Essar Shipping Limited. · NSE:ESSARSHPNG
Essar Shipping — Essar Oil — Investor Presentation (May 2008)
66 slides from Essar Shipping's investor presentation, May 2008
Slide 1: Essar Oil – Analysts' Meet – May, 2008
Essar Oil – Analysts’ Meet – May, 2008 Strictly Private & Confidential
Slide 2: Disclaimer
Disclaimer nied All information and material in this presentation is provided by Essar Oil Limited (“Company”) on an “as is" basis. No information contained herein has been verified for truthfulness completeness, accuracy, reliability or otherwise whatsoever by anyone. While the Company will use rea
Slide 3: Table of Contents
Confidential Table of Contents ¾ Essar Group Overview ¾ Essar Oil Limited Refining Business Overview Exploration & Production Business Marketing and Distribution Business ¾ Market Overview & Operation Performance ¾ Refining Expansion Rationale Project parameters Project Cost & Financing
Slide 4: Essar Group Overview
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Slide 5: Essar: Amongst the Leading Indian Business Houses
Confidential Essar: Amongst the Leading Indian Business Houses Essar Global Limited Essar Essar Essar Steel Essar Energy Essar Essar Shipping & Communi cations Power Holdings Holdings Limited Holdings Limited Proje cts Limited Logisti cs Limited Holdings Limited Limited Essar Steel Essar Oil Vodafon
Slide 6: With A Long-Term Growth Vision For The Energy Sector
Confidential With A Long-Term Growth Vision For The Energy Sector Setup Indian retail network of 5,000 outlets and establish footprint in important export markets Significant Presence throughout hydrocarbon value-chain Crude Oil - 30% of refining capacity Gas – 100% of group feed stock requirement T
Slide 7: Essar Oil Limited – An Integrated Energy Company
Confidential Essar Oil Limited – An Integrated Energy Company Essar Energy Holding Limited Essar Oil Limited Marketing & Exploration & Refining Production Distribution Network Blocks Existing (EOL) Essar Oil Vadinar Ltd. • Develop & Maintain well Essar Exploration & spread out distribution Indian Pr
Slide 8: Essar Oil: Refining Business Overview
Essar Oil: Refining Business Overview
Slide 9: Strategically Located World Class Refinery Operational Highlights
Confidential Strategically Located World Class Refinery Operational Highlights ● Commenced Commercial Production (from May 1, 2008) and operating at well above rated capacity of 10.5 mmtpa ● Designed as a cracking refinery utilising FCC as major conversion technology with complexity of 6.1 ● Locatio
Slide 10: Existing Refinery – Configuration
Confidential Existing Refinery – Configuration Commissioning S.N. UNIT MMTPA Technology Licensor Date (Trial) 1 Crude & Vaccum Distillation Unit Open Art November, 2006 (CDU)/ (VDU) 10.5 /7.2 (ABB Lummus) 2 Visbreaker Unit (VBU) Axens, France January, 2007 1.9 3 Naphtha Hydrotreating Unit (NHT) Axen
Slide 11: Refinery currently operating at 12.5 MMTPA
Confidential Refinery Trial Run Operations ● Processed about 67 mln barrels of crude since inception ● Processed about 21 types of crude with a wide variety of assays: Gravity, Sulphur content & TAN ● No unplanned outages of the Crude Unit. ● Secondary Units ( FCCU, DHDS, Sulphur Block ) are operati
Slide 12: Tax Benefits
Confidential Tax Benefits ¾ Income Tax Benefit 100% income-tax exemption on refinery profits for 7 years under section 80-IB ¾ Sales Tax/ VAT Deferral Benefit Gujarat High Court vide its Order dated April 22, 2008 has restored the benefits by extending the time limit for production to 02/04/2007
Slide 13: ..And Ability to Leverage Synergies with Group Companies
Confidential ..And Ability to Leverage Synergies with Group Companies Essar Shipping SBM Port Handling Tank Farms Vadinar Oil Terminal Limited Refinery Essar Vadinar Power Construction Plant Township Essar Steel 13
Slide 14: End to End Infrastructure: SBM
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity 14 SBM
Slide 15: End to End Infrastructure: COT
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity 15 COT
Slide 16: End to End Infrastructure: Main Refinery
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity Main Refinery 16
Slide 17: End to End Infrastructure: Water Intake
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity Water Intake 17
Slide 18: End to End Infrastructure: Captive Power Plant
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity Captive Power Plant 18
Slide 19: End to End Infrastructure: CDU / VDU
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity CDU / VDU 19
Slide 20: End to End Infrastructure: VBU Treaters
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity VBU Treaters 20
Slide 21: End to End Infrastructure: NHT / CCR
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity NHT / CCR 21
Slide 22: End to End Infrastructure: FCCU
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity FCCU 22
Slide 23: End to End Infrastructure: Diesel Hydro Desulphurization
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity 23 Diesel Hydro Desulphurization (DHDS)
Slide 24: End to End Infrastructure: ARU / SRU
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity Aromatics Recovery Unit / Sulphur Recovery Unit (ARU / SRU) 24
Slide 25: End to End Infrastructure: Dispatch Area
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity Dispatch Area 25
Slide 26: End to End Infrastructure: Truck Gantry
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity Truck Gantry 26
Slide 27: End to End Infrastructure: Rail Loading Gantry
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity 27 Rail Loading Gantry
Slide 28: End to End Infrastructure: Product Jetty
Confidential End to End Infrastructure in Place with Ability to Ramp Up Capacity 28 Product Jetty
Slide 29: Exploration and Production Business
Exploration and Production Business
Slide 30: E&P Assets
Confidential E&P Assets Assam ● 100% interest in 2 Gujarat exploration blocks ● 70% operatorship interest in Mehsana block CB-ON/3 ● Certified 2P Reserves of 2.7 mmbbl of oil in one discovery alone West Bengal ● 100% interest in RG(East)- Nigeria * CBM-2001/1 block in Ratna Durgapur, WB ● 63% intere
Slide 31: E & P - Performance
Confidential E & P - Performance 180 Sqkm of 3D seismic acquired and 10 wells drilled in block CB-ON/3, Mehsana. Currently producing from one field with certified 2P of 2.7 mmbbls and 2 additional discoveries under appraisal. Produced and sold more than 17,000 bbls of crude oil. 15 core holes
Slide 32: Marketing and Distribution Business
Marketing and Distribution Business
Slide 33: India: Amongst the world's fastest growing energy consumers
Confidential India: Amongst the world’s fastest growing energy consumers Demand & Supply of Oil Per Capita Consumption of Energy (kgoe) 400 Constrained supply builds pressure on additional capacity... 360 10 In per-capita consumption India ranks 20th 350 8 300 (million tons) 250 6 190 200 170 150 12
Slide 34: Oil Distribution and Marketing
Confidential Oil Distribution and Marketing Presence across India with 1,274 retail Outlets y First private company in India to enter petro-retailing Own Supply Points spread sector (2003) through a franchisee model all across India 53 8 8 53 y Existing platform can be rapidly ramped up after 2 1 19
Slide 35: Market Overview & Operational Performance
Market Overview & Operational Performance
Slide 36: Key Driving factors
Confidential Key Driving factors ● Crude oil prices touched a record high FY 2007-2008 Nymex W TI Price of $135 in May’08. 140 130 ● Price outlook for the FY 2008-2009 remains bullish but extreme volatility 120 cannot be ruled out. 110 ● Geopolitical developments in the Middle East and supply disrup
Slide 37: Product Cracks Scenario
Confidential Product Cracks Scenario Product Cracks on Dubai 55 Sing Gas Oil Dubai Structural Shift Jet Dubai 45 Naphtha Dubai 1. Middle distillate crack soar to historic highs Mogas 92 RON Dubai 2. Gasoline crack below middle distillate during peak summer driving period Fuel Oil - Dubai 3. Fuel oil
Slide 38: Product Market Overview
Confidential Product Market Overview…. ● The gasoline margins have been negatively impacted by the high level of inventories in the US and arbitrage flows into Asia from Europe. ● Naphtha crack in the Asian market was weighed down as higher Naphtha prices led to weakening regional demand, owing to p
Slide 39: To sum up, we can expect bullish refinery margin in FY 08-09
Confidential Product Market Overview ● Gasoline stock-draws during peak driving season in the US along with the tight distillate markets in Europe and Asia should support the product market, lifting refining margins across the globe. ● The current sentiment prevailing in the product market may suppo
Slide 40: Comparative Yearly Financial Results
Confidential Comparative Yearly Financial Results ( Rs in Crore) Sr.No. Particulars Year ended Year ended 31.03.2008 31.03.2007 (Unaudited) (Audited) 1 Net Sales / Income from operations 562.42 473.98 2 Other Income 14.37 10.39 3 Total Income (1+2) 576.79 484.37 4 Expenditure a) (Increase)/ Decrease
Slide 41: Refining Expansion (10.5 MMTPA to 34 MMTPA)
Refining Expansion ( 10.5 MMTPA to 34 MMTPA )
Slide 42: Refining Sector: Rationale
Confidential Refining Sector: Rationale cStrong global economic growth driven by BRIC nations fuelling energy demand Strong Macro cShift to heavier and sourer crude Dynamics and cClean fuel norms & compliance costs Consolidation cIncreased dependence on complex refining capacities c Global demand to
Slide 43: Macro Dynamics: Oil Demand Appears Robust
Confidential Macro Dynamics: Oil Demand Appears Robust 70.0 US Canada Developed Nations Oil Consumption Per capita (bbl/day per '000 people) 60.0 50.0 Korea Japan Australia Taiwan 40.0 Sweden Developing Nations Italy Germany 30.0 UK World 20.0 Mexico Russia Thailand 10.0 Brazil Indonesia China India
Slide 44: Macro Dynamics: Global Crude Oil Availability Trends
Confidential Macro Dynamics: Global Crude Oil Availability Trends Global Crude Oil Availability Trends (2005 – 2020) 33.7 1.45 33.6 1.40 33.5 1.35 API Gravity (Degrees) Sulphur Content (%) 33.4 1.30 33.3 1.25 33.2 1.20 33.1 1.15 33.0 1.10 2005 2010 2015 2020 API Gravity Sulphur (%) Source: OPEC Worl
Slide 45: Macro Trends: Shift to Cleaner Fuels
Confidential Macro Trends: Shift to Cleaner Fuels Gasoline Sulphur Specs (ppm) Diesel Sulphur Specs (ppm) 600 2,500 500 2,000 400 1,500 ppm ppm 300 1,000 200 500 100 - - 2005 2010 2015 2020 2005 2010 2015 2020 North America Latin America Western Europe North America Latin America Western Europe FSU
Slide 46: Capacity Trends: APac / Middle East Leading Growth
Confidential Capacity Trends: APac / Middle East Leading Growth 1996 – 2006 Regional Capacity Increases Regional Capacity Additions (2007F – 2020F) 3.5% 7.0 3.0% 2.9% 6.0 2.5% 5.0 1996 - 2006 Capacity Increase CAGR (%) Distillation Capacity (mbbl/d) 2.2% 2.0% 4.0 1.5% 3.0 1.1% 1.1% 1.0% 1.0% 2.0 0.5
Slide 47: Capacity Trends: Global Refining Capacity Stretched
Confidential Capacity Trends: Global Refining Capacity Stretched 160 Utilization and Refining Margins heading North 12 102% Global Refining Margin ($/bbl) 140 100% 10 Utilization Rates (%) 98% 8 120 Mid-Cycle 96% 6 94% 100 92% 4 90% Brent (US$/bbl) 2 88% 80 - 86% 1993 1996 1999 2002 2005 2008E 2011E
Slide 48: Capacity Trends: Ageing Global Capacities
Confidential Capacity Trends: Ageing Global Capacities 50% 45% 43% 40% 35% % of Global Refining Capacity 30% 25% 21% 21% 20% 15% 10% 10% 5% 5% 1% 0% <10 Years 10-25 26-30 31-35 36-40 >40 Age of Refining Capacity (Years) Source: Based on data from BP Statistical Review of World Energy 2007 ~90% of cu
Slide 49: Demand Trends: Home Market Bolstering Demand
Confidential Demand Trends: Home Market Bolstering Demand Petroleum Products – Domestic Demand Supply Ageing Refinery Profile 120 IOCL 1901 0.7 110 HPCL 1954 5.5 BPCL 1955 12.0 100 HPCL 1957 7.5 million tonnes pa 90 IOCL 1962 1.0 Kochi 1963 7.5 80 IOCL 1964 6.0 CPCL 1965 9.5 70 IOCL 1965 13.7 60 Bon
Slide 50: India Emerging As The Next Global Refinery Hub
Confidential India Emerging As The Next Global Refinery Hub Netherlands Middle East ● Current capacity of ● Leveraged their crude supply / reserves to 63 MMTPA emerge as a strong export hub ● Integrated ● Current capacity of 354 MMTPA petrochemicals ● Significant exports with a large part of exports
Slide 51: Refining Expansion: Project Parameters
Refining Expansion: Project Parameters
Slide 52: Ramping up Capacity to 34 MMTPA with Complexity of 12.8
Confidential Ramping up Capacity to 34 MMTPA with Complexity of 12.8 Base Particulars Total Capacity post Refinery Expansion 12.8 Complexity, Refinery Details 34.0 MMTPA 6.1 Complexity, 10.5 MMTPA API (Density), Avg. 35.5 24.8 Sulphur %, Avg. 2.0% 2.97% Product Grades Upto Euro III Upto Euro V / US
Slide 53: ..With Capability to Produce 16 MMTPA Euro V Products
Confidential ..With Capability to Produce 16 MMTPA Euro V Products ● Largest producer of EURO V MS & HSD from a single refinery location ● Euro V/ US specs grade maximised at 90% in MS pool ● Euro V grade maximised at 61% in HSD pool ● Swing flexibility between light & middle distillates. Gasoline:
Slide 54: ..and Leverage Light Heavy Differential
Confidential …and Leverage Light Heavy Differential Crude Processing Capacity API (Av.) Ability to Process Wide Range of Crudes (MMTPA) Light / Medium / Sweet ● Since January 2007 the monthly average Sour 0% Leverage Processing 15% differential between Bonny Light and Maya has Heavy Sour 24.8 10% 34
Slide 55: .. Leading to High GRM Potential
Confidential .. Leading to High GRM Potential * R2=0.8 13.0 Essar – 34 MMPTA (12.8) R-9 11.0 R-8 9.0 Complexity R-7 R-6 R-5 7.0 R-4 Essar – 10.5 MMPTA (6.1) R-3 5.0 R-2 R-1 3.0 5.0 7.0 9.0 11.0 13.0 15.0 GRM ($/bbl) Positive correlation between Complexity and Gross Refining Margin * Expected Note: G
Slide 56: Expansion Scheduled to Come On-stream in 2010
Confidential Expansion Scheduled to Come On-stream in 2010 Train I Train II UOP Mandated Development Optimization Expansion ● Processing heavy, sour ● UOP developed LP ● 10.5 MMTPA to 16.0 ● 18 MMTPA capacity acidic crude model and carried 300 MMPTA ● Similar units repeated ● Maximize Euro V product
Slide 57: On Track with Support from World Class Partners
Confidential On Track with Support from World Class Partners Basic Detailed Procurement Construction Engineering Engineering ● Order placed with ● Fixed price contract with ● Fixed price contract with ● Fixed price contract with Managing Licensor Essar Engineering Global FZE & Essar Essar Constructi
Slide 58: Refining Expansion – Project Cost & Financing
Refining Expansion – Project Cost & Financing
Slide 59: Planned to be Financed through a D/E of 1.3:1.0
Confidential Planned to be Financed through a D/E of 1.3:1.0 Estimated Project Cost for Expansion Cost Head US$ milllion (%) Land & Buildings 50 1% Plant & Machinery 4,614 77% Project Management & Engineering Fees 246 4% Preliminary & Preoperative Expenses 105 2% Financing Cost 656 11% Contingency 3
Slide 60: Low Capital Cost
Confidential Low Capital Cost 2500 2289 2261 2108 USD/bpd/Complexity 2000 1500 1339 1333 1123 1037 1000 500 0 R1 R2 R3 R4 R5 R6 EOL (34MMTPA) Upcoming Refineries Amongst the lowest capital cost, to provide competitive advantage 60
Slide 61: Refinery Business: Set to Deliver Strong Value
Confidential Refinery Business: Set to Deliver Strong Value Strategic Strategic Location, Location, Proximity Proximity to to Materials, Materials, Access Access to to End End Markets Markets India India Emerging Emerging as as aa Global Global Leverage Leverage Existing Existing Project Project Ref
Slide 62: Management Team
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Slide 63: Experienced Management Team
Confidential Experienced Management Team Senior Management Naresh K Nayyar Managing Director Chartered Accountant and IIM, Ahmedabad Alumnus 33 years of experience in Oil & Gas sector including development of multi billion dollar project, new markets and global operations in Oil & Gas Industry
Slide 64: Project Leadership
Confidential Strong and Experienced Project Implementation Team Shyam Bagrodia Gordon Clarke B. K. Mukherjee Project Leadership President – Refinery Expansion Project Director – PMC Group Technical Head B. Tech (Hons.)- IIT, Kharagpur ; MBA from B.Sc. (Hons) from Salford University Chemical En
Slide 65: Investor/Media contacts
Confidential Investor/Media contacts Analysts contacts Mr V Suresh CFO, Essar Oil Limited Tel #: 66601237/98197-30288 e-mail: vsuresh@essar.com Mr Sudip Rungta Head – Strategic Initiatives, Oil & Gas, Essar Group Tel #: 66601406/98197-30243 e-mail: srungta@essar.com Media contact Mr Mohan Nair Gener
Slide 66: Thank You
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