets, 6000 kerosene agencies and 5000 LPG distributorships Requirements of industrial units met through direct supplies

31

Railways

pipelines

Coastal

Road

Market Share of Oil and Gas Companies

0.4% 18.2% 7.0% 4.7% 0.7% 0.1% 48.5%

20.4%

IOCL

BPCL

HPCL

Shell

RIL

Others

Essar

MRPL

Oil trade-India at a glance

105 95 85 75 68 79.5 100

Crude Oil Import

76

US$ Billion

Oil trade

65 55 45 35 25 15 5 -5 14 9 2 2 3 0.2
199900 200001

48 39 26 13 1 2 16 2
200203

Product Export
43 30 28 27 14 15 7

18 7 11

18

12

4 2 200304

200102

200405

6
200506

9
200607 200708 200809 200910 201011

Product Import

Oil Trade - India

Source: PPAC

Crude oil imports - a big pressure on Current Account balance

Wide gaps between Product Demand and Indigenous Crude Availability

Widening gap between product demand and crude production from indigenous sources; Heavy dependence on Imports Bridging the gap - Oil Equity abroad and fresh finds under New Exploration & Licensing Policy Need for huge investments in refining, pipelines & Marketing infrastructure

Fuel Quality Norms

Product Quality parameter
Sulphur -50 ppm (max) Benzene 1 % (max) Aromatics - 35 % (max) Olefins 21 % (max) Sulphur - 150 ppm (max) Benzene 1 % (max) Aromatics - 42 % (max) Olefins 21 % (max) Cetane No 51 Sulphur 50 ppm (max) 95 % Recovery 360 deg C PAH 11 % max Cetane No 51 Sulphur - 350 ppm (max) 95 % Recovery 360 deg C PAH 11 % max

Equivalent
Euro-IV

Location
13 major cities from April 2010

Petrol

Euro-III

Rest of the country from April 2010

Euro-IV

13 major cities from April 2010

Diesel

Euro-III

Rest of the country from April 2010

Historical Growth Perspective of Oil Industry

Three distinct growth phase post independence
Early phase: 1947-1969 Free Pricing Initially few AngloAmerican companies shaped the Indian industry Industrial Policy Resolution of 1956 gave prominence to the public sector resulting in formation of ONGC (Upstream) & IOC (Downstream) Pricing Development Phase 1970 to 1990 APM introduced in 1974 & Only NOCs Take over of multinationals like Burmah Shell, Esso& Caltex(197479) Dominance of National Oil Companies (NOCs) Economic liberalization phase from 1991 APM Dismantled in 2002 New Exploration Licensing Policy (NELP) launched in 1999 Refinery sector delicensed in 1998. APM dismantled in April 2002 & Private Cos. started marketing Transportation fuels Since 2004, Prices of Sensitive Products Domestic LPG , PDS SKO, MS & HSD again being moderated by Government

Auto-Fuel Price Build up

Approx 75% to 80% of the total crude oil requirement for India is by imports. Cost of Crude oil = 110 $/bbl, which approximately comes to Rs. 35/litre.

Product Petrol Diesel LPG SKO

Rs/ litre 67.63 44.55 16.23 14.83

Adding losses, transportation and processing cost, the cost of products from the refinery would be 38-40 Rs/ litre. Petrol was decontrolled in June 2010; Kerosene, Diesel and LPG are still controlled

Who Gets What from Petrol price

17% 2% 58%

23%

Refiner Dealer commission

Central Government State Government

Share of taxes in Petrol RSP effective 16 January 2012 Rs/ Ltr. Total Price before Government Levies/ Price component realized Less: Under Recovery to OMCs Price Component Realized Custom duty# Excise Duty including Education Cess @ 3% Total Central Taxes Price Charged to customer - Depot Price VAT (Including VAT on dealer commission) Total State Taxes Dealer Commission RSP per litre (Rounded Up) 40.40 0.22 38.42 0.75 14.78 15.53 54.2 10.94 10.94 1.5 65.64
th

Share in RSP

58%

23%

17% 2% 100%

Petrol & Diesel Price Comparison

Petrol Diesel Kerosene (PDS) LPG Per cylinder

India
USA France Germany UK Italy Pakistan Sri lanka Bangladesh Nepal

63.70
42.82 94.97 95.99 96.39 96.79 41.81 50.30 44.80 63.24

41.29
45.84 69.87 72.54 82.93 74.00 46.70 24.67 27.32 45.38

14.83

399

44.06 24.67 27.32 45.38

757.04 863.40 469.24 819.60

Information declared in Rajaya sabha, with inputs from IEA (Aug 23, 2011 prices at Delhi)

Kochi Refinery Past present future

Kochi Refinery Milestones in Growth

Incorporated in 1963 as a joint sector company Original crude oil Refining Capacity of 2.5 MMTPA Refining capacity increased to 9.5 MMTPA in four stages

Diversified into petrochemicals in 1989

Subsidiary of BPCL since April, 2001
2.0

Merged with BPCL on August 21, 2006

1.2 0.8 2.5

3.0 9.5

1966

1973

1984 1994

2009

2011

Dedication

Late Smt. Indira Gandhi, Prime Minister of India dedicates Cochin Refineries Ltd. to the Nation on September 23, 1966

Kochi Refinery Today.

9.5 MMTPA fuel & petrochemical refinery
5.1 % of Indias crude oil refining capacity

Producing Euro-III/ Euro-IV (part) compliant auto-fuels Meets the demand of petroleum products in Kerala and Southern part of India. International accreditations: ISO 14001/ ISO 9001/ ISO 17025/ OHSAS 18001

Raw Material Linkages

Imported LS Crudes:
Labuan Bonny light Marib Light Tapis Mirri light -Malaysia -Nigeria -Yemen -Malaysia -Malaysia

Cochin Oil Terminal

Indigenous BH crude

BPCL KR
Imported HS Crudes:
Arab Mix Kuwaity Dubai Murban Umm Shaif -Saudi -Kuwait -UAE -UAE -UAE

Single point mooring

Yield Pattern Ex. Kochi Refinery

Figs in %

Products
LPG MS (Petrol) Naphtha LT DIST. SKO (Kerosene) HSD (Diesel) MD.DIST. TOTAL DIST LSHS (Low Sulphur Feedstock) FO (Fuel Oil) HY ENDS PF & Loss Total

Percentage
4.9 11.5 4.9 24.6 4.2 46.1 54.9 79.5 3.1 9.2 12.4 8.1 100

Crude Oil Receipt Facilities

Major facilities are
SPM 19 Kms off the coast line
48 sub-sea pipeline from SPM to shore tank farm Shore Tank Farm (STF) 3 tanks

Onshore line from STF to existing 30 crude pipeline

Capable of handling VLCCs Flexibility in crude selection Reduction in freight and wharfage Capital cost of Rs 821 Crores Project Commissioned, First tanker berthed on 3rd December 2007

Crude Oil Receipt Facilities

A floating buoy anchored at deep waters Floating hoses will be connected to tanker to discharge crude oil Under buoy hoses connect buoy to PLEM (Pipeline end manifold) at sea bed Sub sea pipeline

Capacity Expansion cum Modernization Project

Envisaged to comply with Auto Fuel Policy of Government of India along with Capacity expansion
Implemented in two phases Ph-I Commissioned in December 2004
Facilities for BS II specifications

Capital cost - Rs. 273 Crore

Increased capacity by 2 MMTPA Facilities for producing auto-fuels conforming to Euro III / IV specifications Capital cost - Rs. 3,700 Crore

Ph-II commissioned in February 2011

Integrated Refinery Expansion Project

To meet the healthy demand growth of petroleum products
HSD
MS

:7%
:9%

To increase the refining share of BPCL within the country To produce Euro-IV compliant auto-fuels To become a more complex, state of the art refinery

Integration with Petrochemicals for value addition

6 MMTPA refinery with matching downstream treatment facilities Residue up-gradation facilities Petrochemical integration -Propylene based petrochemical complex

Applications of Propylene Derivatives

Product
Glacial Acrylic Acid Super Absorbent Polymer Acrylates N-Butanol/2 Ethyl Hexanol

Uses / Industry
Water treatment chemicals, Detergent Diaper / sanitary products Paints & Inks, Adhesives, Textiles, Resins Plasticizers, Di-Octyl Phthalate, Detergents, Paints and Inks Powder coating resins, Poly Ethylene Terephthalate (Plastics) Automotive, Resins, Wood Products, Plastics Pharmaceutical, Plastics, PVC, Resins Polyols Glycols - Poly Urethane Foam (PUF) - Antifreeze

Neo Pentyl glycol Phenol Acetone Propylene Oxide

Benefits of the Project -Industrial

Caters to growing demand for petroleum products in the country
Product Diesel Current Production (TMT) 4384 Post IREP (TMT) 7232

Petrol
LPG Propylene

1115
469 50

1600
1153 500

Propylene production will catalyze downstream petchem business Production of about 1.1 MMTPA of petcoke Petcoke for Cement production Possibility of setting up a petcoke based power plant

Additional sulfur production will benefit Kerala based industries like FACT and Travancore Titanium

Refining Industry outlook

New Economic Order

Gold Man Sachs study Dreaming with BRICs: The Path to 2050 observes over the next 50 years, Brazil, Russia, India and China could become a much larger force in the world economy As per IEO 2009: Over the period 20092030, non-OECD economies are expected to clock 5.3% against 2.5% by OECD economies The development of BRIC (particularly industrialization of China and India) can push the world growth rate to above 4 % as against 3.7 % ( Avg. of last 20 years) Oil is expected to remain 37-39 % of global primary commercial energy mix
GDP at Market Prices (US$ billion

10000 1000 100 2000

40 35 30 25 20 15 10 5 0 2003 2004 2010 2015 2020 2025

India China UK Germany Japan US

2010 2020

2030

2040 2050

GDP at PPP (trillion 2000 $)

China
US

India Japan Brazil

2030

India & China: Cutting across industrialized economies

Region wise Consumption of Petroleum Products

Figs in Mbpd

Source : International Energy Outlook , EIA 2009

Refining Challenges
Changing Feed Quality and availability Declining trend of low sulfur crude oils
Growing supply of Heavier, Sour and high TAN crude slate

Product Mix variation

Address growing demand for distillates & tighter product specifications Shifting regional balance of demand as western markets mature and new markets grow rapidly in Asia

Challenges in processing. Configuration/ complexity

High level of integration to reduce capex and opex (from topping refinery to integrated petrochemical complex Increasing Complexity factor

Changing Business Environment regulations & framework

Emergence of refining hubs in Asian countries Managing new norms; environmental (GHG emission); societal (CSR)

Refinery Configuration & Competitiveness

Evolution of Regulations & Technology

GHG
2010 Green House Gas Co2 is a pollutant 2005 Kyoto adopted Energy Security Bio fuels 1990 CAA amendments 1980 European directives 1970 US Clean Air Act 1952 London Killer Fog

Efficiency Renewables

NOx VOC Pb SOx PM

Hydro-treaters Oxygenates Alkylation Isomerisation FCC Scrubbers Crude Distillation

Oil a Strategic Commodity

Oil is the largest traded commodity in the world
Nymex, IPE

Energy security is the prime concern for all the nations in the world Countries investing in oil assets across the globe
ONGC videsh, BPRL

Oil producers

Wars were fought for oil and its control Price volatility on account of various geo-political reasons Oil is finite; but infinite need for energy

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