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Transcript of RIL Q4 08 presentation
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April 21, 2008
FY 2007-08 Results
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Forward Looking Statements
This presentation contains forward-looking statements which may be identified
by their use of words like “plans,” “expects,” “will,” “anticipates,” “believes,”
“intends,” “projects,” “estimates” or other words of similar meaning. All
statements that address expectations or projections about the future,including, but not limited to, statements about the strategy for growth, product
development, market position, expenditures, and financial results, are forward-
looking statements.
Forward-looking statements are based on certain assumptions and
expectations of future events. The companies referred to in this presentation
cannot guarantee that these assumptions and expectations are accurate or
will be realised. The actual results, performance or achievements, could thus differ materially from those projected in any such forward-looking statements.
These companies assume no responsibility to publicly amend, modify or
revise any forward looking statements, on the basis of any subsequent
developments, information or events, or otherwise.
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Contents
Business Review
Business Review
Summary
Summary
Financial Performance
Financial Performance
Performance Highlights
Performance Highlights
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Performance Highlights
E&P
Days of ‘easy’ oil over – paradigm shift in prices
9 additional oil and gas discoveries in several blocks
KG D6 projects (D1, D3 gas and MA oil) on schedule for commissioning this year
Development plans for NEC-25 and MA oil field (KG-D6) submitted to DGH.
Development plan for CBM blocks approved
Sr.No.
Block & Well Well Name Oil/GasDiscovery
1 KG- D6 R1 Gas
2 CY-D5 A1 Oil & Gas
3 KG-D4 MD1 Oil
4 KG III 5 P1 Gas
5 KG III 5 J1 Gas
6 KG V D3 A1 Gas
7 NE-25 J1 Gas
8 GS-01 B1 Gas9 KG V D3 B1 Gas
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Performance Highlights
R&M
Refining complexity, higher yields, superior product mix and wide crude slate enabled
RIL to achieve superior GRM
GRM at $15.5/bbl for the quarter and at $15/bbl for the full year
Strong product cracks in Asia result in high Singapore complex margins
Petrochemicals
Strong domestic demand for polyester (up 17%) and polymer (up 15%) support
volume growth
Polymer margins remain strong despite high feedstock cost
Standalone polyester margins improve significantly – chain margins impacted on
account of significant margin contraction in PX
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Financial Performance FY 2007-08Financial Performance FY 2007-08
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Financial Performance FY 2007-08Financial Performance FY 2007-08
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Financial Results – FY 2007-08
Robust Operating Performance – Net Profit Growth of 38%
4Q FY08 3Q FY08 4Q FY07
%
Change
over 4Q
FY07
FY08 FY07%
Change
9,645 9,103 6,735 43% Turnover 34,713 27,227 27%
1,572 1,541 1,218 29% PBDIT 6,032 4,722 27%
975 2,050 726 34% Net Profit 4,850 2,747 77%
975 985 726 34%Net Profit [excl.exceptional item]
3,804 2,747 38%
0.7 0.7 0.5 EPS (US$) [excl.exceptional item]
2.6 1.9
(In USD Million)
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Financial Results – FY 2007-08
Robust Operating Performance – Net Profit Growth of 28%
4Q FY08 3Q FY08 4Q FY07
%
Change
over 4Q
FY07
FY08 FY07
%
Change
38,697 35,880 29,276 32% Turnover 139,269 118,354 18%
6,308 6,074 5,293 19% PBDIT 24,201 20,525 18%
3,912 8,079 3,156 24% Net Profit 19,458 11,943 63%
3,912 3,882 3,156 24%Net Profit [excl.
exceptional item]
15,261 11,943 28%
26.9 26.7 21.7EPS (Rs.) [excl.exceptional item]
105.0 82.2
(In Rs. Crores)
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Segment Results
4Q 3Q 4Q Chg. Over FY08 FY07 Change
FY08 FY08 FY07 4Q FY07 YoY
Refining
7,150 6,636 4,837 48% Revenues 25,110 19,768 27%
708 663 523 35% EBIT 2,575 1,777 45%
9.9% 10.0% 10.8% EBIT (%) 10.3% 9.0%
15.5 15.4 13.0 GRM (US$ / bbl) 15.0 11.7
Petrochemicals
3,519 3,224 2,892 22% Revenues 13,210 11,588 14%365 451 318 15% EBIT 1,773 1,513 17%
10.4% 14.0% 11.0% EBIT (%) 13.4% 13.1%
Oil and Gas
206 192 126 63% Revenues 673 470 43%111 98 70 59% EBIT 375 295 27%
54.0% 51.1% 55.3% EBIT (%) 55.6% 62.7%
In US$ Million
Strong market dynamics drive refining performance; high naphtha
cracks impacts petrochemical margins
(In US$ Million)
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Segment Results
4Q 3Q 4Q Chg. Over FY08 FY07 Change
FY08 FY08 FY07 4Q FY07 YoY
Refining
28,686 26,154 21,025 36% Revenues 100,743 85,932 17%
2,839 2,614 2,275 25% EBIT 10,332 7,724 34%
9.9% 10.0% 10.8% EBIT (%) 10.3% 9.0%
15.5 15.4 13.0 GRM (US$ / bbl) 15.0 11.7
Petrochemicals
14,119 12,706 12,572 12% Revenues 53,000 50,371 5%1,466 1,777 1,381 6% EBIT 7,113 6,578 8%
10.4% 14.0% 11.0% EBIT (%) 13.4% 13.1%
Oil and Gas
828 758 548 51% Revenues 2,702 2,043 32%
447 387 303 48% EBIT 1,503 1,281 17%
54.0% 51.1% 55.3% EBIT (%) 55.6% 62.7%
In Rs. Crore
Strong market dynamics drive refining performance; high naphtha
cracks impacts petrochemical margins
(In Rs. Crore)
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Segment EBIT Bridge – FY08 Vs FY07
Higher EBIT due to higher operating profit from all three operating segments -
refining, petrochemicals and oil & gas
FY07 FY08
EBIT Variance Rs. Crore
R& M
Operating
Profit
OthersPetchem
Operating
Profit
Net Impact
Rs. 3,352 Crore
Depreciation
15,636
18,988(32)
2,639366
45
Oil & Gas
Operating
Profit
334
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Oil & Gas
1.7%
Others
0.5%
Refining
64.1%
Petchem
33.7%
Oil & Gas
7.9%
Others
0.2%
Refining
54.4%
Petchem
37.5%
Business Mix for FY08
Refining and petrochemicals contributed 98% of revenues and 92% of EBIT
Revenues FY08 EBIT FY08
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Financial Ratios – FY08
Ratios Mar-08 Mar-07
Net Debt : Equity 0.35 0.34
Net Gearing 22% 25%
Interest Cover 12.3 11.9
Weighted Avg. Cost of Debt (%) 5.9 7.1Avg. Maturity of Debt (years) 5.0 5.4
Forex Debt (%) 85.0 73.0
ROCE (%) 20.1 20.5ROE (%) (Adjusted) 23.0 24.0
Strong balance sheet with conservative financing norms
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Capex – FY08
4Q
FY08
3Q
FY08
4Q
FY07 (in US$ M illion) FY08 FY07
855 1,236 758 Oil & Gas (E&P) 3,351 1,317
232 136 76 Refining & Marketing 663 329
18 57 22 Petrochemicals 126 106
294 136 15 Common 721 314
1,399 1,565 871 Tota l 4,861 2,066
Almost 70% of the capex incurred in Oil & Gas business
Cash profits fully re-deployed in existing businesses
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RIL Financial: 5 Year Trends
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
FY04 FY05 FY06 FY07 FY08
Revenues
0
5,000
10,000
15,000
20,000
25,000
FY04 FY05 FY06 FY07 FY08
0
4,000
8,000
12,000
16,000
FY04 FY05 FY06 FY07 FY08
EBITDA
PAT
(Rs. Crores)
CAGR
– 21%
CAGR
–23%
30% CAGR inPAT
30% CAGR inPAT
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0%
5%
10%
15%
20%
25%
30%
FY04 FY05 FY06 FY07 FY08
ROCE ROE
RIL Financial: 5 Year Trends (Contd.)
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
FY04 FY05 FY06 FY07 FY08
Market Cap. (Rs. Crs.) ROCE - ROE
Consistent performance across all key metrics
CAGR –54%
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Stock Performance
Significant out-performance over benchmark indices
Source: Bloomberg
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Business ReviewBusiness Review
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Exploration & Production (E&P)Exploration & Production (E&P)
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E&P Environment
Energy demand driven by secular growth
– OECD slowdown mitigated by demand
from Middle East and Emerging
Economies Energy supply challenge - production from
existing fields declining at about 5%
Energy prices to remain firm
– Era of Easy oil finds are over
– High F&D costs in Frontier Areas
– Resource Nationalism
Despite high prices, demand is sustained
– IEA expects oil demand to grow by 1.5
MMBD in 2008
Supply chain continues to be tight
High prices and tight supply chain to continue
90
100
110
120
May-08
Jun-08
Jul-08
3Q 08
4Q 08
1Q 09
2Q 09
3Q 09
4Q 09
($/bbl)
B r e nt A ve ra ge
IPE Brent Futures
IHS/CERA Upstream Capital Costs Index
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Limited access to New Resources
Source:Industry Reports
1960s
FullInternational Oil
CompanyAccess
85%
2008(a)
SovietReserves
14%
National OilCompany Reserves
1%
No Equity AccessFull Equity Access(c) Limited Equity Access
Full International OilCompany Access
16%
NationalOil Company
Reserves65%
LimitedInternational
Access(b)
19%
Gas Reserves split between NOCs and
IOCs
IOCs NOCs
IOCs 9%
NOCs 91%
Resource Nationalism - larger state
control of oil and gas resources
– Restricted access to large
resources– Increasing fiscal terms
IOCs had access to 85% of the worlds
oil reserves in the 1960s - current
share at about 16%
NOCs had access to 1% of the world’s
oil reserves in the 1960s – now at 65%
Access to conventional low cost
prospects a challenge
IEA expects NOCs will dominate oil
production by 2030
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New Finds are in Frontier areas
– Arctic, Deepwater, Oil Sands, Shale
Exploitation of Deepwater resources remain low
–
Deepwater resources aggregate to 300Billion barrels
– About 30% discovered and only 2.5%
exploited
– 13 deepwater basins being developed
around the world
Long Lead times to monetisation- 8-10 years
Technology Challenges
– Subsurface
– Drilling
– Field Development
– Production
Harsh Environment for Operations
New Resources in Challenging Frontiers
Future oil and gas deepwater potential in the world
Deepwater E&P is characterized by technology challenges and long lead times
Cutting / Breaking
Edge Technologies !
DEPTH
COSTS
DEPTH
COSTSCOSTS
DRILLING COSTS
Expensive
Cutting / Breaking
Edge Technologies
DEPTH
COSTS
DEPTH
COSTSCOSTS
DRILLING COSTS
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0
400
800
1200
1600
2006 2015 2030
(MMSCD)
China India ROW
Global LNG Demand
8
10
12
14
16
18
20
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Asian LNG HH NBP Crude Oil
Rising Oil Prices& Tight LNG Supply
Addl LNGCome onStream
New Plateau:Incr Globalisation of LNG
Trade
Key Trends in LNG
Tight markets and record prices for long-term contracts at above $ 10 /MMBTUSource: Platts, Energy Intel
Asian LNG prices to rise with demand,
cost escalation and a tight supply market
New and future LNG contracts expected
to have higher crude linkages
General trend of shorter contracts
Spot LNG prices still high due to strong
Asian demand
– Asian cargoes for March delivery at$15 -17/ MMBTU
– Deal between a Japanese utility and
with Abu Dhabi at $13/MMBTU
– Petrochina contract with Australia at$10/MMBTU
LNG prices ex-ship expected to range
between $8/mmbtu to $18/mmbtu
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Indian Business Environment
Energy demand mirroring growth in
economy
Gas demand set to treble by 2012
from current level of 110 MMSCMD -
supply unlikely to keep pace
Dependence on LNG imports to
increase - spot LNG cargoes at$10+/mmbtu
Investments to spur connectivity and
demand growth88%
61%
38%
12%
19%
40%
20% 22%
2001 2006 2009E
APM PSC LNG
* BP Statistical Review, MOPNG, Planning Commission’s report – Integrated Energy Policy, Aug’06
179196
226
261280
120
190 197 202
110
81
0
50
100
150
200
250
300
2008 2009 2010 2011 2012
Total Gas Demand Total Gas Supply Current Consumption
Indian gas sector poised for vibrant growth
Domestic Gas Scenario
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E&P Strategy
Grow domestic business and also look beyond
– Early development to supply into Indian markets
– Reserve accretion in India and other countries
Transfer competencies to replicate success
– Business structure and processes to support organic and inorganic
growth globally
Portfolio diversification - onshore, shallow, new plays and mature assets
Enhance technical skill-set and experience base
– Build world-class technology centers for deepwater etc. with local
talent pool to build supply chain capacity
– Focusing on growth and unlocking value in current portfolio
Build portfolio and competence to be a leading upstream player
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RIL Upstream Business
Integrated model across Exploration & Production
Largest acreagein the privatesector
Domesticportfolio of 33 oiland gas blocks
5 CBM blocks PMT (Pre-
NELP) International
blocks
Exploration
KG-D6 gas KG-D6 oil NEC25 gas CBM gas PMT
Development
30% stake inPMT fields Joint
operator 17MMscmd
of gas prod.and40,000bopdof oil (gross)
Oil production inYemen
Production
East –Westpipeline networkunder development
Plans to createnational gas grid
Pipelines
Bulk gasmarketing
Development of CGD projects
Marketing
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Key Differentiating Factors for RIL
Large acreage especially in the emerging hydrocarbon region along the
east coast of India
Pioneering exploration and development work in India’s deepwater basins
Commercial discoveries in four of India’s major offshore basins in the
recent past
Efficient project execution leveraging human resources and cutting-edge
processes and technologies
– Completing a competitive development project which is the amongst
the fastest deepwater oil and gas projects in the world
Ongoing focus on safety performance and minimize environmental impact
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RIL E&P Business – Journey So Far
Exploration
KG D6
NEC25PMT
Yemen
KG D6 (D1/D3 &MA)
NEC25
KG III 5 & 6
Yemen
Acreage /
Portfolio
Economic
Discoveries
Commercial
Fields
InDevelopment
KG D6
NEC 25
GS 01CY D5
KG -V-D3
KGD4
KG Blocks
NEC Blocks
MN Blocks
CY Blocks
GS Blocks
CB Blocks
KK Blocks
International
Blocks
Appraisal
Under Production
KG D6
PMT
Yemen
Acquisition Development Production
& Marketing
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63%3863TOTAL
--9Relinquished
76%1621Shallow Water
44%49Deep Water -Others
86%1824Deep Water - D6
SuccessRate
SuccessDrilled
RIL – Domestic Portfolio
Amongst the fastest growing private sector E&P companies in the world
DescriptionNo. of
Blocks
Acreage -
'000 Sq KM
Deepwater
Acreage %
PMT 2 2.7Pre NELP 4 22.5
Nelp 1 5 38.7 59%Nelp 2 2 14.6Nelp 3 9 113.5 99%Nelp 4 1 25.6 100%Nelp 5 5 51.5 99%Nelp 6 7 76.1 100%
CBM 5 3.9
International 11 78.8 70%
51 427.8 80%
Success Ratio
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RIL - International Portfolio
International footprint with focus on Asia-Pacific & Latin Americanopportunities
Consolidated presence in Middle East
– Plan to drill Oman Block 18 – 2H FY2008-09
Tapping opportunities in Columbia and Peru
– Signed a deal in Peru for exploration
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Basin Location Block & Well Disc. No. Discovery
Guj.
Saurashtra
SW GS-01 - B1 D33 Gas
Godavari DW KG- D6 - R1 D34 Gas
Cauvery DW CY-D5 - A1 D35 Oil & Gas
Krishna DW KG-D4 - MD1 D36 Oil
Krishna SW KG III 5 - P1 D37 Gas
Krishna SW KG III 5 - J1 D38 Gas
Krishna DW KG V D3 - A1 D39 Gas
Mahanadi DW NEC-25 - J1 D40 Gas
Krishna DW KG V D3 - B1 D41 Gas
SW = Shallow water DW = Deep water
Domestic Exploration Performance
Discoveries have opened new vistas for further exploration
Discoveries in 2007-08
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Discoveries in FY08
KG basin Discoveries:
– Extension of the 'Biogenic Gas
Corridor' across the basin
Cauvery Discovery
– Field Delineation and reservoir
characterization underway
– Further prospecting underway to
establish the extents of this play
Gujarat Saurashtra Discovery
– Discovery establishes existence of
a petroleum system– Extension of play fairway is being
evaluated
Global leadership in success rate – 64%
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Rig Fleet Update
Day Rates of Deepwater Rigs
0
100
200
300
400
500
600
700
800
2003 2004 2005 2006 2007 2008 2009 2010
Market Average Rate
RIL Average Contract Rate
‘000 US$ per day Current fleet - 4 rigs
– 2 deep / ultra deepwater
– 2 Jack-ups
Rigs contracted for FY 2009
– 3 deepwater
– 1 onshore rig
3 more deepwater rigs
contracted – currently under
construction
Superior contracting strategies driving performance
Source: Industry Research
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Accelerating Monetisation of reserves in India
Source: Top 170 E&P Projects to Change the World (Goldman Sachs, February 2007)
0
2
4
6
810
12
14
16
18
20
22
24
KG-D6-RIL
Project A
Project B
Project C
Project D
Project E
Project F
Project G
Project H
Project I
Project J
Project K
Project L
Project M
Project N
Project O
Project P
Project Q
Project R
Project S
Project T
Project U
Project V
Project W
Project X
Project Y
Project Z
Project AA
Field – Operator
Time (Years)
Global Average of 9 Years
Deepwater Fields – Estimated Time From First Discovery to Production
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Operating under severe resource constraints
0
100000
200000
300000
400000
500000
600000
700000
800000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source:Deutsche Bank
Market for deepwater rigs is expected
to remain tight in the coming years
– New deep water discoveries
– Limited Vendors globally
– High oil prices supporting record
upstream spend
Under these circumstances
– RIL has added 3 rigs to its fleet to
speed up its exploration and
development efforts– They have been contracted at very
competitive rates
Drill Ship Day Rates (> 7500 Feet)
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D1 D3 Gas Fields - Project on Track for First Gas by2H 2008
■ Drilling of wells: 17 drilled
■ Well completions hardware delivered
■ Two rigs deployed for well completions
■
Lower well completions: 5 wellscompleted
■ Upper well completions commenced.
Drilling & WellCompletions
OffshoreSubsea, CRP
OnshoreTerminal
■ XMT: 6 nos. recd at site. 3 No.installed. Progressive deliveries up toAug 08.
■ All the installation barges/supportvessels mobilized/operating
■ CRP:
– Jacket, deck & LQ installationcompleted.
– Hookup & pre-commissioning
commenced. Target completionMay 08.
■ Subsea Installation:
– Structures: All 11 installed
– Pipe laying: Total 50 % completed
– Dredging & pipe-laying in river section nearing completion
– 2 Major Infield Umbilicals layingcompleted. Target completion for major umbilicals by end Jun 08
■ LFP to OT Pipe laying: 80%completed. Target installation
completion by end May 08
■ Structural: 78% completed
■ Pipe rack erection: 100% completed
■ All major equipment /packages at site■ AG Piping fabrication – 70 %
completed.
■ AG Piping erection – 62& completed
■ Installation of all major equipment/packages completed.
■ Field Fab Tanks – Installationcompleted. Testing in progress.
■ Infrastructure facilities in operation:
– Construction jetty
– Haul road from LFP to OT
■ Construction of buildings in
infrastructure area: advanced stage of completion.
■ Transformers completed and HT/LVpanels nearing completion.
■ Instrumentation – Commenced.
Drilling: 94% of planned wellscompleted Offshore Facilities: 79% complete Onshore Facilities: 83% complete
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Sub Surface, Drilling andWell Completions
Sub Sea InstallationOnshore Terminal and
Infrastructure Facilities
KG D6 - D1 D3 Gas Field Development
Development Concept: Full Sub-sea Production System with Shallow Water
Control & Riser Platform and Onshore Processing. Shallow Water CompressionPlatform at a Future Date
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Tog Mor Laying pipelines
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Offshore Installation Works
Audacia – Stringer
Stemat 82 – Umbilical Laying
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Lorelay laying pipelines
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Lorelay installing PLET
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Sub-Sea Installation Activities: Express
SDA2 Rigging SDA2 in Splash Zone
ROV Monitoring during Installation
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Installation of Deepwater PLEM
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CRP Installation Completed
NORTH DECK LOAD OUTNORTH DECK LOAD OUT
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LFP to OT Pipe Lines & Umbilicals
Pipe Welding Activities in Progress
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Onshore Terminal - Then …….and Now
May 2006
April 2008
Onshore Terminal 25 km from
Kakinada
Spread over approx 300 acres of land
Peripheral bund constructed. About 2 Million
meters band drains installed for the peripheralbund to facilitate drainage
OT site raised to +4.2 m above MSL by
hydraulic filling.
Total 20,000 piles driven equivalent to 1000
kms
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MEG Regeneration / Reclamation area
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Fuel Gas Skids
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Flare and Hot Oil Heaters
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Chemical Injection skids – MEG area
MA Status Project on Track for First Oil by
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MA Status - Project on Track for First Oil by2H 2008
■ Drilling of Wells : Drilling of 3 wells ( 2production wells + 1 Gas Injectionwell) completed
■ Lower Well Completions : 2 Productionwells + 1 Gas Injection well completed.
■ Upper Well Completions : tocommence after Subsea facilities areinstalled.
Drilling & WellCompletions
OffshoreSubsea
FPSO
■ All subsea Hardware received.
■ All the installation barges / support
vessels mobilized / operating.2 Vesseldemobilized after completing their scope.
■ Installation :
Installation of Suction anchors (9Nos), Mooring Lines and Buoycompleted.
Installation of Manifold completed.
Installation of Hold Back Piles,Tether Piles (16 Nos) completed
Installation of Gas InjectionUmbilical Completed
Installation of Production Risers in
progress.
■ All Major modules received andinstalled on FPSO except for GasCompression Module.
■ 2nd Dry docking period completed.
■ Mechanical Completion of Subsystemis in progress
■ Pre commissioning activities startedon FPSO
Drilling & Well Completion: 82%Complete Subsea Supply & Logistic andInstallation: 85% complete FPSO: 95% complete
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Key Components -MA Field Development
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FPSO
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FPSO
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FPSO
Gas Compression and DehydrationFPSO
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FPSO Handling Capacities
Oil storage = 1.3 MM bbls
Liquid handling = 80,000 BPD
Gas processing = 9.0 MMscmd
Gas dehydration unit = 9.0 MMscmd
Gas injection = 3.0 MMscmd
Gas export = 9.0 MMscmd
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Key Challenges
Weather uncertainties: Met / Oceanic conditions
Complex logistics: Vessel Mobility Management - 70 vessels
Sensitivity to local issues: Managing local fisherman
Resource constraints
−
Tight supply chain market
− Global shortage of manpower
Project on track to deliver first gas and oil by 2H 2008-09
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Other Development Projects
Commerciality of nine satellite gas discoveries in KG D6 approved
Development of NEC25
– Concepts and other G&G studies underway
– Drilled 11 Exploration wells with 8 discoveries
Development Plan for CBM discoveries in Sohagpur East and
West Blocks approved
Appraisal plan for discoveries in blocks SR01, KGIII5, KGD4,
NEC25, KGIII6 and CYD5 are underway
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Panna-Mukta and Tapti Update
Panna – Mukta: Crude production up 9% to 1.91 MMT and Gas production
up 22% to 2,030 MMSCM
Tapti block: Condensate production up 82% to 232,000 MT and Gas
production up 51% to 3,365 MMSCM
Panna-Mukta EPOD yielded incremental production of 850bopd
Tapti NRPOD completed in September 07 - incremental production of 6.4
MMSCMD of gas and 4000 bopd of condensate.
Development Plan of SWP & PK approved
– EPIC award in progress.
– Incremental Recovery of 14.5 MMBbls and 21.4 Bcf of gas
GAIL nominated for off take of entire PMT JV gas. Effective price at $5.57
to $5.73 per MMbtu
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Summary
KG-D6 - amongst most complex deep water projects - on schedule for
delivery of first gas and oil by H2 FY2008-09
Growing market and competitive pricing assures off take in the domestic
market
Resources mobilised to continue exploration, appraisal and development
in other blocks
E&P to be significant contributor to RIL’s earnings and cash flows in
coming years
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Refining & Marketing BusinessRefining & Marketing Business
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Global Business Environment
Crude oil touched an all-time high - crossed $110/bbl in Mar’2008
OPEC remains unfazed with price rally. Keeps quota unchanged
Non-OPEC capacity additions suffering schedule delays; Spare
capacity only in the hands of OPEC
Geopolitical concerns persist
Asian Sour Benchmark crude (Dubai) likely to remain above
$85/bbl in 2008
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Global Business Environment (Contd.)
Middle distillate cracks crossed $30/bbl; Light distillate cracks under
pressure
Oil demand remains healthy, forecast to grow at 1.3 MMBD in 2008
– Global economic growth positive, supported by emerging economies
– Driven largely by China, India, Middle East and Latin America
– Demand expected to stay flat in North America and Europe
New refining projects continuing to suffer from costs and time overruns
Medium term tightness in refining capacity expected to stay
Positive outlook for the refining sector
Wh i d b lli h
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Why is crude so bullish…..
SUPPLY CONCERNS
–OPEC did not increase quota
–
Nigeria remains a concernamidst renewed threats for
kidnapping and militants attacks
OTHERS
–Weakening of US dollar
– Flow of investor funds into oil
– High degree of speculative
activity: NYMEX sees all time
high net speculative length
Bullish factors seem to persist in the short term
50
55
60
65
70
75
80
85
90
95
100
105
110
115
02APR07
24APR07
15MAY07
06JUN07
27JUN07
19JUL07
09AUG07
30AUG07
21SEP07
12OCT07
02NOV07
26NOV07
17DEC07
09JAN08
31JAN08
22FEB08
14MAR08
$/BBL
NYMEX WTI Daily Closing Prices
S
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Product Price Scenario
In US, Gasoline cracks improved only marginally due to high stocks
Gasoline margin in Asia remains stable due to restricted exports from China
Middle Distillates cracks average $22/bbl in Asia due to stock draw onextended winter and upsurge in Asian demand
Margins better in Q1-2008
114.13102.13Gas Oil
113.21104.38Heating Oil
104.1394.10Gasoline
104.2895.77RBOB (Gasoline)
91.2782.83
Dubai
97.8690.47
WTI (Cushing)
Q1-2008Q4-2007Q1-2008Q4-2007
SingaporeUS
$/bblGasoline / Gasoil price performance
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Singapore Product Deltas
Gasoil - Dubai Crack
10
15
20
25
30
35
Apr-0
7
May-07
Jun-07
Jul-0
7
Aug -07
Sep-07
Oct-0
7
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Jet/Kero - Dubai Crack
10
15
20
25
30
35
Apr-0
7
May-07
Jun-07
Jul-0
7
Aug -07
Sep-07
Oct-0
7
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Gasoline - Dubai Crack
-
5
10
15
20
2530
Apr-0
7
May
-07
Jun-07
Jul-0
7
Aug -07
Sep-07
Oct-0
7
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
US$/bbl
Significant improvement in Jet/Kero
and Gasoil cracks during the last
quarter of FY 2007-08
Source: Reuters
RIL R fi O ti Hi hli ht
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RIL - Refinery Operating Highlights
Consistent out performance amongst key benchmark regions
Refining complexity, higher yields, superior product slate and export
revenues enabled RIL to achieve GRM at $15.5 /bbl for the quarter
Average GRM at US$ 15 / bbl in FY08 - with continued strong performance
against all global benchmarks
Refinery utilization at 96.4% with 31.8 Mn Tons of crude processed in FY08
Export volumes soared to 22.1 Mn Tons against 17.7 Mn Tons in FY07
Aviation sector presence expanded further - operating at 13 airports
Six new varieties of crude processed
50 ppm ULSD produced and sold for the first time
E t k t
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Export markets
Americas
7%
Africa
18%Europe
20%
Asia / Middle
East
55%
Thrust on emerging markets continued for transportation fuels
Commenced export of 50ppm Ultra Low Sulphur Diesel to Europe
R fi P d t S l FY08
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Refinery Product Sales: FY08
Exports account for 63% of aggregate volumes
Growth driven by higher volumes of HSD and ATF
Export Domestic Total Export Domestic Total
LPG - 2,712 2,712 - 2,671 2,671
HSD 11,482 929 12,411 9,147 2,031 11,178
MS 3,607 322 3,929 3,154 388 3,542
ATF 3,276 20 3,296 2,834 31 2,866
Naphtha 3,273 3,965 7,238 2,276 5,093 7,369
Propylene - 1,019 1,019 - 996 996
Others 510 4,469 4,979 243 4,990 4,990
22,147 13,437 35,584 17,655 16,200 33,612
2007-08 2006-07
M i B h ki
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Margin Benchmarking
15.0
8.9
5.16.1
8.8
10.3
11.7
4.8
4.9
7.6
0
2
4
6
8
10
12
14
16
18
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
US$ / bbl
RIL US Gulf Coast Mediterranean Rotterdam Singapore
Increasing out-performance over the global benchmarks
Cracking margins Source: Reuters / Company Data
RIL Refining B siness Trends
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22.1
6.6
16.1
1.4
0
4
8
12
16
20
24
FY03 FY04 FY05 FY06 FY07 FY08
-
2
4
6
8
10
12
14
16
18
Volume (MMT) Value (US$ Billion)
RIL Refining Business Trends
0
40000
80000
120000
FY03 FY04 FY05 FY06 FY07 FY08
Export Performance
63% CAGR in value
Refining Revenues (Rs. Crs)
5 Yr. CAGR – 24%
RIL Margin Trends
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RIL Margin Trends
15.0
5.3
2.4
7.6
0
2
4
6
8
10
12
14
16
FY03 FY04 FY05 FY06 FY07 FY08
-
2,000
4,000
6,000
8,00010,000
12,000
EBIT (Rs crore) RIL GRM ($/bbl) Singapore GRM ($/bbl)
Refining EBIT records a CAGR of 36% over the last 5 years
Premium over Singapore complex margins have more than doubled
Crude Oil Outlook
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Demand outlook positive, despite fears of slower economic expansion
Vigilant OPEC not looking to add production even at all-time high prices
New investment and index funds chasing commodities as a hedge
Ailing US economy leading to low interest rates, weaker dollar and flight to
commodities. Emerging markets remain strong and partially decoupled
Demand from China expected to stay robust
Marginal cost of production increasing : ~ 4 million bpd @ 75 $/bbl or more
Outlook for oil price stays firm
Crude Oil Outlook
P d t O tl k
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Product Outlook
Global demand is expected to grow by a estimated 1.3 MMBPD
– Agency forecasts range between 1.21 – 1.30 MMBPD
– Downward revision by about 0.2 mbd from previous quarter estimates
Demand growth is expected to come from Asia Pacific, Middle East, Latin
America and Russia. US demand growth vulnerable to economic slow
down
Gasoil demand is expected to be strong, led by growth in Asia and
‘dieselisation’ in Europe
Gasoline demand growth is expected to be robust in Asia-Pacific. Potential
downside risk for growth in US due to high inventories, economic slow
down and ethanol substitution
RPL Project Progress
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RPL Project Progress
Overall implementation progress at 90%
Project engineering efforts completed
Procurement activities nearing completion
Overall construction progress nearing 80% mark for the complex
Nearly 65% of project scope of equipments already installed
Startup planning and operation preparedness activities gained momentum
Sufficient site infrastructure mobilised to sustain construction on fast track
Project on-track for early commissioning
GAPCO Update
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GAPCO Update
Acquired towards enhancing wider footprint in petroleum retailing
Owns 250 retail outlets and 225,200 KL of storage capacity with 2 large
coastal terminals at Dar-es- salaam and Mombassa in East Africa
Significant progress made already
– Successfully revived business in Tanzania
– Improved supply chain management
– Obtained marketing/import rights in Kenya
Refining Business Summary
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Refining Business Summary
Oil demand growth expected to stay firm, supported by rising
consumption in emerging economies. Demand softening likely in the US
and Europe
WTI prices likely to average upwards of $90/bbl in 2008
Product spec changes to present exciting trade opportunities
Extended strength in refining margins seen till 2012 with continuing delays
/ cancellation of new projects. Middle distillates margins seen well
supported
Light – heavy differentials to remain wide
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PetrochemicalsPetrochemicals
Business Environment: Polymers
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Business Environment: Polymers
Global
– Firm price trends across the value chain
– Global polymer demand growth strong at 5.5%
– New cracker capacities on-stream ( in million tonnes)
FPC, Taiwan 1.2 (Q1FY08)
Qapco, Qatar (expansion) 0.2 (Q2FY08)
Arya Sasol, Iran 1.0 (Q4FY08)
Jam Petro, Iran 1.3 (Q4FY08)
India
– Domestic demand grew by 15% year-on-year
–
Aggregate consumption of PE, PP and PVC crossed 5 million tonnes– Growth driven by infrastructure and flexible packaging
– Over 1 million tonne capacity added by producers in downstream
industries
Product Deltas
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Product Deltas
USD/MT
Q4 FY08 Q3 FY08 Q4 FY07 FY08 FY07
PE - Naphtha 694 628 697 651 704
PP - Propylene 134 211 52 163 54
PVC - EDC 461 448 345 457 387
Margins remained robust in ’07-08
Ethylene : Global Demand Supply
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Ethylene : Global Demand Supply
Operating rates peaked at 91% in 2008
Startup delays in Middle East can push operating rates to 93%
0
50
100
150
200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201280%
85%
90%
95%
100%Op Rate %
Demand / Capacity
MMTPA
Capacity
DemandOp Rate
Source -CMAI
Middle East Capacity Expansions Update
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Middle East Capacity Expansions Update
# in bracket indicate capacity in 2012
Source : CMAI web site
In MMTPA
2007 2012
Saudi Arabia 9.5 17.6
Iran 5.0 7.6
UAE 1.4 2.0
Qatar 2.9 4.0
Kuwait 0.8 1.8
Total 19.6 32.5
32 mmta of new capacities underway; 11 mmta to go onstream by 1H 2009
Global Cracker Vintage
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2007
17%
19%31%
23%
10%
0-5 Yrs 5-10 Yrs 10-20 Yrs 20-30 Yrs 30+ Yrs
2012
29%
9%
21%
10%
31%
Global Cracker Vintage
30% of global capacity is vulnerable to a down cycle
Growth Opportunities
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Growth Opportunities
Current Market Size
148 Mn Tons
Source : CMAI
Estimated Market Size
192 Mn Tons in 2012
US22%
China
23%
India4%
Rest of
World
51%
Rest of the
World
50%
India
5%
China
28%
US17%
52% of incremental demand to come from India and China
RIL Downstream Portfolio
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RIL Downstream Portfolio
Site Polymer CapacityKTA
Remarks
Baroda LD 95 Only domestic producer
PP 165 Only plant with Adipol technology in Asia
PVC 55
Gandhar PE 160 Speciality HM Grades
PVC 245 High value - Low K grades
Hazira PE 450 Swing plant - Quick to respond to market needs
PP 400 ICP Capability
PVC 325
Jamnagar PP 1030 World Scale plants
Nagothane LD 110 Only domestic producer
PE 240 Only plant with metallocene capability
PP 115 Highly Reliable
3390
Balanced portfolio of gas based and low cost naphtha based assets
Polymer Production: FY 2007-08
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Polymer Production: FY 2007-08
FY07 FY08 % change FY07 FY08 % change
PE 1,925 2,004 4.1% 1,011 1,084 7.2%
PP 1,917 1,978 3.2% 1,641 1,712 4.3%
PVC 889 958 7.8% 561 578 3.0%
TOTAL 4,731 4,940 4.4% 3,214 3,374 5.0%
Industry RIL
Slowdown in industry capacity addition despite strong demand due to
concerns over impact of impending capacity additions in the Middle East
Polymers – Demand / Supply Outlook
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Polymers Demand / Supply Outlook
PE
– Global demand at 68 MMT in 2007; growing at over 5% annually
– 50% incremental demand to come from China and India
–
China and India growing 10% annually, aided by robust demand fromdownstream user industries
PP
– Global demand grew by 5.6% to 44.5 MMT in 2007
– PP demand from China and India to rise 5 MMT in the next 5 years
– India is the fastest growing market with 14% annual growth
PVC
–
Global PVC demand at 35.5 MMT in 2007 - a growth of 5% YoY– China to provide impetus to PVC demand. Aggregate consumption to
rise to 15 MMT by 2012 from 10 MMT in 2007
– India would continue be the fastest growing market growing at 10%
PE – Sector Outlook
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PE Sector Outlook
Demand likely to grow at healthy pace
– Driven by large consumption base and retailing
Key Growth Sectors
– HD : HM Film, HD/HM Pipe and Blow Molding
– LLD : Flexible Packaging, Roto Molding
Films/ Pipes continue to grow over 20%.
– Packaging: Retail boom
– Pipes: Infrastructure growth
RIL: Unique Metallocene capability– Converting NC-LLD to NC-mLLD
– Reviving specialty products like EVA / UHMWPE
PP – Sector Outlook
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PP Sector Outlook
Demand: Double digit growth likely to continue in ’08-09
– Likely to double in next 7 years reaching 4.0 MMT by 2014
Raffia and BOPP with 50% sector share would remain mainstay
– Cement industry to drive growth
Films/ Sheets/Moulding would also grow over 10%
– Packaging Retail boom, Moulding Automobile boom
RIL is the only manufacturer catering to all end-use segments
PVC – Sector Outlook
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PVC Sector Outlook
With infrastructure growth demand would continue to be healthy
– Likely to double in next 7 years reaching 2.7 MMT by 2014
Pipes and fittings with 70% sector share would remain mainstay
– Government focus on Irrigation / Sanitation
Films/ Sheets and Calendering would also grow over 10%
– Packaging Retail boom; Blister Pharmaceuticals
RIL Only manufacturer catering to all end-use segments
– Wide spectrum of grade slate from K 57 (Blister) to K67 (Pipes/
Flexible applications)
Polymer Price Outlook
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o y e ce Out oo
Source: Platts400
600
800
1000
1200
1400
1600
03-04 04-05 05-06 06-07 07-08 10 yr 5 yr
PE PP PVC Long Term Averages
$ /MT
Prices to remain firm in the near term
Polymer Summary
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Demand outlook remains positive, particularly in India and China
Polymer prices likely to stay firm, pending new capacity additions
in ME
RIL to continue focus on fast growing domestic market
RIL cost competitiveness to remain with refining off-gas based
cracker at Jamnagar
y y
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Polyester Polyester
Business Environment: Polyester
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y
International cotton prices averaged 25% higher at US$ 1631/MT in 2007
Polyester margin improved, despite higher input costs
High MEG prices due to unplanned capacity shutdowns in Middle East
Slowdown in capacity additions in China due to monetary tightening,
stringent labour laws and fresh pollution control measures
Integrated players maintained margins
Integrated players pursuing consolidation opportunities before upcycle
Margin Environment
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Margin Environment
Q4 FY08 Q3 FY08 Q4 FY07 FY08 FY07
PX - Naphtha 338 339 620 430 672
PTA - PX 83 92 77 107 86
MEG - Naphtha 626 1,022 508 712 499
POY - PTA/MEG 455 320 375 348 301
PSF - PTA/MEG 327 195 257 222 168
PET - PTA/MEG 262 126 226 188 172
Standalone polyester margins improve - chain margins impacted due to
intermediates
Global Polyester Fiber Production
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y
0
500010000
15000
20000
25000
30000
35000
40000
45000
2005 2006 2007 2008 2009 2010 2015
Asia North America Latin America Europe (Incld Turkey) Af rica/M iddle East
KT
Polyester Growth: 5.4% ; All fiber growth 3% (CAGR 2005-15)
Asia contributes 82% to the world’s textile polyester production
Asian dominance to continue
Source: PCI 2007
Key Growth Drivers
• Economic growth,
New applications, Life
style changes andgrowing affluence
• Higher cotton prices
• Short term driver:
Beijing Olympics in
2008 for incremental
polyester demand in
China
Global Per Capita Fibre Consumption
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p p
0
1
2
3
4
5
6
1980 1985 1990 1995 2000 2005 2010 2015 2020Source: Tecnon OrbiChem
Polyester Filament
Polyester Staple
Polyamide Filament
Polyamide Staple
Acrylic
Polypropylene
Cellulosic
Cotton
Wool
Cotton struggling
PES filament to overtake
cotton by 2015PES staple to overtake
cotton by 2020
Share of Polyester to grow from 40% to 56%
World Fibre Demand
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Fibre growth rate : Positive correlation with GDP
Polyester: Foundation to the growth of global industry
-
10000
20000
30000
40000
50000
60000
70000
KT
6.5%
4.2%
1%
6% - 0.5%
CAGR 2005-2010
Source: PCI
-0.4%
PSF
PFY
Cotton
Cellulose
Acrylic
Nylon
Textile industry growth 3%
Cotton: Global Supply Demand Outlook
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Declining stock to use ratio pushing prices higher
Acreage expected to decline in USA and increase only marginally in China,
India, Brazil, African Franc Zone and Australia
Key Issues: Consumption, currency appreciation & acreage
Bio fuel crops influencing cotton economy
Source: ICAC , Apr ‘08
2006-07 2007-08 (E) 2008-09 (P)Acreage Mn Ha 34.7 33.8 33.8
Yield Kg/Ha 766 763 794
Production Mn MT 26.7 26.0 26.9
Year on year growth -2.6 3.3
Consumption Mn MT 26.7 27.1 27.5
Year on year growth 1.8 1.3
Closing Stock Mn MT 12.7 11.6 11.0
Stock-to-use ratio % 48% 43% 40%
Cotlook 'A' - FE USD/MT 1304 1631 1763
Cotton Outlook
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700
1100
1500
1900
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008 (P)
2009 (P)
USD/MT
Long term avg: $ 1428/MT
5 Yr avg: $ 1366/MT
Cotton prices on Upcycle
c/lbs 63 58 71 94 86 79 72 59 53 57 42 59 68 52 56 59 74 80 83Cotlook ‘A’
Cotlook ‘A’
PSF
Indian Business Environment
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18%
12%
26%
PFY PSF PET
Custom duty of polyester products reduced to 5% from 10% (mid year revision to 7.5%)
Major filament capacity (~1.3 MMT) being planned in view of strong domestic demand
–
Backward integrated texturisers have better margins versus standalone players
Rupee appreciation has hit downstream exporters resulting in slower demand growth
– Government announces measures to cushion rupee hit exporters
10% capital subsidy on technical textiles & garments m/c under TUFS
Demand Growth FY 2007-08
Polyester Production: FY 2007-08
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y
FY07 FY08 % change FY07 FY08 % change
POY 1,415 1,684 19.0% 616 683 10.9%
PSF 774 897 15.9% 610 621 1.8%
PET 490 510 4.1% 256 268 4.7%
TOTAL 2,679 3,091 15.4% 1,482 1,572 6.1%
Industry RIL
Growth in RIL production reflects full year impact of additional capacity
added during FY2006-07
Industry capacity addition on the back of improvement in standalone
margins and strong outlook on cotton prices
Upstream & downstream squeezing PX
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0
200
400
600
800
1000
1200
1400
1600
1800
Aug-02
Nov-02
Feb-03
May-03
Aug-03
Nov-03
Feb-04
May-04
Aug-04
Nov-04
Feb-05
May-05
Aug-05
Nov-05
Feb-06
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
Feb-08
0
200
400
600
800
1000
1200
1400
1600
1800Naptha in PSF PX Delta
PTA Delta MEG in PSF
PSF Price Cotton Price
PX deltasunder pressure
MEG pricesSkyrocket on the
back of globaloutages
Cotton pricescapping Polyester
Crude drivingNaptha prices
upwards
Domestic Market Outlook : 2008-09
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Cotton prices to remain firm; to support polyester prices
Polyester operating rates to improve
Margins to improve with easing of raw material supplies
New capacity addition in China slowing down or deferred
India: Government action review
– Extended DEPB scheme & interest payment on delayed
refunds to provide cushion to rupee appreciation hit exporters
– TUFS extended for the period of full 11th plan; downstream
investments to continue
Rising domestic demand to cushion against unfavourable export
environment
Domestic Fiber Market: Growth outlook
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12%120006043Grand total
23%32731160PFY
8%906627Others
23%1907676PSF
10%59143580Raw Cotton
CARG (07-12)2011-122006-07KTA
Source: CITI
Incremental polyester demand of 3.4 MT in the next 5 years
Polyester: Journey beyond Apparels
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Huge untapped potential in non-apparel applications in India
Apparel
41%Automotive
20%
Industrial
23%
Home
Textiles
16%
Source: PCI
Apparel
90%
Automotive
3%
Home
Textiles
5%
Industrial
2%
India World
Innovations
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Recron Polylon
Recron Stretch
Octagonal Black
Deep Dye Low Shrinkage FDY
Carpet fibre
Low Pill Tow Recrobulk
Short cut fibers for wet laid
application
Developed a strategy for implementing “open innovation”
Self sustaining innovative process capability for idea generation
New Products
Growth Strategy
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Pursue both organic and inorganic growth opportunities
Integrated POY-PTY for new capacity to reduce packing and logistic costs
Participate in high value growing business segments
Enhance innovation through integration of efforts between research,
manufacturing and business development
Poised to reap benefits of leadership in large growth markets
Trevira Performance
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New Product Development
Four new patent applications
Marketing
Focus on premium automotive, functional wear, home and technical textiles market
Thrust on quality conscious markets in Germany, France, Italy, US and Spain
Leading customers include Toyota, Volkswagen, BMW, Mercedes, Volvo, Nissan
Manufacturing Transfer of production of Air texturising and Dyed yarn to Poland initiated
Other manufacturing locations are in Germany, Belgium and Denmark
2006 2007
Sales (KT) 126 138
Recron Malaysia (Hualon): Update
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Management control taken over in Dec ’07
– Physical control of assets in Jan ‘08
Complete overhaul of production being done to optimize assets
Quality improvement being undertaken to bring it to RIL standards
Strategic initiatives taken to reduce cost, utility optimization and effective
supply chain management
Polyester : 550 KTA (POY, FDY, PSF, PET)
Texturising : 200 Murata machines
Spun Yarn : 2.5 lacs spindlesIndia’s largest synthetic spinner, 2.6 lacs
Weaving : 5758 water jet looms 500 mn yards
Larger than any Indian company
Finishing : 80 mn yards
Nylon : 36 KTA (New product for RIL)
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SummarySummary
Summary
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Superior performance from world-class assets in all our businesses
Best-in-class project execution for RPL refinery project - Reliance’s refining
capacity to double - Jamnagar to be the largest refining hub in the World
Production of 80 MMSCMD gas from D1 & D3 fields to double India’s gas
availability - will operate amongst the most complex deep water production
systems globally
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Thank YouThank You