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Petrochemicals : Petrochemicals : Growth & ChallengesGrowth & Challenges

IndiaChem 2006 ConferenceIndiaChem 2006 ConferenceIndiaChem 2006 ConferenceIndiaChem 2006 Conference

9th November 2006

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Presentation OverviewPresentation Overview

Economic Profile : India SnapshotEconomic Profile : India SnapshotOpportunities and Growth of Opportunities and Growth of

Indian Petrochemical IndustryIndian Petrochemical IndustryChallenges in Indian Challenges in Indian

Petrochemical IndustryPetrochemical Industry IndianOil integration into IndianOil integration into

petrochemicalspetrochemicalsConclusionConclusion

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Economic Profile : India Economic Profile : India SnapshotSnapshot

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5.9

15.4

20.1

6.4

2.6 2.6

India China USA Japan Russia Brazil

GDP based on PPP; Source : World Economic Outlook 2006

India: 4India: 4thth largest economy in world largest economy in world

% of World GDP

5GDP based on PPP; Source : World Economic Outlook 2006

India: 4India: 4thth largest economy in world largest economy in world

Real GDP Growth

2003

2004

2005

JapanBrazil

USAWorld

RussiaIndia

China

10 10.1

9.97.2 8.1

8.3

7.37.2

6.4

4.1 5.3

4.8

2.7 4.2

3.50.5

4.9

2.3

1.6

2.2

2.7

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Opportunities and Growth of Indian Opportunities and Growth of Indian Petrochemical IndustryPetrochemical Industry

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Petrochemicals - Per capita Petrochemicals - Per capita consumptionconsumption

Polymers

412

24

0

10

20

30

India China World

Country

Kg

/ Per

son

Per capita consumption in India is much lower than world average – Ample potential for growthTask Force Report on Petrochemicals, April 2003

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Consumption of major Consumption of major Petrochemicals – Petrochemicals – last two last two decadesdecades

Consumption Pattern

0

2000

4000

6000

1985-86 1995-96 2001-02

Year

Actua

l KT

Polymers

Fiber

Int Fiber

1985-1985-86 / 86 /

1995-961995-96

1995-1995-96 / 96 /

2001-022001-02

PolymePolymer r

14.0 14.0 14.414.4

FibreFibre 14.014.0 13.013.0

Fibre Fibre Int.Int.

16.416.4 15.315.3

CARG %

Growth in consumption during last two decades has been significant and consistent

Task Force Report on Petrochemicals, April 2003

CARG achieved : more than double the growth rate of GDP

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Growth Potential for IndiaGrowth Potential for India

Polymer consumption in developed Polymer consumption in developed countries are reaching a stagnation : countries are reaching a stagnation : growth areas in Asia.growth areas in Asia.

Amongst fastest growing world economies.Amongst fastest growing world economies. Opening up of petrochemical sector for Opening up of petrochemical sector for

investment.investment. Large and growing domestic consumer market.Large and growing domestic consumer market. Investments in InfrastructureInvestments in Infrastructure Large working age populationLarge working age population Growing middle class households.Growing middle class households.

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in KTs

Polymer Demand Growth Potential: Snapshot

15.2

12.7

15.3

02468

1012141618

VIIIthPlan

IXth Plan 00-01 to02-03

CAGR, %

46004700

210011761700

1025

12591

5300

2201

0

2000

4000

6000

8000

10000

12000

14000

2001-02 2006-07 2011-12

LLD/HDPE PPTotal Polymer

CAGR: 13%

CAGR: 15-16%

Source: Information from Dept. of Petrochemicals, MOC&F

New capacity additions required to meet the growing future demand of Polymers

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Domestic Supply Demand Balance -Domestic Supply Demand Balance - Polyethylene Polyethylene

-2000

-1000

0

1000

2000

3000

4000

5000

Demand 2100 4700

Capacity 1760 3010

Surplus/(Deficit) -340 -1690

2006-07 2011-12

Demand as per recent indication by DOC&P, MOC&F

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-2000

-1000

0

1000

2000

3000

4000

5000

Demand 1700 4600

Capacity 1355 3015

Surplus/(Deficit) -345 -1585

2006-07 2011-12

Domestic Supply Demand Balance -Domestic Supply Demand Balance - Polypropylene Polypropylene

Demand as per recent indication by DOC&P, MOC&F

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Emerging opportunities – FibresEmerging opportunities – Fibres

Global restructuring of textile and Global restructuring of textile and clothing trade post MFA.clothing trade post MFA.

International competitiveness in International competitiveness in Quality, ServiceQuality, Service

India and China are best placed in India and China are best placed in entire clothing value chain- cost entire clothing value chain- cost competitivenesscompetitiveness

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Domestic Demand projection Domestic Demand projection Synthetic fibreSynthetic fibre

2000-2000-01/01/

2006-2006-0707

2006-07/2006-07/

2011-122011-12

PFYPFY 6.66.6 5.65.6

PSFPSF 6.76.7 6.26.2

Fibre Fibre Int.Int.

1.8 - 1.8 - 9.49.4

2.3 - 2.3 - 10.510.5

Total Total 6.46.4 5.65.6

CARG %

0

200

400

600

800

1000

1200

1400

1600

'00-01 '06-07 '11-12

PFYPSFOthers

Demand, KT

Source: Task Force report on petrochemicals, April’03

While the Task Force has projected growth of around 6% in future,considering the opening up of the market and post MFA, it is expectedthat the growth in the fibre sector would be in double digits

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Domestic Supply Demand Balance - Fibres Domestic Supply Demand Balance - Fibres

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Demand 2303 3039

Supply 3208 4225

Surplus/(Deficit) 905 1196

2006-07 2011-12

Based on Task Force report demand projection

Figs. TMT

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Domestic Supply Demand Balance – Para-Domestic Supply Demand Balance – Para-xylenexylene

(1000)

(500)

0

500

1000

1500

2000

2500

3000

Demand 1737 2653

Supply 1975 2066

Surplus/(Deficit) 238 -569

2006-07 2011-12

Source : Industry

Fig’s in TMT

Significant potential exists for addition of new PX capacity

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Domestic Supply Demand Balance – Domestic Supply Demand Balance – Fibre Intermediates Fibre Intermediates

-2000

-1000

0

1000

2000

3000

4000

5000

Demand 2431 4033

Supply 2180 2790

Surplus/(Deficit) -251 -1243

2006-07 2011-12

Based on Task Force report demand projection

-600

-400

-200

0

200

400

600

800

1000

1200

1400

Demand 893 1322

Supply 635 921

Surplus/(Deficit) -258 -401

2006-07 2011-12

PTA MEG

Figs. TMT

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Indian petrochemical industry has:Indian petrochemical industry has:– Large & growing domestic marketLarge & growing domestic market– Low per capita consumptionLow per capita consumption– Growing GDP growthGrowing GDP growth– Expertise in specialized productsExpertise in specialized products– Large availability of trained manpowerLarge availability of trained manpower– Ability to adapt & assimilate new technologyAbility to adapt & assimilate new technology– Competent managerial & technical manpowerCompetent managerial & technical manpower– Emergence of petrochemical hubsEmergence of petrochemical hubs

Petrochemicals ImperativesPetrochemicals Imperatives

Indian petrochemical industry has grown & poised to grow further in near future

Indian Petrochemicals on the move

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Petroleum, Chemicals and Petroleum, Chemicals and Petrochemicals Investment region Petrochemicals Investment region (PCPIRs)(PCPIRs)

Government is working on PCPIRs to promote investment both domestic and international markets

These regions will have state-of-the art infrastructure and support to boost manufacturing, augment exports and generate employments.

Benefits of co-citing, networking and efficiency through common facilities

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Drive for GrowthDrive for Growth

Indian companies are willing for collaboration with international majors to add new capacities in India to explore the growing demand of products.

Government of India is also advocating and promoting new investments in the country.

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Challenges in Challenges in Indian Petrochemicals IndustryIndian Petrochemicals Industry

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Key Challenges- PolymersKey Challenges- Polymers

Focus/thrust areas on development of newer Focus/thrust areas on development of newer applications/ value added products: applications/ value added products:

– Plasticulture: leading to modern farming Plasticulture: leading to modern farming resulting in improved productivityresulting in improved productivity

– Packaging: processed foods & consumer non-Packaging: processed foods & consumer non-durablesdurables

– Automotives: better performance plastics for Automotives: better performance plastics for automobiles & consumer durablesautomobiles & consumer durables

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Key Challenges- Polymers…Key Challenges- Polymers…

Focus/thrust areas on development of newer Focus/thrust areas on development of newer applications/ value added products: applications/ value added products:

– Geo-textiles/Geo-synthesis: infrastructure Geo-textiles/Geo-synthesis: infrastructure development – gas piping, canal lining, inter-river development – gas piping, canal lining, inter-river linkages, roads (polymer modified Bitumen) etc.linkages, roads (polymer modified Bitumen) etc.

– Innovative products for telecom & IT sectorsInnovative products for telecom & IT sectors

– Engineering polymers: electronics, telecom, Engineering polymers: electronics, telecom, automobiles, substitution of metals etc.automobiles, substitution of metals etc.

– Substituting construction materialsSubstituting construction materials

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Key Challenges- Synthetic fibresKey Challenges- Synthetic fibres

Future growth areas: Future growth areas: – New varieties of polyester fibres & yarnNew varieties of polyester fibres & yarn

– PP filament yarnPP filament yarn

– Acrylic fibresAcrylic fibres

– Technical textiles including performance fibresTechnical textiles including performance fibres

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Key Challenges- environmental Key Challenges- environmental aspectsaspects

To achieve environmentally sustainable growth through: To achieve environmentally sustainable growth through: – Innovative methods of plastic waste managementInnovative methods of plastic waste management– RecyclingRecycling– Development of bio- & photo-degradable polymers Development of bio- & photo-degradable polymers

Approach through:Approach through:– Setting up of dedicated plastic park to promote a cluster Setting up of dedicated plastic park to promote a cluster

concept for applications & recycling, which would yield concept for applications & recycling, which would yield benefit to:benefit to:• Areas of technology developmentAreas of technology development• Best practicesBest practices• Market developmentMarket development• Recycling of wastesRecycling of wastes

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IndianOilIndianOilIntegration into PetrochemicalsIntegration into Petrochemicals

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ConclusionConclusion

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ConclusionConclusion

World has become a single global World has become a single global market – Manufacturers to be highly market – Manufacturers to be highly competitive to survivecompetitive to survive

Opportunities are available for growth in Opportunities are available for growth in Petrochemicals – to cater to India and Petrochemicals – to cater to India and global marketsglobal markets

India needs significant investment for India needs significant investment for addition of new capacities on addition of new capacities on petrochemicalspetrochemicals

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Thank YouThank You