“OIL AND GAS INDUSTRY”

Management Research Project -I

Submitted

In the partial fulfillment of the Degree of

Master of Business Administration

Semester-III

By

Name Exam No.

Patel Ashish P. (13044311055)

Patel Hitesh R. (13044311073)

Patel Kuntal J . (13044311088)

Patel Jignesh D. (13044311080)

Patel Mihir B. (13044311091)

Patel Shruti K. (13044311107)

Under the Guidance of:

Prof. (Dr.) Mahendra Sharma

Prof. & Head,

V. M. Patel Institute of Management.

&

Dr. HarshaJariwala

Dr. Abhishek Parikh

Faculty Members

V. M. Patel Institute of Management.

Submitted To:

V. M. Patel Institute of Management,

Ganpat University,Kherva.

(December, 2014)

i

CERTIFICATE BY THE GUIDE

This is to certify that the contents of this report entitled “A study on Oil and Gas industry” by

Patel Hitesh (13044311073), Patel Kuntal (13044311088),Patel Ashish (13044311055), Patel

Mihir (13044311091), Patel Jignesh (13044311080), Patel Shruti (13044311107) Submitted to

V. M. Patel Institute of Management for the Award of Master of Business Administration (MBA

Semester - III) is original research work carried out by them under my supervision.

This report has not been submitted either partly or fully to any other University or Institute for

award of any degree or diploma.

Prof. (Dr.) Mahendra Sharma

Professor& Head,

V. M. Patel Institute Of

Management,

Ganpat University.

Kherva

Date: / /

Place: KHERVA

ii

CANDIDATE’S STATEMENT

We hereby declare that the work incorporated in this report entitled “A study on Oil and

Gas industry” in partial fulfillment of the requirements for the award of Master of

Business

Administration (Semester - III) is the outcome of original study undertaken by us and it

has not been submitted earlier to any other University or Institution for the award of any

Degree or Diploma.

Patel Hitesh(13044311073)

Patel Kuntal(13044311088)

Patel Ashish(13044311055)

Patel Mihir(13044311091)

Patel Jignesh(13044311080)

Patel Shruti(13044311107)

Date: / /

Place: KHERVA

iii

PERFACE

One can deny for the importance of the practical exposure of the problem for its better

understanding and better grip of coming out with an industrially acceptable solution.

Being the Management student and performing small practical even is in itself an experience of

responsibility on our head. The project is certainly the best chance to work in the Management

field and have practical understanding of Management Strategic Planning and his

implementation. This exposure has really added a supplement and nourishment to our growing

tree of management knowledge- just like the fertilizer does to the plants.

In view of above, this report has been completed as a part of syllabus prescribed for the master of

business administration. This had been made in order to know Oil and gas industry overview and

its strategic tools and its planning. This will help us to understand How Made Strategic Tools for

particular industry, which factor affected to Oil and Gas industry. We also know the Strengths,

Weakness, Opportunities, and Threats. This will help to understand financial overview of Oil and

Gas industry. We also know the Political, Economical, Social, Technology factor which affected

to the Oil and Gas Industry.

iv

ACKNOWLEDGEMENT

It is indeed of great moment to pleasure to express our sense of per found gratitude and ineptness

to all the people who have been instrumental in making our learning a rich experience. We got

the opportunity to do a challenging project in Management Research Project. The project is the

important part of our study and gives us a practical exposure to Strategic Tools its

implementation and it is almost impossible to do the same without the guidance of people in and

around us.

It gives me immense pleasure to acknowledge Strategic Tools which has been nice enough to

give our chance to do our Report and providing us support throughout our Report period and

afterward.

We hereby take the pleasure of thanking all who have contributed to the making of this report.

Firstly we would like to thank Ms. HarshaZariwala Asst. Professor and Mr. Abhishek

Parikh, Asst.Professor , Who has provided us full liberty, co–operation during our Report and

sharing knowledge of his field with us always with a smile.

v

EXECUTIVE SUMMARY

India has one of the fastest growing economies in the world, and the demand for oil and gas is

rising at a matching rate. Not only is India’s market potential huge, but in recent years India has

emerged as one of the most prospective regions in the world with major oil and gas discoveries,

both onshore and offshore.

India has total reserves (proved & indicated) of 1,201 million metric tonnes (MMT) of crude oil

and 1,437 billion cubic metres (BCM) of natural gas as on April 1, 2010, according to the basic

statistics released by the Ministry of Petroleum and Natural Gas. Against a crude oil production

of about 37 million tonnes per annum (MTPA), India’s consumption currently exceeds 138

million tonnes. In

2010, 194 MMT of crude oil was refined and actual natural gas production was 31.0 BCM. By

the end of 2012, the refinery capacity is expected to reach 240.96 million metric tonnes per

annum (MMTPA). The refining capacity of the oil refineries in India has undergone nearly a

three-fold increase in 2012. The country exported 50.974 MMT of petroleum products during

2011-12. To provide energy security, the Government of India is seeking private and foreign

investments in excess of $250 billion in both the upstream and the downstream sectors during the

next 10 years. India’s petroleum product consumption has grown by 4-5% over the past 10 years

and the oil demand in India is expected to rise to 368 MMTPA by 2025. With widening gap

between demand and supply, both for oil and gas, the outlook for the upstream sector is

extremely positive. While oil and gas will continue to play a substantial role in the total energy

mix, the need for harnessing alternate energy sources like Coal Bed Methane (CBM),

Underground Coal Gasification (UCG) and Shale Gas (gas locked in sedimentary rocks) will

become crucial to balance the demand and supply.

The Government of India approved the New Exploration Licensing Policy (NELP) on April 9,

2009, to tackle the increasing demand supply gap of energy in India. In the eighth round of the

NELP-VIII, 1.62 km2areas will be covered comprising of 70 oil and gas blocks and 10 areas for

the extraction of coal bed methane (CBM) gas from below the coal fields under CBM-IV.

vi

Petroleum & Natural Gas Ministry launched the ninth round of NELP (NELP-IX) in New Delhi

on October 15, 2010. NELP-IX offered34 exploration blocks comprising of 8 deepwater blocks,

7 shallow water blocks and 19 on land

blocks. Moreover, the government is planning its first ever offer of shale gas exploration permits

2012. Shale gas (gas locked in sedimentary rocks) is an emerging area and has become an

important source of energy in a few countries which have been able to commercially exploit this

resource.

In this report an attempt has been made to provide the broad understanding of the oil and gas

sector in India across the industries. The upstream and downstream processing sectors, key

players, key market, transportation and distribution network, fuel retailing, Indian taxation

systems have been presented. The Western Australian capability/ level of interest in the market

have also been described.

vii

LIST OF TABLES

TABLE NO PARTICULARS

3.1 Strategic group mapping

3.2 Competitive profile matrix

3.3 External factor evaluation

4.1.1 Total expense

4.1.2 Total income

4.1.3 Total assets

4.1.4 Total liability

4.1.5 Investment

4.1.6 Share capital

4.2.1 Current ratio

4.2.2 Operating profit ratio

4.2.3 Investment current ratio

4.2.4 Common size statement

5.1 Fixed assets

5.2 Source of Finance at Starting Time

5.3 Sales of product

5.4 Job role salary

5.5 Projected profit & loss account

5.6 Projected balance sheet

5.7 Cash flow

7.1 ONGC balancesheet

7.2 ONGC profit and loss account

7.3 Oil indiabalancesheet

7.4 Oil india profit and loss account

viii

7.5 Hindustan oil exploration limited balancesheet

7.6 Hindustan oil exploration limited profit and loss account

LIST OF GRAPHS

GRAPH NO PARTICULARS

1.1 Types of oil and gas

3.1 Pest analysis

3.2 Strategic group mapping

3.6 Five force model

4.1.1 Total Expense

4.1.2 Total Income

4.1.3 Total Assets

4.1.4 Total liability

4.1.5 Investment

4.1.6 Share capital

4.2.1 Current ratio

4.2.2 Operating profit ratio

4.2.3 Interest coverage ratio

5.5 Organization structure

SR NO. CONTENT PG NO. Certificate by the guide I

Candidate’s statement ii

Preface iii

Acknowledgement iv

Executive summary V

List of tables vii

List of graphs viii

1 Introduction 1

1.1 History of oil and gas industry 2

1.2 Oil and gas industry in india 3

1.3 Gas industry in india 4

1.4 Investments in indian oil and gas sector 8

1.5 Indian senario: history of oil and gas industry 9

1.6 Types of oil and gas 10

1.7 Brief introduction 12

1.8 Economic features 15

2 Major player 16

2.1 Oil india limited 19

2.2 Oil and natural gas corporation 20

2.3 Hindustan oil exploration company limited 21

2.4 Market analysis 22

3 Macro analysis 24

3.1 PEST analysis 25

3.2 Key success factors 29

3.3 Strategic group mapping 31

3.4

Competing and Factors affecting the strength of

rivalry 33

3.5 External factor evaluation 34

3.6 Porter’s five force 39

3.7 SWOT 48

4 Financial analysis 57

4.1 Trend analysis 58

4.1.1 Total expense 58

4.1.2 Total income 59

4.1.3 Total assets 60

4.1.4 Total liability 61

4.1.5 Investment 62

4.1.6 Share capital 63

4.2 Ratio analysis 64

4.2.1 Current ratio 65

4.2.2 Operating profit ratio 66

4.2.3 Interest coverage ratio 68

4.2.4 Common size statement 69

5 Business planning 73

5.1 Company profile 74

5.2 Vision 76

5.3 Mission 76

5.4 Product 76

5.5 Organisation structure 78

6 Conclusion and Limitations 84

7 Biblogaphy 86

8 Annexure 88

1

CHAPTER-1

INTRODUCTION

2

1.1 HISTORY OF OIL AND GAS INDUSTRY:-

Indian Oil and Gas Industry have been successful in fuelling the rapid growth of the Indian

economy. As India's largest company by sales, the highest ranked Indian company in the

Fortune "Global 500" listing and the 18th largest petroleum company in the world, Indian Oil

deals with a lot of information on an ongoing basis through its network of over 5,000

distributors of liquefied petroleum gas (LPG), has more than 2,000 gas stations or

transactions from its 70 million customers all over India. The origin of Indian Oil & Gas

Industry can be traced back to 1867 when oil was struck at Makum near Margherita in

Assam.

In 1947 at the time of Independence the Oil & Gas industry was controlled by international

companies. India's domestic oil production was just 250,000 tonnes per annum and the entire

production was from one state - Assam. The foundation of the Indian Oil & Gas Industry was

laid by the 1954 Industrial Policy Resolution when the government announced that petroleum

would be since then the core sector industry. In pursuance of the 1954 Industrial Policy

Resolution, Government-owned National Oil Companies ONGC (Oil & Natural Gas

Commission), IOC (Indian Oil Corporation), and OIL (Oil India Ltd.) were formed.

In 1955, ONGC was formed as a Directorate and then in 1956 became a Commission. Indian

Refineries Ltd, a government company was set up in 1958. Later In 1959, for marketing of

petroleum products, the government set up another company called Indian Refineries Ltd.

Then in 1964, Indian Refineries Ltd was merged with Indian Oil Company Ltd. to form

Indian Oil Corporation Ltd.

3

1.2 OIL AND GAS INDUSTRY IN INDIA:-

Availability of natural gas, including imported LNG, is expected to intensify in the country

by over 52 per cent to 271.92 million cubic meters a day by 2013-14. The Union Minister of

Petroleum & Natural Gas has stated that at present, total availability of natural gas in India,

including liquidities natural gas (LNG) is around 167.80 mmcmd, which is likely to be

around 202.97 mmcmd, 256.6 mmcmd and 271.92 mmcmd during 2011-12, 2012-13 and

2013-14 respectively. To take the advantage of prospect presented by the alarming gas surge

in India, the Gas Authority of India Ltd (GAIL) is spending substantially in its pipeline

network. Over the next three years, it will invest US$ 660.7 million-US$ 770.8 million,

enlarging its transmission capacity from the current 150 MSCMD to 300 MSCMD (million

standard cubic metres per day ).

Moreover, GAIL which has signed a Memorandum of Understanding (MoU) with the

Karnataka government, which will spend US$ 423.6 million this year to lay an 800-

kmpipeline to transport gas from the LNG terminal in Dabhol to Bidadi near Bangalore.

GAIL expects the project to be completed by March 2012. Currently, Punj Lloyd Group has

secured a US$ 87.57 million deal from GAIL India for laying a natural gas pipeline from

Dabhol to Bangalore. Further, GAIL has commenced construction of its Karanpur–

Moradabad–Kashipur– Rudrapur/Pant Nagar natural gas pipeline at Kashipur, Uttarakhand.

The assessed expenditure on the project is US$ 40.22 million.

The State-owned Oil and Natural Gas Corp (ONGC) has said that its natural gas production

will go up by over 58 per cent to 100 million cubic metres a day by 2015-16 after it puts its

eastern offshore fields into production, said R S Sharma, Chairman and Managing Director,

ONGC. Natural gas production will climb to 72 million standard cubic metres per day

(MSCMD) in 2012-13 from 63 MMSCMD in 2009-10.The US Overseas Private Investment

Corporation (OPIC) will provide US$100 million in financing for the US$ 300 million South

Asia Energy Fund, part of the Global Environment Fund (GEF). The South Asia Energy Fund

will spend in solar, wind, hydropower, advanced bio-fuels and natural gas projects, with

focus on Indian investment. GSPC Gas Company Ltd, a gas distribution arm of state-run

Gujarat State Petroleum Corporation (GSPC), has put the target of attaining 300,000 piped

natural gas (PNG) connections by 2012. The company presently has 192,000 PNG

connections across Gujarat.

4

1.3 GAS INDUSTRY IN INDIA:-

Availability of natural gas, including imported LNG, is expected to intensify in the country

by over 52 per cent to 271.92 million cubic meters a day by 2013-14. The Union Minister of

Petroleum & Natural Gas has stated that at present, total availability of natural gas in India,

including liquidities natural gas (LNG) is around 167.80 mmcmd, which is likely to be

around 202.97 mmcmd, 256.6 mmcmd and 271.92 mmcmd during 2011-12, 2012-13 and

2013-14 respectively. To take the advantage of prospect presented by the alarming gas surge

in India, the Gas Authority of India Ltd (GAIL) is spending substantially in its pipeline

network. Over the next three years, it will invest US$ 660.7 million-US$ 770.8 million,

enlarging its transmission capacity from the current 150 MSCMD to 300 MSCMD.

Moreover, GAIL which has signed a Memorandum of Understanding (MoU) with the

Karnataka government, which will spend US$ 423.6 million this year to lay an 800-

kmpipeline to transport gas from the LNG terminal in Dabhol to Bidadi near Bangalore.

GAIL expects the project to be completed by March 2012. Currently, Punj Lloyd Group has

secured a US$ 87.57 million deal from GAIL India for laying a natural gas pipeline from

Dabhol to Bangalore. Further, GAIL has commenced construction of its Karanpur–

Moradabad–Kashipur– Rudrapur/Pant Nagar natural gas pipeline at Kashipur, Uttarakhand.

The assessed expenditure on the project is US$ 40.22 million.

The State-owned Oil and Natural Gas Corp (ONGC) has said that its natural gas production

will go up by over 58 per cent to 100 million cubic metres a day by 2015-16 after it puts its

eastern offshore fields into production, said R S Sharma, Chairman and Managing Director,

ONGC. Natural gas production will climb to 72 million standard cubic metres per day

(MMSCMD) in 2012-13 from 63 MMSCMD in 2009-10.The US Overseas Private

Investment Corporation (OPIC) will provide US$100 million in financing for the US$ 300

million South Asia Energy Fund, part of the Global Environment Fund (GEF). The South

Asia Energy Fund will spend in solar, wind, hydropower, advanced bio fuels and natural gas

projects, with focus on Indian investment. GSPC Gas Company Ltd, a gas distribution arm of

state-run Gujarat State Petroleum Corporation (GSPC), has put the target of attaining 300,000

piped natural gas (PNG) connections by 2012. The company presently has 192,000 PNG

connections across Gujarat.

5

Coal Bed Methane (CBM)

The Government evolved a Policy for Coal Bed Methane in 1997 so as to utilize the country‘s

enormous coal reserves and the methane gas trapped in coal seams The MoPNG was to be the

administrative ministry with the Directorate General of Hydrocarbon (DGH) as the

implementing agency and accordingly, a MoU was signed between the MoPNG and Ministry

of Coal in September 1997. The first meeting on CBM was held in 2001, on the lines of

NELP, with competitive bidding deciding the award of acreages. So far 3 rounds of bidding

have been concluded and 26 blocks have been awarded. The fourth round of CBM has been

declared along with the latest round of NELP. The CBM reserves of 6 trillion cubic feet (tcf)

have been established. Major players in this sector are Arrow Energy, Gas Authority of India

Ltd. (GAIL), ONGC, Great Eastern Energy Corporation, BP Exploration, Reliance Energy

Ltd, Reliance Natural Resources Ltd, GeoPetrol and others.

Gas Transportation and Distribution

The transmission and distribution sector of the natural gas stays comparatively immature, but

this is expected to alter in the medium term.

Gas Transportation

For a lengthy period in India, there was only one major long distance gas transportation

pipeline, joining ONGC delivery point near Hazira in Gujarat to demand centres in the north-

west corridor of the country including Jagdishpur in Uttar Pradesh and Vijaipur in Madhya

Pradesh. This pipeline, 3187 kms long and with a capacity of around 34 mmscmd was run by

the former public sector monopoly GAIL India Ltd and persists to serve a number of large

power and fertilizer plants, besides smaller industrial units lying along its route. In recent

times, GAIL has constructed a few other pipelines, connecting the LNG terminal at Dahej to

Vijaipur and Uran and the power plant at Dabhol to Panvel.

Furthermore, major pipeline expansions have also been commenced by the private sector,

particular Reliance Gas Transportation India Ltd (RGTIL), which has constructed the 1,386

km long East-West pipeline connecting RIL's fields in Kakinada to centres of demand and

ending at Bharuch in Gujarat. RGTIL also proposes to connect the KG Basin fields to Haldia

in West Bengal and Chennai and Bangalore. The map in Appendix II illustrates the major

existing pipelines and the ones planned as part of the 'National Gas Grid'.

6

Trans-national Pipelines

The Government has been examining the possibility of bringing in gas from countries such as

Iran, Turkmenistan, Bangladesh and Myanmar through pipelines. Various initiatives are

under scrutiny, which include:

City Gas Distribution

The boost in gas supplies and gas transmission infrastructure is also liable to provide stimulus

to City Gas Distribution (CGD) players. So far, only a small number of major players are

present in the market: these are Indraprastha Gas, MahanagarGas, Gujarat Gas and GSPC

Gas which distributes Piped Natural Gas and Compressed Natural Gas to cities in Delhi,

Mumbai and Gujarat respectively. Recent years have noticed some activity, with a number of

players registering their presence. In particular, GAIL has formed Joint Ventures with other

PSU firms to distribute gas in a number of cities.

With the importance being laid on a cleaner environment and lower pollution levels in cities,

CGD is likely to get a push in the future. Thus, apart from GAIL, handful players have drawn

up grand plans to roll out city gas infrastructure across a number of cities in the country.

States which are likely to see further activity include UttarPradesh, Maharashtra, Andhra

Pradesh, Rajasthan, Karnataka, Kerala, MadhyaPradesh and West Bengal. The establishment

of the Petroleum and Natural Gas Regulatory Board (PNGRB) following the passage of the

PNGRB Act is likely to help in the further development of the sector. The Board shall

regulate existing players, and promote the development of CGD networks in new cities. In

fact, the Chairman of the PNGRB was quoted stating that natural gas would be available in

84 cities by 2011 and 250 cities by 2018.

The PNGRB has begun the process of inviting applications for CGD licences in the country.

Licenses are to be awarded through an open competitive bidding process, with their being a

level playing field for both domestic and foreign units. Lately, requests were received for six

cities put up for bidding. The main driver for the development of gas transmission and CGD

will be the availability of essential volumes of gas. With the development of RIL's KG Basin

and other fields, the opening could be available; what now matters is whether the CGD

license-holders can obtain gas supplies and develop gas distribution infrastructure.

7

Liquefied Natural Gas (LNG)

At present India has two operational LNG terminals, both situated in Gujarat, one by Petronet

LNG Ltd. (PLL) at Dahej and the other at Hazira instituted as a Joint Venture between Shell

and Total. While the size of the Dahej plant is being extended from 5 to 7.5 and later to 10

mtpa de-bottlenecking operations have resulted in the merchant Hazira terminal being able to

process around 3.6-4 mtpa of LNG. A couple of other terminals are also being planned, at

Kochi in Kerala (also by PLL) and Mundra in Gujarat. Meanwhile, some progress is also

being made to bring the partially constructed terminal at Dabhol into operation in which

GAIL and National Thermal Power Corporation (NTPC) have a majority stake. Besides the

gas meant for the Ratnagiri (the erstwhile Dabhol) plant, it appears that other parties may be

allowed to use this terminal to re-gassify LNG obtained from various sources in return for a

fee. India is in discussions with various companies in the Middle East, particularly Qatar, and

Australia to source LNG for the terminals currently under operations or planned for the

future.

Petroleum Product Pipelines

India has a network of petroleum product pipelines connecting sources of supply /refineries

to sources of demand. IOC has the largest network, with pipelines such as the Haldia-

Barauni, Barauni-Kanpur product lines and the Mundra-Panipat crude oil pipeline. GAIL has

established two LPG pipelines, from Jamnagar to Loni and Vishakhapatnam to Secunderabad

respectively. Appendix III provides a map of the existing and proposed Product Pipelines.

8

1.4 INVESTMENTS IN INDIAN OIL AND GAS SECTOR:-

The Ministry of Chemicals and Fertilisers, Government of India has approved a scheme of

investments worth US$ 25.25 billion in three areas under its flagship petroleum, chemicals

and petrochemicals investment regions (PCPIR) policy. The investment consist of US$ 7.32

billion for physical infrastructure development, and the rest is project-specific investments

committed by various public and private companies in three PCPIRs — Visakhapatnam and

East Godavari districts in Andhra Pradesh, Bharuch in Gujarat and East Midnapore in West

Bengal. US-based industrial gases company Praxair has decided to invest about US$ 370.74

million into its India operations, said GajananNabar, Managing Director, Praxair India.

Chennai Petroleum Corporation Limited (CPCL) plans to invest around US$ 3.39 billion for

the next five years for capacity expansion including a Brownfield refinery project at Manali

near Chennai with an expenditure of US$ 1.69 billion.

Essar Oil proposes to enlarge its refinery capability by 2 million tonnes a year at Vadinar in

Gujarat with an investment of US$ 278.46 million. The company will increase its volume to

20 million tonnes by 2012. According to Mr S. Sundareshan, Secretary, Petroleum and

Natural Gas, public sector oil companies are going to be the major investors in Kerala over

the next two years as they have allocated over US$ 1.61 billion money in the State. State-

owned refinery and marketing firm, Hindustan Petroleum plans to spend US$ 4.87 billion

into a new refinery with a capacity of 18 million tonnes per year in Maharashtra.

9

1.5 INDIAN SENARIO: HISTORY OF OIL AND GAS INDUSTRY :-

- Oil struck at Makum near Margherita in Assam in 1867

- First commercial oil discovery in digboi in 1889

- Systematic E $ P in 1889 after Assam oil company formed

- 1947 India‘s domestic oil production just 2,50,000 tonnes per annum

- 1954 IRR – petroleum to core sector

- 1955 – ONGC set up

- 1958 – First gas $ oil pool discovered in jwalamukhi (Punjab) and cambay. Oil India

limited (OIL) was set up.

- Discovery of giant Bombay high field in 1974 – western offshore highest producer.

- 1991- liberalized petroleum exploitation $ exploration policy

- 1991-1994- 4th

,5th

,6th

, 7th

and 8th

rounds of exploration biading

- 1999- new exploration licensing policy (NELP)

- 2000 - NELP II

- 2002- NELP III

- 2003- NELP IV

- 2004 – NELP V

- 2006 – NELP VI

- 2007 – NELP VII

10

1.6 TYPES OF OIL AND GAS:-

Fig-1.1

LIGHTEEST

- Methane

- Ethane

Natural gas - Propane

- Butane

- Gasoline

- Kerosene

- Gas Oil

- Diesel Oil

Crude oil

- Lubricating Oil

- Lubricants and Greas

- fuel oil

HEAVIEST - Asphalt

During 1960's, a number of oil and gas-bearing companies were discovered by ONGC in

Gujarat and Assam. Discovery of oil in February 1974 of significant quantities in Bombay

High opened up new avenues of oil exploration in offshore areas. During 1970's and till mid

1980's exploratory efforts were made by ONGC and OIL India to yield discoveries of oil and

gas in a number of structures in Bassein, Tapti, Krishna-Godavari-Cauvery basins,

Cachar(Assam), Nagaland, and Tripura. In the year 1984-85, India achieved a self-

sufficiency level of 70% in petroleum products. Gas Authority of India Ltd. (GAIL) was set

up in the year 1984 to look after transportation, processing and marketing of natural gas and

natural gas liquids. GAIL has been successful in the laying 1700 km-long gas pipeline (HBJ

pipeline) from Hazira in Gujarat to Jagdishpur in Uttar Pradesh, passing through Rajasthan

and Madhya Pradesh.

11

After Independence, India made significant efforts for its refining capacity. In the first decade

immediately after independence, three coastal refineries were established by multinational oil

companies operating in India at that time. This included refineries by Burma Shell, and Esso

Stanvac at Mumbai, and by Caltex at Visakhapatnam. Indian government in order to increase

exploration activity approved the New Exploration Licensing Policy (NELP) in March 1997

to ensure level playing field in the upstream sector between private and public sector

companies in all fiscal, financial and contractual matters. The policy ensued that there was no

mandatory state participation through ONGC/OIL nor there was any carried interest of the

government.

Today to meet its growing petroleum demand, India is investing heavily in oil fields abroad.

India's state-owned oil firms have stakes in oil and gas fields in Russia, Sudan, Iraq, Libya,

Egypt, Qatar, Ivory Coast, Australia, Vietnam and Myanmar. Indian Oil and Gas Industry has

a vital role to play in India's energy security and if India has to sustain its high economic

growth rate.

Why is Oil so Important in Today‘s World?

The answer to this question may already be obvious to you but let's try and see how big a role

oil plays in Your daily life.

When you got out of bed this morning, the electricity you used to cook breakfast may have

been generated from an oil-burning generating station; or perhaps your family uses a natural

gas-burning stove. You were able to enjoy breakfast in comfort and warmth because of the

oil-burning furnace in your basement. Next you may have taken a gasoline or diesel powered

car (or bus) to school. So, as you can see, before you even started your school day you

already used a certain amount of petroleum. Many of us tend to take these conveniences for

granted. Try and imagine how your life might change if we suddenly lost our supply of oil.

A Source of Energy

Primary importance lies in the fact that it is a very versatile and powerful source of energy.

There are many other energy sources that we routinely use, including firewood, coal, and

hydroelectric and nuclear generating stations. All of these sources have their advantages and

12

disadvantages. A clean and renewable source of energy would certainly be the most

desirable. What this means is that our natural sources of oil are finite; there will come a time

when we have used them up. One of the exercises at the end of this chapter will ask you to

calculate how long our present known supplies of oil will last at today's consumption rates.

The reason that oil has such importance is that it provides the fuel that runs the internal

combustion engine. The internal combustion engine was invented by Karl Benz in 1885-86.

Gotlieb Daimler improved on this invention and eight years later Rudolph Diesel created the

engine that bears his name. These types of engines are still used today in all kinds of

machinery including automobiles, ships, tractors, generators and tanks. Oil is also the raw

material for the fuels that are used in jet engines and in some cases to fuel rocket engines to

propel spacecraft into outer space. It should now be obvious why oil plays such a dominant

role in today's world. If oil supplies were to be cut off, cars, boats and planes would grind to a

halt. We would have to find alternate means of heating many of our homes and generating

sufficient electricity. Our personal security would also be threatened because our military

forces and police forces would be largely immobilized.

1.7 BRIFE INTRODUCTION:-

The Oil that is produced by the Oil Industry in India provides more than 35% of the energy

that is primarily consumed by the people of India. This amount is expected to grow further

with both economic and overall growth in terms of production as well as percentage. The

demand for oil is predicted to go higher and higher with every passing decade and is expected

to reach an amount of nearly 250 million metric tone by the year 2024.

Most of India's crude oil reserves in India are located offshore, in the west and onshore in the

northeast. Substantial reserves, however, are located offshore in the Bay of Bengal and in

Rajasthan state. India's largest oil field is the offshore Mumbai High field, located north-west

of Mumbai and operated by ONGC. Another effort is India's large oil fields are the Krishna-

Godavari basin which is located in the Bay of Bengal.

NELP framework is the primary mechanism through which the Indian government has

promoted new E&P projects. The latest round of auctions, NELP VIII, was launched in April

2009 and attracted nearly $1.1 billion in investment.

13

According to Oil & Gas Journal (OGJ), India has approximately 5.6 billion barrels of proven oil

reserves as of January 2010, the second-largest amount in the Asia-Pacific region after China.

India's crude oil reserves tend to be light and sweet, with specific gravity varying from 38° API in

the offshore Mumbai High field to 32° API at other onshore basins. India produced roughly 880

thousand barrels per day (bbl/d) of total oil in 2009 from over 3,600 operating oil wells.

Approximately there are 680 thousand bbl/d was crude oil; the remainder was other liquids and

refinery gain. In 2009, India consumed nearly 3 million bbl/d, making it the fourth largest

consumer of oil in the world. EIA expects and predicts approximately 100 thousand bbl/d

annual consumption growth through 2011.

Market capitalization

In January 2012, Gas Authority of India Ltd (GAIL) said that gas availability in India is

expected to grow at 23% compounded annual growth rate (CAGR) to 312 mscmd by 2013-

14, buoyed by trebling of domestic production to 254 mscmd and doubling of regasified

liquefied natural gas imports to 58 mscmd.

Size of the industry

India has total reserves of 775 million metric tonnes (MMT) of crude oil and 1074 billion

cubic metres (BCM) of natural gas accordingly as on April 1, 2009, as per the basic statistics

released by the Ministry of Petroleum and Natural Gas. Petroleum exports during 2009-10

were US$ 26.2 billion. In the eighth round of the NELP (NELP-VIII), 1.62 sq km area will be

covered comprising 70 blocks. Out of 70 blocks, 36 blocks have been awarded under NELP-

VIII, according to the Economic Survey 2011-12.

Today, there are about total of 18 refineries in the country comprising 17 in the Public Sector,

one in the private sector. There are 17 Public sector refineries are located at Guwahati,

Barauni, Haldia, Mathura, Digboi, Koyali, Panipat, Visakhapatnam, Chennai, Nagapatinam,

Kochi, Bongaigaon, Numaligarh, Mangalore, Tatipaka, and two refineries in Mumbai. The

private sector refinery built by Reliance Petroleum Ltd is in Jamnagar is the biggest oil

refinery in Asia.

14

Employment opportunities

Oil & gas industry jobs onshore or offshore, are most preferred career option for people due

to its vast employment potential as well as high rate of wages. The oil & gas industry job

vacancies exist in fields as well as rigs. Onshore and offshore jobs are mostly available for

Petroleum engineers, Geoscientists, Pipeline engineers, Reservoir engineers, Design

engineers, Shipping officers, Geologists, Drilling supervisors, Pipe stress engineers,

Reservoir managers and many more categories. The general categories those can find

employment vacancies in the oil and gas industry are mainly finance, sales, health, safety,

refinery professionals and environment engineers.

Pollution

In the classification of Pollution, the Indian Oil and Gas Industry comes under the category

"Red" which represents highly polluting industries.

Latest developments

To support India's energy security the country is constructing a strategic petroleum

reserve (SPR).

o The first storage facility at Visakhapatnam will hold approximately 1.33

million tons of crude and is scheduled for completion by the end of 2011.

o Then the second facility at Mangalore would have a capacity of nearly 1.5

million tons and is scheduled for completion by the end of 2012.

o The third facility of Padur is also scheduled to be completed by the end of

2012, which will have capacity of nearly 2.5 million tons.

The selection of coastal storage facilities are accordingly so that the reserves could be easily

transported to refineries during a supply disruption. The Strategic Petroleum Reserves(SPR)

project is managed by the Indian Strategic Petroleum Reserves Limited (ISPRL), which is

part of Oil Industry Development Board (OIDB), a state-controlled organization. India does

not have any strategic crude oil stocks at this time.

15

The government is planning for its first ever offer of shale gas exploration in 2012.

Shale gas (gas locked in sedimentary rocks) is an emerging area. It has become an

important source of energy in a few countries that have been able to commercially

exploit this resource.

1.8 ECONOMIC FEATURES :-

Oil and gas management systems

Petroleum production graphing

Oil and gas data maintenance

Complete oilfield operations software

System for recording production history

Gas and oil production analysis

Production database system

Production management software

Daily production tracking

Production curve fit analysis

Information management for daily field production

Oil and gas production engineering

16

CHAPTER-2

MAJOR PLAYERS

17

Major players

1. Indian Oil Corporation

2. ONGC

3. Bharat Petroleum

4. Reliance Petroleum Limited

5. Essar Oil Limited

6. Gas Authority of India

7. Hindustan Petroleum Corporation

8. Aban

9. Oil India Limited

10. Tata Petrodyne

11. Bongaigaon Refinery

12. Gas Projects (India) Private Limited

13. Hindustan Oil Exploration Company Limited

14. India LPG

15. IBP Co. Limited

16. Lubricants India

18

17. Oil Gas India

18. Petrosil Group

19. Shiv-Vani Universal

20. Kochi Refineries Limited

21. Niko Resources Limited

22. Assam Oil Company Limited

23. Balmer&Lawrie& Co.

24. Bombay High

25. Mangalore Refinery and Petrochemicals

26. Petronet LNG Limited

19

2.1 OIL INDIA LIMITED (OIL) :-

Oil India Ltd is the second largest national oil and gas company in India as measured by total

proved plus probable oil and natural gas reserves and production. The company is engaged in

the business of Exploration, Development and Production of Crude Oil and Natural Gas,

Transportation of Crude oil and Production of LPG. They own and operate a range of

facilities and services required for the above business in the existing and new concessions in

an environment-friendly and financially-efficient manner.

The company holds interests in various oil and gas projects located in India, Libya, Gabon,

Iran, Nigeria, and Sudan. In addition, the company offers various technical services related to

pipeline construction; specialized services, such as hot tapping, stapling, and pipe cutting and

shearing off services; and various operation and maintenance services. They also own and

operate crude oil pumping stations and repeater stations.

In the year 2009, the company entered into a MoU with Advanced Well Technologies Pty

Limited to form a joint venture for identifying acquisition opportunities for upstream

petroleum assets in Australia and elsewhere. Also, they entered into MoU with BPCL and

DNP Ltd for mutual cooperation in gas related business in India & overseas and for leasing

of the company's right of way through the DuliajanNumaligarh Pipeline respectively.

The company was awarded 'Best overall performance in upstream sector' by Petroleum

Conservation Research Association. Also, they received Certificate of merit for being one of

the 'PSU with Highest Book Value' from Dalal Street Investment Journal.

20

2.2 OIL AND NATURAL GAS CORPORATION (ONGC) :-

More than half century survival in oil and gas industry is a record of work by Oil and Natural

Gas Corporation Limited (ONGC). It was originated in the year of 1956 as a private sector

company. Later, in the year 1993 the company was came to known as Public Sector

Company.

In March 2005 ONGC launched its retail marketing business with commissioning of its first

auto fuels outlet at Mangalore under the brand 'ONGC Values' and 'Shopp'njoy' for fuel and

non-fuel business respectively. Tripura Power Development Company Pvt Ltd (TPDCL) was

incorporated to set up a gas-based power-generating project in Tripura. TPDCL has been

renamed as ONGC Tripura Power Company Pvt Ltd after the domination. In the same year

the company has entered into various alliances in form of execution of Memorandum of

Understanding with Kakinada Seaport & IL&FS with 26% equity stake for development of

Port based SEZ at Kakinada, Andhra Pradesh. During the year 2006 the company was

awarded 60 out of 110 exploration blocks by the Government in the five NELP rounds.

In December 2009, the company entered into two broad enabling agreements with Iranian

authorities for participation in development of gas fields and liquefaction facilities in Iran, in

return for assured minimum 6 million tonne LNG per annum on long term basis. Also,

ONGC Videsh entered into a non exclusive memorandum of understanding (MOU) to

explore the possibilities of jointly studying and if mutually agreed, to participate in attractive

oil and gas assets in Russia and third countries. In June 2010, Stealth Ventures Ltd entered

into a Joint Study Agreement (JSA) with the company to evaluate emerging Unconventional

Resource plays and opportunities in India. The objective of the JSA is to identify the

unconventional resource plays within India, and a high priority has been given by both

parties, to identify high growth profile shale gas and CBM prospects, on the basis of the large

database available within ONGC. In December 2010, the company's subsidiary, ONGC

Videsh Ltd signed a Framework Agreement on Cooperation in Hydrocarbon Sector in Delhi

with Sistema, a public financial corporation in Russia and CIS.

The Government of India has decided to disinvest 5% paid up equity capital of ONGC out

of Government shareholding.

21

2.3 HINDUSTAN OIL EXPLORATION COMPANY LIMITED (HOEC) :-

HOEC was incorporated in 1983 for taking up Exploration and Production (E&P) activities

inter-alia by Late Shri. H T Parekh. HOEC was the first private company in India to enter

into field of oil and gas exploration. HOEC‘s operational activities commenced in 1991 with

the Government of India announcing the fourth round of exploration bidding for private

Sector participation.

The Company has been under professional management since inception consisting of eminent

industrialists, professionals and technocrats like Late Shri B.K Nehru, Late Dr. I. G. Patel,

Shri Deepak Parekh and the current Chairman Shri R. Vasudevan.

In 2005, Burren Shakti Ltd (BSL) and Burren Energy India Ltd (BEIL), wholly owned

subsidiary of Burren Energy plc (Burren), acquired 26% controlling stake in the Company

from Unocal. BSL and BEIL declared themselves the promoters of the Company in

September 2005. Burren is a London based exploration and production company, having core

producing assets in the Caspian state of Turkmenistan, the Republic of Congo and Egypt. In

February 2008, Burren was acquired by ENI UK Holding plc (ENI UK) which is a subsidiary

of ENI spa, Italy. ENI UK made a mandatory open offer to the shareholders of the Company,

thereby acquiring an additional 20% shares taking the combined shareholding of the

Promoters to 47.18% of the paid up share capital of the Company.

The Company has a wholly owned subsidiary, HOEC Bardahl India Ltd, engaged in

marketing of high performance fuel / engine additives.

22

2.4 MARKET ANALYSIS:-

Oil

Global oil reserves rose by 31 billion barrels to 1,653 billion barrels in 2011, according to

BP. Iraq added 28 billion bbl and Russia, Brazil, and Saudi Arabia all increased reserves

by 1 billion bbl. Proved reserves remain concentrated in OPEC, which controls 72% of

the world‘s oil reserves, the highest proportion since 1998. Overall, the long-term trend is

that globally reserves are increasing in proportion to the amount being used. Global

proved oil reserves at the end of 2011 reached 1652.6 billion bbl, sufficient to meet 54.2

years of global production.

Annual global oil production in 2011 increased by 1.1 million bpd, or 1.3%. Nearly all the net

growth was in OPEC, with large increases in Saudi Arabia, the UAE, Kuwait, and Iraq more

than offsetting the loss of the Libyan supply. Output reached record levels in Saudi Arabia,

the UAE, and Qatar. Non-OPEC output was broadly flat, with increases in the United States,

Canada, Russia, and Colombia offsetting continued declines in mature provinces such as the

United Kingdom and Norway, as well as unexpected outages in a number of other countries.

Gas

Global natural gas reserves increased by 12.3 trillion m3 to 208.4 trillion m3 in 2011,

according to BP. Meanwhile, global natural gas production grew by 3.1%. The United

States recorded the largest volumetric increase despite lower gas prices, and remained the

world‘s largest producer. Consumption growth was below average in all regions except

North America, where low prices drove robust growth. Outside North America, the

largest volumetric gains in consumption were in China, Saudi Arabia, and Japan these

increases were partly offset by the largest decline on record in EU gas consumption.

Analysts expect global gas demand to grow rapidly over the coming decades. The key

drivers of this growth are likely to be:

Aggressive gas usage plans in China and India;

The emergence of domestic shale gas as a preferred fuel source in the United

23

States;

The discovery and utilization of gas resources in Latin America;

The move away from nuclear power in Japan and some European countries in

response to the Fukushima Dai-ichi nuclear accident;

Europe‘s continued reduction of greenhouse gas emissions;

Russian plans to search for gas in its Far Eastern region.

24

CHEPTER –3

MACRO ANALYSIS

25

3.1 PEST ANALYSIS :-

Fig.3.1

The first framework from the strategic analysis is at the macro level and is going to help us

assess the external environment of the company, how it can impact the development of the

industry and how it‘s ultimately influencing the value of companies operating within it. The

PEST analysis consists of six aspects;

26

Political factor

The Political aspects have rather significant influence on the petroleum industry. Countries

around the world have a great impact on the industry‘s players, since primarily they are the

owners of hydrocarbon (i.e. oil and gas) resources. Controlling hydrocarbon reserves allows

governments to sell concessions to different companies, which grant an exclusive right for

exploration and production of oil within a specified geographical area at a given time

horizon. This also allows governments to favour national oil companies and exclude foreign

ones from the process, which can terminate operations of these companies. In addition to

individual countries, a very influential inter-governmental organization in the world

petroleum scene is OPEC (the Organization of the Petroleum Exporting Countries). OPEC

controls 75.5% of the world‘s oil resources (and that is one of the cheapest-to-produce oil on

the planet). OPEC will be discussed further in this paper. Internal political and broader

geopolitical risks may hold back upstream investment in many countries in spite of

favourable policies and strong economic incentives. Instability, changes in the regulatory

environment, expropriation or nationalization of property, terrorism, civil conflicts, strikes

and acts of war, can all cause discouragement and disruption of investments and operations.

These are indeed very common among oil-rich-countries around the world. For instance, no

major oil company has yet decided to invest in Iraq; geopolitical tensions in the Middle East

has since always discouraged foreign investments; political resistance in Mexico that would

give private companies a bigger role in exploration and development is also the reason for

diverting investors. All of these political aspects eventually negatively affect the value

creation of oil companies.

Political decisions among world leaders to stimulate other cleaner sources of energy due to

climate changes are also going to greatly impact the petroleum industry. Passing

environmental treaties such as the Kyoto protocol, which establishes legally binding

commitments for countries to reduce greenhouse gases, is only going to result in substantial

reductions in profitability and strategic growth opportunities being adversely affected.

27

Economic factor

There is no other industry so much interdependent with the world Economy as the oil

industry. Not only is the global economy dependent on continual supply of oil at reasonable

prices, but also, the progress of the international economy is crucial for the oil industry‘s

development. This is understandable as the demand for energy is largely driven by economic

growth, prosperity and rising population. Whenever there is a downturn in the economy, the

demand for energy, and especially the one for crude oil decreases. This is due to the fact that

most industries and transportation run on oil. The current financial and economic crisis,

which is the worst and deepest since the great depression, has had a remarkable effect on oil

markets. Global demand in general is currently on a downhill. This is largely driven by

plummeting demand in developed OECD countries, whose economies entered recession. The

outlook is not positive for the rest of the year, as it doesn‘t only mean lower oil demand, but

also plunging prices (prices have fallen from $147 at the peak in 2008, to around $50/barrel

in 2009). Demand has been however increasing and is expected to increase in the coming

decades in developing countries, especially in countries experiencing rather high growth in

GDP, such as China and India. A good feature of oil demand is the fact it‘s inelastic. Namely,

it takes long time for businesses and consumers to respond to oil price changes, which is a

positive aspect for oil companies.

In addition to GDP and the market demand, another important economic aspect affecting

petroleum and the industry is the value of the dollar, the currency in which oil is traded

internationally. When the oil price was soaring in 2008, for example, the value of the dollar

was down substantially. This occurs due to exchange rates. Oil producers (which sell oil in

dollars) are regularly exposed to changes in the exchange rate between their national

currencies and the dollar. Thus, when the US dollar weakens, for instance, crude oil market

participants push the price of oil higher as oil producers are entitled to at least the same price

of oil as before in their own currencies, after exchanging USD into their currencies. This is

why a good management of the US economy (and the dollar) should provide greater stability

for oil prices and profitability of oil companies.

28

Socio-cultural factor

Socio-cultural forces determine the values, beliefs and lifestyles of societies (and the world in

general) where oil companies operate. These forces have been also shaping the preferences of

societies for different energy types. Even though the world demand for energy has been

increasing, especially the one for oil, the share of oil in the total energy consumption has been

decreasing in the last decades (its share stood at around 45% in the early ‗80s and it‘s at 35%

today). This trend is expected to continue, where greener sources of energy are likely to

increase their share (EIA, 2008, pg.1). After fears of global warming proved to be founded,

social considerations and responsibility of societies and governments resulted in increased

focus on alternative energies (wind, solar energy, bio fuels, hydro, etc.). People in general

started putting greater value to healthy living surroundings and are showing more concern

about the environment. As new and more environment-friendly fuels are developed and the

cost of their production is reduced, the picture is going to get less favourable for oil

producers.

Companies‘ social responsibility is yet another factor affecting companies‘ operations in this

industry, mainly through their image. Therefore, many big oil corporations claim in their

annual statements that they are actively playing a dedicated role in supporting sustainable

human development in societies they operate. Petro bras for instance, invest in different

social, cultural and environmental activities and admit that it depletes natural resources that

are part of everyone‘s heritage, hence its duty to render accounts to society. Similar to Petro

bras, BP too, states that it also contributes to local communities development either through

investments in education (which creates skilled labour), or through training and financing

programs that stimulate local suppliers.

Technological factor

The oil and gas industry is extremely Technology-driven, as research and technology play a

critical role in addressing the world‘s energy needs and challenges. Technology is the key

element from fundamental exploration all the way to refinement of oil. Innovations and

improvements of technologies in the upstream processes have made it possible to extract

bigger volumes or improve the recovery of oil and gas, and to extract maintaining reserves in

some fields which were previously considered exhausted. This has allowed for increasing

profitability and gains from existing oilfields.

29

Technological advances, however, have made breakthroughs especially in the exploration

and extraction of ultra-deep-water reservoirs. These are indeed the hardest to reach, for some

of which technology is still being developed. As an example of such oil fields are the recently

discovered ones off the Brazilian shore, Tupi being the most important. Petro bras has been

dedicated in developing appropriate technologies during the last year and managed to lift the

first oil from the Tupi reservoir on 1stMay, 2009-10. By deploying advanced technologies in

locating fields and exploration, companies can secure competitive advantage.

Technology is also an important development-driver in the midstream and downstream

sectors. In the midstream, for e.g. for underwater oil-transporting pipelines at significant

depths and pressure; in the downstream, for optimizing refining processes of petroleum of

varying quality, which can ultimately improve companies‘ margins.

The general impression is that technology will have a profound impact on the future

development of the oil industry, and especially on its long-term sustainability. This comes as

a logical reasoning, as hydrocarbon reserves are increasingly depleting and new discoveries

are showing at extreme depths, which so far, had not been profitably or technologically

feasible to exploit.

3.2 KEY SUCCESS FACTORS (KSFS) :-

Technology related:

Most high-tech industries Expertise in oil and gas technology or in

scientific research such as internet application software

Proven ability to improve production processes of oil and gas through

advancing technology opens the way for higher manufacturing efficiency

and lower production cost

30

Manufacturing related:

Ability to achieve economies scale and capturing learning curve effects

Quality control know-how is important in industries where customer

insist on product reliability.

High utilization of fixed assets of the industry

Access to attractive supplies of skilled labour.

Achieve a high labour productivity for items with high labour content.

For reducing manufacturing costs by low cost product design and

engineering.

Distributions related:

Create a strong network of wholesale distributors/dealers of oil and gas

and also create strong direct sales capabilities via the internet or having a

industry owned retail outlets.

Marketing related

A well know and well respected brand name in a market.

A fast accurate technical assistance for marketing of oil and gas and also

accurate for feeling of buyer orders.

Clever advertising for increase the sales of oil and gas.

31

3.3 STATEGIC GROUP MAPPING:-

Understanding which companies are strongly positioned and which are weekly positioned is

an integral part of analyzing an industries competitive structure. The best technique for

revealing the market position of the industry competitors is strategic group mapping. A

strategic group consist member with similar competitive approaches and position in the

market.

The procedure for constructing strategic group map is straight forward:

1. Indentify the competitive characteristics that differentiate firms in an industry, typical

variable are number of products and profit.

2. Plot the firms on a two-variable map using pairs of differentiating characteristics.

3. Assign firms that fall in about the same strategy space to same strategic group.

4. Draw a circle around each group, making a circle proportional to size of a group‘s

respective share of total industry sales

Table-3.1

Company name Profit No. of products

ONGC 88429.81 22

OIL 11483.69 11

HOEC 120.42 18

32

Fig.3.2

In above diagram show the company name according to the following manner (x-axis: profit

and y-axis: no. Of products)

Interpretation:-

From the above strategic group mapping graph, we take all products and services on

the Y-axis and market share on the X-axis.

No. of products are different type in oil and gas.

Profit consist of that how much profit a particular company is making in industry.

From the above chart we can interpret that the ONGC provides the highest no of

products & services with the highest profit.

While IOCL come second after into the industry after ONGC in profit and providing

product and services.

HOEC have a lowest profit as compared to OIL but provide large no. Of products.

33

3.4 Weapons for Competing and Factors affecting the strength of rivalry.

Rivalry among competing sellers intensifies the more frequently and more

aggressively that industry members undertake fresh action to boost their market

standing and performance –perhaps at the expense of rivals. Rivalry tends to be fairly

intense whenever sellers actively engage in vigorous price competition Lively price

competition pressure rival companies to aggressively Ways to drive cost out of the

business; high cost companies are hard pressed to survive. Other indicators of the

intensity of rivalry among industry members include:

-The frequency with which rivals introduce and improved product (and

expertise and on the basis of their product innovation capabilities).

Rivalry is usually stronger in slow-growing markets and weaker in fast-growing

markets. Rapidly expanding buyer demand product enough new business for all

industry members to grow. Indeed, in afast-growing market, a company may find

Typical "Weapons" for betting Rivals and Attracting Buyers

-Lower Price

-Performance

-Higher quality

-stronger Brand

-Low interest

Rivailry among Competing sellers

-How strong are thecompetitive pressuresstreming from the efforts ofrivals to gain better marketposition, Higher salesmarket shares, andcompetitive advantages?

Rivalry is genrally stronger when.

-Competing sellers active inmarketing fres moves toimprove their marketstanding and businessperformance

-Buyer demand is growingslowly.

Buyer cost to switch randsare low.

rivalry is generlly Weaker when.

-Buyer demand isgrowing rapidiy.

-buyer cost to switchbrand are high.

34

itself stretched just to keep abreast of incoming or-dears, let along devote resources to

stealing customer away from rivals.

Rivalry is intensifies as the number of competitor‘s increases and as compretitoer

increases and as competitor become more equal in size and capability. The greeted the

numbers of competitors, the higher the probability that one or more companies will be

busily engaged in a strategic offensive intended to enhance their marketing standing,

thereby heating up competition and putting new pressures on rivals to respond with

offensive or defensive moves of their own.

Revelry increases when one or more competitor become dissatisfaction with their

market position and launch moves to bolster their standing at the expense of rivals.

Firms that are losing ground or in financial trouble often react aggressively by

acquiring smaller rivals, introducing new products, boosting advertising, discounting

prices, and so on.

A powerful, successful competitive strategy employed by one company greatly

intensifies the competitive pressures on its rivals to develop effecting strategic

responses or be relegated to also-ran status.

3.5 EXTERNAL FACTOR EVALUATION MATRIX (EFE) :-

EFE method is a strategic-management tool often used for assessment of current

businessconditions. The EFE matrix is a good tool to visualize and prioritize the

opportunities and threats that a business is facing.

The EFE matrix is very similar to the IFE matrix. The major difference between the EFE

matrix and the IFE matrix is the type of factors that are included in the model. While the IFE

matrix deals with internal factors, the EFE matrix is concerned solely with external factors.

External factors assessed in the EFE matrix are the ones that are subjected to the will of

social, economic, political, legal, and other external forces.

How to create the EFE matrix?

Developing an EFE matrix is an intuitive process which works conceptually very much the

35

same way like creating the IFE matrix. The EFE matrix process uses the same five steps as

the IFE matrix.

List factors: The first step is to gather a list of external factors. Divide factors into

twogroups: opportunities and threats.

Assign weights: Assign a weight to each factor. The value of each weight should be

between0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero

means the factor is not important. One or hundred means that the factor is the most influential

and critical one. The total value of all weights together should equal 1 or 100.

Rate factors: Assign a rating to each factor. Rating should be between 1 and 4.

Ratingindicates how effective the firm‘s current strategies respond to the factor. 1 = the

response is poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights

are industry-specific. Ratings are company-specific.

Multiply weights by ratings: Multiply each factor weight with its rating. This will

calculatethe weighted score for each factor.

Total all weighted scores: Add all weighted scores for each factor. This will calculatethe

total weighted score for the company.

You can find more details about this approach as well as about possible values that the EFE

Matrix can take on the IFE matrix.

36

EFE matrix

Table-3.3

Opportunities weight rating Weighted score

1. Industry consolidation 20% 4 0.80

2. Growth of low- cost sector 15% 3 0.45

3. Strengthening position trough acquisition 20% 2 0.40

Threats

1. Declining margin 20% 1 0.20

2. New security tax 10% 2 0.20

3. Economic condition 15% 1 0.15

Poor(1),below average(2),above average(3),superior(4)

TOTAL WEIGHT SCORE 100% 2.20

Total weighted score of 2.2 indicates that the business has slightly less than average ability

to respond to external factors.

Justification for factors selected for EFE Matrix

Now that we know how to construct or create the EFE matrix, let's focus on factors.

External factors can be grouped into the following groups:

Social, cultural, demographic, and environmental variables:

Economic variables

Political, government, business trends, and legal variables

37

Below you can find examples of some factors that capture aspects external to your

business. These factors may not all apply to your business, but you can use this listing as a

starting point.

Social, cultural, demographic, and environmental factors

- Percentage or one race to other races

- Per-capita income

- Widening gap between rich & poor

- Trends in housing, shopping, careers, and business

Economic factors

- Growth of the economy

- Level of savings, investments, and capital spending

- Inflation

- Foreign exchange rates

- Stock market trends

- Level of disposable income

- Import and export factors and barriers

- Product life cycle ( the Product life cycle )

- Government spending

38

- Industry properties

- Economies of scale

- Barriers to market entry

- Product differentiation

- Level of competitiveness ( the Michael Porter's Five Forces model)

Political, government, business trends & legal factors

- Globalization trends

- Government regulations and policies

- Internet and communication technologies (e-commerce)

- Protection of rights (patents, trademarks, antitrust legislation)

- Level of government subsidies

- International trade regulations

- Taxation

39

3.6 INDUSTRY COMPETITION ANALYSIS (PORTER’S FIVE FORCES) :-

Fig 3.6

Industry Competition Forces

In order to create a profitable competitive strategy, a firm must first examine the basic

competitive structure of its industry through the competitive forces, because the potential

profitability of the firm is heavily influenced by the profitability of its industry. For this

purpose, corporate strategists advise the use of the Porter‘s Industry Analysis framework,

40

which describes the competitive environment in terms of five basic competitive forces.

Based on Porter‘s framework, for instance, competition in an industry arises not only from

established producers, producing same or similar products, but also from suppliers of

substitutes and from potential new entrants into the market.

This analysis will allow us to investigate how the competitive situation in the petroleum

Industry influences the ability of oil companies to sustain profitability now and in the future.

Threat of New Entrants

- Huge capital requirements (e.g. $2-50bn for oil fields development)

- Government policies that favour state oil company

→ Threat of new entrants insignificant

The threat of new entrants refers to the force of new potential competitors in the industry that

can attack companies‘ profits. Undoubtedly, the threat of new entities entering the oil

industry is insignificant, despite the attractiveness of the industry.

First, there are huge capital requirements associated with the activities performed by major

oil companies, most of which are vertically positioned in almost all upstream, midstream and

downstream activities of the industry. Enormous fixed up-front investments are required for

the development of oil fields or setting-up production facilities. The costs incurred here

simply cannot be supported by everyone. Developing oil fields, for example, can cost from

couple of billions of dollars for relatively easily accessible reserves (in the Middle East)12, to

some $50bn, for such as the Brazilian offshore Tupi field13, which is found 4000 meters

below the seabed, in a pre-salt layer, requiring very sophisticated technologies for extraction.

The International Energy Agency (IEA, 2008) reports that the unit costs in the upstream oil

industry have increased considerably, in the last decade (average rise of 90% between 2000

and 2007). This does not only include costs for exploration of new fields, but also for drilling,

oilfield services, skilled labour, scientific research, materials and energy, all of which create

substantial barriers for potential entrants.

41

Another barrier prevalent here are economies of scale. Due to the increased unit costs in the

exploration and production of oil, only big oil companies and refineries that are able to take

advantage of economies of scale (and scope) can survive. This makes things very difficult

and risky for new players, since they usually don‘t have access to a big number of oil

reserves, and sometimes they can‘t even own these in a foreign country. The latter is the case

for many oil-rich-countries, apart from the US, Canada, Brazil, Norway (IEA, 2008).

The need to secure access to distribution channels can also create barriers to entry. Usually

only major oil companies (both national and international) possess well established channels

of distribution, whether it‘s in the upstream, downstream or both segments. Oil pipelines for

some companies, and gas stations and distribution stores for others, or both, as means of

distribution, are costly and require time to build. This creates obstacles for new entrants.

However, some of the greatest impediments for potential entrants come from disadvantages

independent of economic factors, i.e. from different government policies that favour national

companies in different ways. Oil and gas are state owned resources and governments tend to

give access to these raw materials to national companies. Most of the oil-rich countries also

allow other companies to engage in the exploitation of oil fields, but in partnership with the

national company. Experience and know-how are essential, as cutting edge technology is

increasingly required in reaching more and more inaccessible reserves. In the case of the

newly discovered oil fields offshore Brazil, for instance, specialized drilling technologies are

needed that not even major international oil companies possess. Petrobras has been engaging

in such exploration throughout its lifetime and thus has acquired competitive advantage over

other oil companies in the field. All this can only divert potential new entries in the industry.

There is no product differentiation, as oil is a commodity product; and there are no

switching costs that buyers face when having to turn to a different supplier. However, this

doesn‘t change the fact that new entrants in the industry face rather tough obstacles

preventing them to endanger established companies and their profits.

42

Bargaining Power of Buyers

- Given world oil price

→ Buyers‘ bargaining power low

- Big-country consumers may affect global demand > price

→ Buyers‘ bargaining power increases

Suggest that buyers can influence the profitability of an industry because they can bid down

prices or demand higher quality or more services by bargaining among competitors.

However, the petroleum industry is a specific one where the price of crude oil is determined

on a global level, based on the economic relationship between global demand and supply of

oil. This unique world price of oil usually refers to the spot price of light crude as traded on

the New York Mercantile Exchange (NYMEX). Opposed to this, it is also very common that

oil is traded over-the counter between two parties, but again, at the global price. Based on

this, the willingness to pay is more or less the only bargaining power that buyers possess.

Among buyers of oil usually turn up refiners, major international companies, national oil

companies, marketers, distributors and traders. Countries themselves can also appear as

buyers. Large consumers such as the US, the EU, China and Japan, which account for more

than half of the world consumption of oil, may indeed be in position to exert some degree of

bargaining power, through different volumes of demand.

So far, empirical evidence suggests that only the largest buyers, through the oil quantity

demanded, can exert some bargaining power in the market. Contributing to buyers‘

bargaining power is the standard and undifferentiated product, and again, buyers who do

not face switching costs. These two conditions are not sufficient to put power in the hands of

buyers, since the industry‘s product is extremely important for the buyers‘ products or

services; and, it doesn‘t seem that individual buyers are any threat when it comes to the

volumes they purchase.

43

Bargaining Power of Suppliers

Suppliers:-

- Mean ‗suppliers‘ of oil fields

→ Suppliers‘ bargaining power significant

- Many conventional suppliers from supporting industries

→Suppliers‘ bargaining power lows

the Big oil companies, like Petrobras or ExxonMobil, have a complex chain of suppliers,

ranging from ‗suppliers‘ of oil (fields), to suppliers of engineering, field development

management, pipeline installations, specific equipment and materials, or even scientific

researchers and engineers.

Countries rich with oil (also referred as oil producing countries), which in this context appear

as suppliers of the basic ‗ingredient‘ of the industry, own significant bargaining power. Oil is

a scarce resource and without countries‘ openness in allowing corporations to exploit it, the

latter have simply no reasons to operate in the industry. Today‘s OPEC nations were the ones

to actually nationalize oil production in their countries and take over most of the business

from big oil corporations. As OPEC nations own 2/3 of the world‘s proven reserves, with oil

that is one of the cheapest to produce, they in fact possess significant bargaining power to oil

corporations. Thus, OPEC‘s bargaining power is rather evident when it comes to granting oil-

fields-concession rights to international companies.

Oil-rich-countries (especially ones belonging to OPEC) were especially ‗mean‘ to foreign oil

companies when the oil price was skyrocketing last year. However, this bargaining power

Misbalance have somewhat changed since the beginning of 2009, when the oil price dropped

almost threefold from its peak in 2008. Namely, as oil prices decreased substantially (to

around $50/barrel), countries found many fields not to be economical to develop (by

themselves and their national oil companies), and are now turning to major international oil

44

companies for help14. The latter are in advantage due to the fact that: they possess

specialized know-how and expertise in developing fields with different accessibility; They

have stockpiled cash when profits were high (i.e. cheaper capital) and can shift operations to

any corner of the globe, all of which ‗allows them to strike deals with state controlled

producers on very favourable terms‘. Unlike the distribution of power in favour of supplying

countries, power is distributed more in favour of oil companies when it comes to the other

types of suppliers in the industry. This is due to the fact that the oil industry has a wide range

of small sub-suppliers coming from various industries. Most of these are not consolidated,

and given the fact that big oil corporations represent large-volume buyers with high profits

for them, it diminishes their bargaining power. The oil companies are in fact in position to

choose preferred suppliers, providing their business with high quality supplies of materials

and services.

Another important category in the industry is engineers and scientific researches, whom oil

companies, owe their know-how and technological advancement. Here, oil companies are

facing great supply shortages of these qualified labour categories. Due to the cyclical nature

of the petroleum business and its lost ‗glamour‘, university graduates are simply not

interested in the industry15, which gives them bargaining power to oil companies.

The general picture of the power distribution between oil companies and their suppliers is

that it all depends on the type of the supplier. When looking at the more conventional

suppliers of materials and services, the impression is that big oil companies can exert power

due to their position. However, the picture is totally different when looking at the ‗suppliers‘

of oil fields, with OPEC countries as a specific example, which hold most of the easy-to

access oil reserves in the world. These countries‘ policies can in fact make firms to go out of

business as companies‘ present oil reserves dry out.

Threat of Substitute Products and Services

- Oil irreplaceable in industry and transportation now and in future

- Renewable represent a threat in the longer run

→ Threat of substitutes currently low, but likely to change

45

Substitute products and services limit the profit potential of firms and their source of value

creation. This is mostly due to the fact that oil is cheaper compared to other fuel types. As drilling

and exploitation technology is getting ever more sophisticated, which is going to outpace rising

depletion costs, oil is likely to stay one of the cheapest sources of energy in the following years.

Substitutes of oil, though, become a threat once the crude oil price increases significantly. The

most used substitute fuels are in the following order: coal, natural gas, renewable (wind, solar

energy, bio-fuels, hydro power, tidal energy, etc.), and nuclear energy.

Governments around the world are also changing their attitude towards fossil fuels and the

harm they cause to the planet. This should be considered as a serious threat to petroleum

products, as the world is more than ever determined to change its energy habits in favour of

‗green‘ energies.

From the substitutes, based on the Energy Information Administration, natural gas is

expected to have a higher growth rate than oil. The projections are that gas is going to gain

significant market share in the industrial, residential and commercial sectors. This is, by any

means, good news for companies such as Petrobras and other oil companies, as most of them

produce gas along with oil, (due to the fact that oil and gas are often found together). These

trends are also occurring since natural gas emits a lot less greenhouse gases, which doesn‘t

add much of carbon dioxide taxes to its price. For comparison, natural gas emits 40% less

carbon dioxide than by burning oil, and 78% less CO2 than by burning coal16.

The world coalconsumption is expected to face a slight fall in the share of total energy

consumption, primarily because resources are mainly concentrated in few countries and are

becoming increasingly complex and distant from major markets. The costs of exploiting and

using coal are only going to rise in the upcoming years, due to environmental regulations,

such as the Kyoto Protocol.

Renewable energies, like wind-, hydro- power or hydrogen are expected to slowly but

surelyincrease their market share in the future. However, without major proactive

governmental policies aimed at reducing the impacts of carbon dioxide emissions in the

atmosphere, the process of adopting renewable energies on a large scale is going to be rather

slow. So long as these sources of energy have relatively high production costs, they will not

be economically competitive to fossil fuels. Nonetheless, oil companies should not

46

underestimate the potential of these energies, especially after many world governments have

been actively supporting the use of green sources of energy.

Nuclear energy expansion has stalled in OECD countries due to being a relatively

expensiveoption for electricity generation compared to sources as natural gas or coal.

Petroleum is still going to lead the energy industry in the following decades, but as the

intensive search for alternative energy resources continues, more environmental friendly

energy sources may constitute a threat in the long run. Thus, oil companies already need to

put greater focus on renewable energies. Petrobras is one of these examples of oil companies

that is steadily increasing the research and production of bio-fuels. More on this will be

discussed in the company‘s strategic approach chapter.

Intensity of Rivalry among Competitors in the Industry

- Significant pressure to replace drying reserves

- Slow growth, homogenous product

→ Rivalry among competitors high

There are several conditions that determine the extent of rivalry in the industry;

First, the competitive environment in the oil industry can be described as having few major

and strong players and several smaller players with less power. The bigger competitors

though differ in that some of them represent the major international companies with limited

proprietary control of oil but rather sophisticated technological know-how, and the national

oil companies on the other hand, which own the oil reserves (controlled 88% of world‘s

proven oil reserves in 2007-(EIA, 2008)), but have put less focus on technology17.Most of

these national oil companies are under the OPEC umbrella, meaning they operate as a single

entity, the cartel, thus reducing rivalry or competition among these companies. However, the

rivalry is getting increasingly fierce among big producers, as the need to replace drying fields

puts significant pressure, having the fact that new discoveries are ever harder to get to.

Second, the slow industry growth also intensifies rivalry among competitors. Recent

47

research6 shows that ‗oil and gas exploration are increasingly fruitless‘ and ‗easily accessible

supplies of oil and gas will no longer keep up with demand‘. Since the beginning of this

century the five largest oil corporations have replaced only 82% of the reserves they have

consumed. Additionally, hardly any new refineries have been opening in the US in the last

two decades.

Theoretically, high exit barriers keep the firms in the industry ‗fighting‘ in spite of below

average or negative rates of return. High exit barriers are present in the refinery

business18(i.e. the downstream segment of the industry), but are much lower in the upstream

segment of the industry, where relinquishment of field-concession-rights is easily done due to

the interest of competitors to always strengthen their portfolios with new fields.

Other factors contributing to rivalry among competitors in the oil industry are: the high fixed

(and storage costs) and the lack of product differentiation (oil & gas are commodity

products). The high fixed costs, as already mentioned, can be tolerated only by bigger

companies taking advantage of economies of scale. In this respect, the industry saw a

consolidation (during 1998-2001), which increased the industry concentration significantly in

the given period (Weston et al., 2001).

So what is the general conclusion? How is the competitive situation in the

industryinfluencing the ability of companies to sustain profitability?

The impression is that the rivalry among competitors in the industry is high, which mainly

finds it explanation in the fact that the majority of companies are in the race to replace their

drying oil resources. This task is not easy, as new oil fields become more difficult to exploit

and require more sophisticated and expensive technologies. On top of this, oil producing

countries practice protectionist and restrictive policies towards their fields‘ exploitation. This

is the general picture of the global oil industry, which suggests a negative trend incompanies‘

sustainable profitability. This however, does not fully apply for the company ofinterest in

this study- Petrobras. Petrobras is, first of all, a Brazilian state oil company with privileged

access to oil resources in the country. It is also the dominant company in the home market,

engaging in production of other alternative fuels (bio-fuels) in addition to oil, and is one of

the leaders in deep-water petroleum extraction. All of this ensures competitive advantage

over its competitors and sustainable value for shareholders. However, being an

48

international player, Petrobras‘ profits are too, vulnerable to the threats and bargaining power

coming from the other entities in the industry.

3.7 SWOT (Strengths, Weaknesses, Opportunities and Threats) :-

After analyzing the company‘s strategic approach and value chain, we can finally determine

Petrobras‘ SWOT, which will help depicting important determinants for value creation. The

company‘s strengths, weaknesses, opportunities and threats will reveal relevant aspects as to

the ability of the firm to create value.

Strengths

- advanced technological know-how for deepwater and ultra-deep

exploration -significant and growing reserve base

-domestic market dominance

- diversifying portfolio of products

- Significant and cheap production of bio-fuels

- Prominent reputation

- R&D in bio-fuels

One of the principal competitive advantages, the company has, is the technological know-

how for deepwater and ultra-deep exploration. Compared to other global corporations,

Petrobras is undoubtedly the market leader, with 23% of the global deepwater production in

2007.Due to the depth of the offshore oil fields the company operates, it has been able to

develop technologies that can exploit hydrocarbons from such depths, which hasn‘t been

done before. This capability not only enables Petrobras to exploit the Brazilian offshore

fields, but the company can also benefit in applying this know-how elsewhere in the world.

Another very important strength, from which Petrobras sources most of its returns, is the fact

49

that Petrobras has domestic market dominance. The hydrocarbons production averaged 2.4

mmboe/d in 2008, it is expected to pass 2.5mn in 2009, and is strategically projected to rise

to around 3.3mn and over 5mn in 2013 and 2020, respectively.

One of the basic strengths, which secure the business and value for an oil company, is the

reserve base. Thanks to its discoveries made in the last couple of years, Petrobras has secured

itself a Reserve Replacement Index of 18.2 years as of December 31, 2008, or proved

reserves of 15.08 billion barrels of oil equivalent. These are definitely going to provide for

lasting and sustainable growth in production, and are going to allow for scale economies and

better control of future expenses.

What is also important and appears as a particular strength is the fact that Petrobras engages

proactively in the development and production of bio-fuels. Having the fact that renewable

energies are going to play a significant role in the fuel transportation market in the future on a

global level, Petrobras‘ engagement in this field is especially important. It is already

producing a third of the world‘s output of ethanol and is more competitive than the American

one, for instance. Petrobras‘ strengths also come from the company‘s strong R&D activity

within the field, where its H-Bio (Vegetable oil hydrogenation) process represents a

technological breakthrough, yielding biodiesel.

Finally, the company‘s prominent reputation due to its social and environmental

responsibility can hold as a particular strength and can provide for the company‘s long run

value creation.

Weakness

- Higher marginal costs in deep-water production

- No sufficient internal funds to finance exploration projects

- Not sufficient number of drilling rigs

- Natural gas transportation infrastructure not interconnected

- Aging workforce, difficulties in attracting new workers and shortage of specialized

candidates

50

The company‘s internal disabilities constitute its weaknesses. They mainly relate to the

financial incapability of Petrobras to finance expensive exploration projects on its own.

Petrobras‘ investment plan of $174.4 billion for the period 2009-201380 is rather massive,

and thus requires foreign investors‘ involvement. In times of financial/credit crisis when it‘s

become more difficult to raise funds, and where the company‘s debt rating has been lowered

to a grade of BBB- from BBB as of recently (by S&P), it is going to be challenging for

Petrobras to achieve its investment goals and boost hydrocarbons output as initially planned.

So far however, the company has managed to make agreements with few Chinese banks and

energy companies, which are going to finance the development of Petrobras‘ offshore

oilfields in exchange for future guaranteed supplies of oil, as a response to the rising Chinese

demand for energy. Some of these entities are the China Development Bank, the China

National Offshore Oil Corp. and SINOPEC Shanghai Petrochemical Company81. Petrobras

is also seeking foreign investments elsewhere in the world, such as in the US and the Middle

East.

Another internal weakness facing Petrobras is the fact that deepwater and ultra-deep water

extraction requires higher marginal costs, when compared to oil produced from conventional

fields, for instance. This is especially critical when oil prices are down, as then the

company‘s margins decrease substantially. Petrobras, on the other hand, expects cost of oil

production from the pre-salt layer to be relatively cheap, even though as seen in the Petrobras

Strategic Plan (2009-2013) these costs are higher than the production of conventional oil, but

cheaper than the oil produced from heavy oil and bitumen sources, or from oil shales.

Yet another weakness that impedes the company to create profit and value is the fact that the

natural gas transportation infrastructure is not interconnected within Brazil. This has disabled

the deployment of the Brazilian inland gas reserves and thus Petrobras‘ natural gas

profitability. Of course, it is to Petrobras to build and develop this network, as the company is

nearly a monopoly in the supply of gas in the country.

Petrobras also does not possess a sufficient number of drilling rigs needed to support future

exploration, production and development activities. Availability of existing rigs is finite and

so is shipyard capacity to build new ones. Thus, the insufficient size of the drilling rig fleet

that the company currently has is a weakness for future oil exploitation.

51

Finally, issues concerning Petrobras‘ workforce may impede the realization of projects and

strategic plans, which also represent a weakness for the company. Namely, the situation is

that the current workforce is aging, there appear to exist difficulties in attracting new workers

and especially specialized/educated ones.

Opportunities

- Huge new oil reserves from undeveloped oil fields in the Atlantic Ocean

- Becoming a major exporter of oil

- Leveraging deep-water expertise internationally (e.g. Gulf of Mexico and West Africa)

- Forming partnerships with other oil companies for new exploration opportunities

- Main operations in a fast growing, emerging economy

- Generate electricity from natural gas, oil products and biomass

- Natural gas infrastructure connection and expansion

- Strengthening position through acquisitions

External conditions that can increase the value of the company in the long run represent its

opportunities. Naturally, the main and most significant opportunities for Petrobras arise from

the huge new oil reserves still not fully developed in the Atlantic Ocean, which can turn

Brazil into a major oil exporter. Out of the projected $174.4 billion of investment spending

for the period until 2013, around 60% (or $104.6bn) is planned for the Exploration and

Production segment, which speaks of Petrobras‘ determination to seize these opportunities

for a significant oil production expansion. In fact, the company is determined to become one

of the top five oil producers in the world82.

52

Leveraging deepwater expertise (developed in Brazil) internationally can open sound

opportunities for Petrobras. As the leader in this field, the company can benefit from further

engagement in oil extraction from the biggest offshore oil areas, such as the Gulf of Mexico

and West Africa. The West African subsea salt layer is identical to Brazil‘s, so even though

already present there, Petrobras has the opportunity to advance its opportunities in these

regions.

New opportunities can also arise from partnerships with other oil companies worldwide in the

exploration of oil. Not only is this a unique opportunity for Petrobras to participate in oil

exploiting in some regions, such as the Middle East, but with presently more restrictive credit

markets, this may be the only opportunity for participation in most projects.

By expanding and interconnecting natural gas infrastructure, and by increasing domestic

electricity generation from natural gas and biomass, the company expands its opportunities in

the wider energy sector and may even change the negative profitability trend in this business

sector (Gas & Energy).

Threat

- Volatility of oil and gas prices

- Exchange rate risk

- Global economic crisis/recession

- Economic conditions

- Possible price controls by government

- Political stability elsewhere, as well as nationalization of property abroad, imposition of

restrictions on hydrocarbon exports, fluctuation of local currencies, unilateral institutional

contractual changes

- Domestic and foreign environmental and health regulations/restrictions

53

- Dependent on Brazilian government for concession rights to develop and operate oil fields

- pending litigations and arbitrations

- Increases in prevailing market interest rates

- Debt rating cut (by S&P)

A special attention should be put on the company‘s external forces that continuously threat its

growth and profits. It must be noted that there is a significant number of aspects which can be

considered threats in the oil industry.

First, there is the significant volatility of oil and gas prices in the world markets, as was the

case in the previous year, when the global oil price dropped from $147 in the middle of 2008

to only $35/barrel by the end of the year83. Substantial declines in crude oil price will

certainly have negative effect on Petrobras business, operations and financial condition, as

well as the value of its proved reserves. Moreover, low oil prices have the potential of

reducing Petrobras‘ exploration efforts and hurting its investment plans, because deepwater

oilfields require rather expensive technology. This is a serious threat, as Petrobras‘ deepwater

fields are the greatest asset and value creation opportunity the company has.82 Petrobras

Strategic Plan 2009-201383 World oil price fluctuates as a result of many factors, i.e. global

and regional economic and geopolitical developments in crude oil producing regions,

particularly in the Middle East; the ability of the Organization of Petroleum Exporting

Countries (OPEC) to set and maintain crude oil production levels and defend prices; global

and regional supply and demand for crude oil and oil products; competition from other

energy sources; domestic and foreign government regulations; and weather conditions.

Second, exchange rate risk or currency fluctuations can also pose a threat towards Petrobras‘

financial condition and operational results. This is due to the fact that most of Petrobras‘

revenues are in reais (the main market for the company‘s products is Brazil around 74% of

revenues) and a big part of its liabilities are in foreign currencies (mostly in US dollars).

Thus, the impact of the exchange rate of the real vs. the dollar in particular, is significant and

any appreciation of the dollar against the real will have an adverse effect for the company. In

54

the last few years, before the financial crisis (until 2007), the real had been appreciating

against the dollar due to improvements of the macroeconomic conditions and the reduction of

political risk in Brazil, and this was a positive trend for Petrobras84. However, a significant

reversal in this trend followed starting 2008, which has posed a significant threat for

Petrobras‘ profitability85.

Third, the global economic crisis/recession, which also had its impact on Brazil, as already

mentioned previously had a negative influence on the company due to decreased demand for

energy sources and difficulties in obtaining loans.

Forth, Brazilian political and economic conditions, in general, have an immense direct

significance on the company‘s business. The federal government‘s policies condition markets

and prices of securities, and may negatively affect different economic parameters or aspects

of the society, which Petrobras is dependent on, i.e. inflation, exchange control policies,

social and price (in)stability, energy shortages, interest rates, liquidity of domestic capital and

lending markets, tax policies and other political, social and economic factors. Specifically,

Petrobras may suffer by certain initiatives that advise the increase in taxation on the upstream

oil activities86.

Furthermore, in case the Brazilian government were to decide to reinstate control over oil

prices due to market instability or conditions alike, these are likely to adversely affect

Petrobras‘ results of operations. These controls were the practice until January 2002, where

not rarely were domestic oil prices below prevailing prices in the world market87.

Sixth, political instability in the regions of operation, as well as nationalization of property,

imposition of restrictions on hydrocarbon exports, fluctuation of local currencies, unilateral

institutional contractual changes, can all threaten the company‘s profitability and value

creation. Substantial risks, related to the company‘s international operations, can

Particularly occur in Latin America, West Africa and the Middle East, which are considered

politically, economically and socially unstable. If any of the risks listed above materializes,

Petrobras may not be in position to achieve its strategic goals in these countries and its

financial outlook will certainly suffer. Among its international operations, Argentina

55

accounts for the largest share with 43.3% of the total international crude oil & gas production

and a third of the international proved oil & gas reserves (December 2007). The Argentine

government has established export tax rates for crude oil, natural gas and oil products, which

have adversely impacted Petrobras‘ results, for instance. Operations and proven reserves in

Bolivia and Venezuela have also suffered due to nationalization measures in the oil and gas

sector taken by these countries‘ authorities88.

Seventh, domestic and foreign environmental and health regulations/restrictions have become

more stringent in the recent past and may result in increased liabilities and increased capital

expenditures. New laws and regulations, some of which relate to climate change as well, are

very likely to eat up part of the company‘s other strategic investments. Any substantial

increase in expenditures for compliance with environmental regulations and the reduction in

strategic investments are likely to have an adverse material effect on Petrobras‘ financial

position.

Eighth, Petrobras is also dependent on the Brazilian government for concession rights for

developing and operating oilfields. Brazilian laws do not allow companies to own oilfield

reserves, but instead grant concession rights for their operation and exploitation. Therefore, if

the Brazilian government were to restrict or prevent Petrobras from exploiting the crude oil

and natural gas reserves, the company‘s ability to generate income will be negatively

impacted.

Yet another threat for oil and gas appears to be the pending litigations and arbitration

processes against it, which may cost the company much time and money spent. Currently,

Petrobras is a party in numerous legal proceedings relating to civil, administrative,

environmental, labour and tax claims that are filed against it. All these claims may involve

substantial amounts of money and other remedies.

Finally, increases in market interest rates and the recent debt-rating cut of the company by the

Standard & Poor's, leaves oil and gas industry vulnerable when it comes to financing its

operations89. The company‘s total debt consists of structured finance, export credits,

tradefinancing and other similar financing methods, whose funding depends on floating rate

instruments. Furthermore, the company is not part of any derivative contracts or other

56

arrangements to hedge against the risk of an increase in interest rates, meaning in case of

market interest rates rise (the LIBOR) its financial expenses will inevitably increase.

In conclusion, apart from the company‘s numerous threats which can derail Petrobras‘

strategic investment plans and value creation prospects, it is apparent that the company

possesses significant advantages found in the advanced technological know-how in

deepwater exploration, exceptionally growing reserve base, Brazilian market dominance, a

diversifying portfolio of products with accent on renewable energies, and profound

opportunities that can be harnessed in the domestic market and internationally, with the

possibility of becoming a major exporter of oil. This makes us confident to assert that

Petrobras‘ enormous value potential is likely to be materializing in the future.

57

CHAPTER –4

FINANCIAL

ANALYSIS

58

4.1 TREND ANALYSIS:-

4.1.1 Total Expense:

Table-4.1.1

Company/year 2010 2011 2012 2013 2014

ONGC 38,052.42 41,854.73 39,999.58 49,494.36 47,095.83

HOEC 38.6 84.69 58.47 616.31 83.71

OIL 6,278.97 7,349.21 5,292.25 5,381.93 5,577.23

Total 48,169.86 44,369.99 49,423.85 51,431.15 62,315.61

Average 16056.62 14790 16474.62 17143.72 20771.87

TOTAL EXP. 100 135.85 159.00 114.50 115.97

Fig.4.1.1

Interpretation:-

Above graph show the industry fluctuating of expenses over the 5 year. The industry has not

able to decrease their expenses. The expenses of last 5 years are continually increased. In

2010-11 Hindustan oil total expenses decrease and then after increase.

59

4.1.2 Total Income:

Table-4.1.2

Company/year 2010 2011 2012 2013 2014

ONGC 64,268.51 71,735.93 84,172.88 88,439.89 90,454.01

HOEC 158.89 337.27 169.02 120.41 62.74

OIL 10,397.98 12,495.21 11,288.72 11,505.39 11,233.47

Total 74,825.38 84,568.41 95,630.62 1,00,065.69 1,01,750.22

Average 24,941.79 28,189.47 31,876.87 33,355.23 33,916.74

TOTAL EXP. 100 96.72 109.31 123.6 129.28

Fig.4.1.2

Interpretation:-

The Industry has a fluctuating flow of income over the 5 years. The industry has been able to

improve its sell much but not able in 2010-11. After 2010 to 2011 the income decreases in

ONGC and Hindustan oil at decreasing rate. But ONGC and Hindustan oil income continues

increase in 2014. This is a good sign for the industry having such a reputed name in the

market.

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4.1.3 Total Assets:

Table-4.1.3

Company/year 2010 2011 2012 2013 2014

ONGC 103,688.25 118,910.40 139,331.78 147,764.83 163,630.00

HOEC 1,754.16 1,843.50 1,888.83 1,638.67 1,581.58

OIL 13,803.18 16,953.76 18,143.98 20,717.42 31,246.00

Total 119,245.59 137,707.66 159,364.59 170,120.92 196,457.58

Average 39,748.53 45,902.55 53,121.53 56,706.97 65,485.86

TOTAL EXP. 100 113.18 151.25 1784.46 1904.9

Fig.4.1.3

Interpretation:-

From the above trend of total assets of the company we can say that company has a good

growth rate in 2013. It has increased in all four year the reason is ONGC and Hindustan oil

and oil India assets are more increase compare to other company. It is because of company

overvalued its fixed assets and investments.

61

4.1.4 Total liability

Table-4.1.4

Company/year 2010 2011 2012 2013 2014

ONGC 103,688.25 118,910.40 139,331.78 147,764.83 163,629.99

HOEC 1,754.16 1,843.50 1,888.83 1,638.67 1,581.58

OIL 13,803.18 16,953.76 18,143.98 20,717.42 31,246.00

Total 119,245.59 137,707.66 159,364.59 170,120.92 196,457.57

Average 39,748.53 45,902.55 53,121.53 56,706.97 65,485.86

TOTAL EXP. 100 113.18 151.25 1784.46 1904.9

Fig.4.1.4

Interpretation:-

Above graph show that the industry total liability continually over the 5 year. The industry

liability is continues increase in all 5 year the reason is all four company increase the liability

but in a year 2013. Hindustan Oil Company is the total liability is decrease.

62

4.1.5 Investment:

Table-4.1.5

Company/year 2010 2011 2012 2013 2014

ONGC 5,772.03 5,182.79 5,216.24 9,173.05 17,204.31

HOEC 2.91 110.29 71.79 27.6 27.21

OIL 859.44 890.41 2,614.19 1,857.07 11,456.61

Total 6,634.38 6,183.49 7,902.22 11,057.72 28,688.13

Average 2,211.46 2,061.16 2,634.07 3,685.91 9,562.71

Investment 100 118.67 110.6 141.34 197.79

Fig4.1.5

Interpretation:-

At the initial level the industry is very poor in making investments at the year

2014.industry sold its investments but in 2012 and 2013 industry had done good business

and the year 2010 and 2014 industry had decrease their investment the reason is Hindustan

oil and oil India sold his investment.

63

4.1.6 Share capital:

Table-4.1.6

Company/year 2010 2011 2012 2013 2014

ONGC 2,138.89 4,277.76 4,277.76 4,277.76 4,277.76

HOEC 130.51 130.51 130.51 130.51 130.51

OIL 240.45 240.45 240.45 601.14 601.14

Total 2,509.85 4,648.72 4,648.72 5,009.41 5,009.41

Average 836.62 1,549.57 1,549.57 1,669.80 1,669.80

Trend analysis 100 101.06 187.18 187.18 201.7

Fig.4.1.6

Interpretation:-

Above graph show the industry fluctuating of Total share capital over the 5 year. In first

three year the total share capital of the industry is near to equal, but in 2013 the share

capital is decrease the reason is ONGC company share capital is decrease. This is not a

good sign for the industry having such a reputed name in the market. Also it affects the

industry volume and profit.

64

4.2 RATIO ANALYSIS:-

Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick

indication of a firm's financial performance in several key areas. The ratios are categorized as

Short-term Solvency Ratios, Debt Management Ratios, Asset Management Ratios,

Profitability Ratios, and Market Value Ratios.

Ratio Analysis as a tool possesses several important features. The data, which are provided

by financial statements, are readily available. The computation of ratios facilitates the

comparison of firms which differ in size. Ratios can be used to compare a firm's financial

performance with industry averages. In addition, ratios can be used in a form of trend

analysis to identify areas where performance has improved or deteriorated over time.

Because Ratio Analysis is based upon accounting information, its effectiveness is limited by

the distortions which arise in financial statements due to such things as Historical Cost

Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in

financial analysis, to obtain a quick indication of a firm's performance and to identify areas

which need to be investigated further.

The pages below present the most widely used ratios in each of the categories given above.

Please keep in mind that there is not universal agreement as to how many of these ratios

should be calculated. You may find that different books use slightly different formulas for

the computation of many ratios. Therefore, if you are comparing a ratio that you calculated

with a published ratio or an industry average, make sure that you use the same formula as

used in the calculation of the published ratio.

65

4.2.1 CURRENT RATIO

Meaning & Importance:-

This most widely used ratio shows the proportion of current assets to current liabilities. It is

also known as ―working capital ratio ―as it is a measure of working capital available of a

particular time.

Table-4.2.1

(Rs in Cr)

PARTICULAR 2010 2011 2012 2013 2014

ONGC 1.73 1.31 0.95 0.99 0.93

HOEC 1.18 1.08 0.88 0.9 0.64

OIL 2.43 2.73 2.76 2.87 1.77

Fig.4.2.1

Interpretation:-

Current assets include cash and those assets that can be converted in to cash within a year.

All obligations maturing within a year are included in current liabilities.

66

Form the above graph we can say that, in past three years performance oil India

continuously showing higher trend compares to other companies. And showing increasing

ratio also. All Company‘s current ratio shows very good result but while comparing year

wise individual performance of every company we can say that, ONGC, HOEC, OIL

shows increasing trend so they try to hold their position and increasing their current ratio to

gain competitive advantage. And pay their short term obligation from their current assets

only. ONGC and Hindustan oil shows mixed trend so they try to hold their position and

increase their efficiency to pay their obligations.

LIQUIDITY RATIO

4.2.2 Current Ratio:-

Current ratio is a financial ratio that measures whether or not a company has enough

resources to pay its debt over the next business cycle (usually 12 months) by comparing

firm's current assets to its current liabilities. Acceptable current ratio values vary from

industry to industry. Generally, a current ratio of 2:1 is considered to be acceptable. The

higher the current ratio is, the more capable the company is to pay its obligations. Current

ratio is also affected by seasonality.

This most widely used ratio shows the proportion of current assets to current liabilities. It is

also known as ―working capital ratio‖ as it is a measure of working spatial available of a

particular time.

The Current Ratio formula is:

CURRENT RATIO = Current Assest / Current liabilities

Table-4.2.2

(Rs in

Cr)

PARTICULAR 2010 2011 2012 2013 2014

ONGC 1.73 1.31 0.95 0.99 0.93

HOEC 1.18 1.08 0.88 0.9 0.64

OIL 2.43 2.73 2.76 2.87 1.77

67

Fig.4.2.2

INTERPRETATION:-

From the year 2013, oil India continuously showing higher trend compares to other

companies. Current Ratio is continuously decreasing over a period of time. If current ratio is

bellow 1 (current liabilities exceed current assets), then the company may have problems

paying its bills on time. However, low values do not indicate a critical problem but should

concern the management. Current ratio gives an idea of company's operating efficiency. A

high ratio indicates "safe" liquidity, but also it can be a signal that the company has problems

getting paid on its receivable or have long inventory turnover, both symptoms that the

company may not be efficiently using its current assets. So, we can conclude that the industry

is moderate for the investment purpose.

0

0.5

1

1.5

2

2.5

3

3.5

2010 2011 2012 2013 2014

CURRENT RATIO

ONGC

HOEC

OIL

68

4.2.3 Interest Coverage Ratio

This ratio indicates as to how many times the profit covers the payment of interest on debentures and

other long- term loans. Hence, it is also known as ―times-interest earned ratio‘‘ it measures the debt

service capacity of the firm in respect of fixed interest on long- term debts. This ratio is obtained by

dividing profit of the firm before interest and taxes by fixed interest charges.

Interest Coverage Ratio = Profit before Interest & Taxes

Interest

Table-4.2.3

(Rs in Cr)

PARTICULAR 2010 2011 2012 2013 2014

ONGC 1,733.43 1,100.82 1,053.04 1,106.08 90,089.72

HOEC 9.09 10.52 5.05 -44.54 -9.09

OIL 1,068.14 329.5 545.49 2,033.01 65.12

Fig.4.2.3

Interpretation:-The interest coverage ratio used to test the firm ‗sdebt–servicing capacity.

It shows the number of times the interest charges covered by funds that are ordinarily

available. Current ratio is higher to last five year.

-10,000.00

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

90,000.00

100,000.00

2010 2011 2012 2013 2014

ONGC

HOEC

OIL

69

4.2.4 Common size Statement

A company financial statement that displays all items as percentage of a common base figure. These

types of financial statement allows for easy analysis between companies and between time periods

of company.

The values on the common size statement are expressed as percentages of a statement component

such as revenue. While most firms don't report their statements in common size, it is beneficial to

compute if you want to analyze two or more companies of differing size against each other.

Formatting financial statements in this way reduces the bias that can occur when

analyzing companies of differing sizes. It also allows for the analysis of a company over

various time periods, revealing, for example, what percentage of sales is cost of goods

sold and how that value has changed over time.

Common size

Table.4.2.4

Balance Sheet

Industry -

OilExplr/Allied

Year Latest 2014 2013 2012 2011 2010

SOURCES OF

FUNDS :

Share Capital 4.51 3.04 5.02 3.71 3.83 3.16

Reserves Total 68.46 78.46 69.75 69.67 69.29 71.39

Equity Share Warrants 0.01 0.02 0 0 0 0

Equity Application

Money

0.17 0 0.15 0.02 0.23 0.09

Total Shareholders‘

Funds

73.15 81.52 74.92 73.4 73.36 74.64

Secured Loans 3.95 2.51 4.11 5.91 4.45 4.97

Unsecured Loans 12.58 3.98 11.01 10.89 11.75 20.39

70

Total Debt 16.52 6.5 15.12 16.81 16.2 25.36

Other Liabilities 10.33 11.99 9.95 9.79 10.44 0

Total Liabilities 100 100 100 100 100 100

APPLICATION OF

FUNDS :

Gross Block 44.26 49.95 44.55 43.28 44.92 43.94

Less : Accumulated

Depreciation

29.59 34.13 29.47 31.59 32.58 32.2

Less:Impairment of

Assets

0.07 0.09 0.08 0.07 0.07 0

Net Block 14.6 15.74 15 11.62 12.27 11.73

Lease Adjustment 0 0 0 0 0 0

Capital Work in

Progress

19.01 12.68 20.62 20.4 16.69 14.43

Investments 24.51 24.81 19.87 23.64 25.79 29.57

Current Assets, Loans

& Advances

Inventories 2.72 3.29 2.79 2.76 2.58 3.01

Sundry Debtors 4.34 4.63 4.4 3.85 3.23 2.6

Cash and Bank 7.77 9.26 9.76 13.05 12.68 14.17

Loans and Advances 4.08 3.64 4.48 3.88 4.5 17.96

Total Current Assets 18.91 20.82 21.44 23.54 23 37.75

Less : Current

Liabilities and

Provisions

Current Liabilities 8.97 9.3 9.22 10.7 10.82 9.14

Provisions 1.37 1.63 1.69 1.82 1.21 4.9

Total Current

Liabilities

10.35 10.93 10.91 12.51 12.03 14.04

Net Current Assets 8.56 9.89 10.53 11.03 10.97 23.71

Miscellaneous

Expenses not written

off

0 0 0 0 0.01 0.47

71

Deferred Tax Assets 3.88 4.17 3.83 3.25 3.63 3.76

Deferred Tax Liability 10.05 11.68 9.31 8.44 8.93 9.1

Net Deferred Tax -6.17 -7.51 -5.48 -5.19 -5.29 -5.34

Other Assets 12.38 14.68 14.36 15.36 15.3 0

Total Assets 100 100 100 100 100 100

Profit and Loss

Industry -

OilExplr/Allied

Year Latest 2014 2013 2012 2011 2010

INCOME :

Sales Turnover 100 100 100 100 100 100

Excise Duty 0.29 0.34 0.28 0.38 0.4 0.39

Net Sales 99.71 99.66 99.72 99.62 99.6 99.61

Other Income 8.77 9.8 6.89 9.53 5.05 6.96

Stock Adjustments -0.27 -0.1 -0.12 0.15 0.18 0.14

Total Income 108.2 109.36 106.49 109.3 104.84 106.71

EXPENDITURE :

Raw Materials 6.62 0.19 6.79 6.64 4.77 4.16

Power & Fuel Cost 0.9 0.44 0.88 0.67 0.5 0.51

Employee Cost 10.42 12.08 9.52 7.84 8.15 8.2

Other Manufacturing

Expenses

13.31 14.18 11.08 10.92 23.87 22.78

Selling and

Administration

Expenses

34.84 40.27 32.81 29.97 31.52 34.63

Miscellaneous

Expenses

10.64 10.54 14.75 15.86 19.87 20.81

Less: Pre-operative

Expenses Capitalised

19.98 23.5 17.01 15.6 27.92 27.88

Total Expenditure 56.74 54.21 58.81 56.31 60.76 63.21

72

Operating Profit 51.46 55.16 47.68 53 44.08 43.49

Interest 0.85 0.66 0.91 1.08 1.18 1.5

Gross Profit 50.61 54.5 46.77 51.91 42.9 41.99

Depreciation 11.22 12.89 8.72 8.55 5.4 3

Profit Before Tax 39.39 41.61 38.06 43.37 37.5 38.99

Tax 7.67 7.56 9.17 12.76 10.26 11.33

Fringe Benefit tax 0 0 0 -0.01 -0.01 -0.01

Deferred Tax 3.23 3.79 1.46 1.19 1.28 1.64

Reported Net Profit 28.5 30.26 27.43 29.42 25.98 26.04

Extraordinary Items 0.4 0.32 0.15 2.43 0 0

Adjusted Net Profit 28.1 29.94 27.28 26.99 25.99 26.03

73

CHAPTER-5

BUSINESS PLAN

74

BUSINESS PLAN ON DEALERSHIP OF

RELIANCE OIL AND GAS

5.1 COMPANY PROFILE

Dealership Name :- JASMAS OIL & GAS

Address :- A/111 Kadi GIDC, near kalol,

Mehsana- Ahmadabad highway

Contact Detail

Partners

Patel Hitesh

Patel Kuntal

Patel Ashish

Patel Mihir

Patel Jignesh

Patel Shruti

75

Authorized dealer: related Oil and gas dealer

Company Summary

Reliance Company Limited (RCL) is a conglomerate with business in the energy and

materials value chain.

The Company operates in three segments:

The petrochemicals segment includes production and marketing operations of

petrochemical products which include, polyethylene, polypropylene, polyvinyl

chloride, poly butadiene rubber, polyester yarn, polyester fibre, purified terephthalic

acid, paraxylene, ethylene glycol, olefins, aromatics, linear alkyl benzene, butadiene,

acrylonitrile, caustic soda and polyethylene terephthalate.

The refining segment includes production and marketing operations of the petroleum

products.

The oil and gas segment includes exploration, development and production of crude

oil and natural gas. It‘s others segment includes textile, retail business, special

economic zone (SEZ) development.

Dealers’ introduction

JASMAS has start its activity of oil and gas distribution of Reliance oil and gas on 1/1/2014

with the name of "JASMAS dealership" and distribute more number of oil and gas related

products including L.P.G. Gasoline, Gas oil, Kerosene, aviation fuels, Light fuel, Heavy jet

fuel, Heavy fuel oil

JASMAS distribute its products according to the NIOPDC (NATIONAL INDIAN

OILREFINING AND DISTRIBUTION CO.) standards, and is competent to export some

oilproducts after consultation with NIOPDC authorities and receiving the necessary

decretory. To improve the level of retailers technical knowledge and to prepare optimum

utilization of updated technology and resources, JASMAS has set up a close relation with

76

company who are involved and are specialist in advanced oil and gas technologies and other

manufacturers of refinery equipments and takes advantage of so called dealers‘' innovations.

5.2 VISION :-

Affordable and secure oil and gas energy for fuelling India's growth

5.3 MISSION :-

To develop the oil and gas distribution through technology up-gradation and

transportation and marketing sectors.

To enhance service standards and to maximize customer satisfaction.

5.4 PRODUCTS :-

The company will initially in market nine distinct products. These products have been

produced based on the standards and their quality is continuously controlled by quality

control laboratory of the refinery which can be transferred to the Distribution Depot upon

issuing of the quality certificate. The quality of the products is permanently under control of

the related departments. In the following, use of some refinery products has been described.

1. LPG (Liquid Petroleum Gas)

Use: this product can be used as fuel in household consumers and some industries and also

can be used as an alternative fuel in vehicles. It also can be used as Freon alternative in

aerosols containers.

2. Motor gasoline

Use: this product is used as motor fuel in gasoline combustion engines.

3. Kerosene

Use: it can be used as fuel in household consumers, industries and lighting.

77

4. Gasoil

Use: it can be used as fuel in diesel internal combustion engines and in household and

industrial burners.

5. Light Fuel Oil

Use: it is used as fuel in stationary and mobile diesel and capable industries.

6. Heavy fuel oil

Use: it is used as fuel in industries and power plants capable of using heavy liquid fuel.

7. ATK (Heavy Jet fuel)

Use: it is a proper fuel which can be used in all turbine engines of airplanes and some jet

fighters thanks to its high flash point.

8. Light Jet fuel

Use: this fuel is used in turbine engine of jet fighters and helicopters due to its special

properties.

Objectives:

To further enhance marketing infrastructure and reseller network for providing

assured service to customers throughout the country..

To maximize utilization of the existing facilities for improving efficiency and

increasing productivity.

To achieve higher growth through mergers, acquisitions, integration and

diversification by harnessing new business opportunities in oil and gas distribution.

To inculcate strong ‗core values‘ among the employees and continuously update skill

sets for full exploitation of the new business opportunities.

78

5.5 ORGANISATION STRUCTURE:-

RISKS:

Political situation,

Economical Stability,

Market opportunities,

Private sector,

Tax System,

Funding & Frameworks.

Fixed Assets

Table 5.1

FIXED ASSESTS Amount

Plant 70000

Machinery 50000

Total Fixed Assets 120000

79

Source of Finance at Starting Time

Table 5.2

Partner‘s Capital 20,00,000

SBI Loan 30,00,000

Total 50,00,000

Note.1- sales of product

Table 5.3

Product Unit/ Leter Rs. total

LPG 3000 50 1,50,000

Motor gas line 3000 40 1,20,000

Gas oil 3000 60 1,80,000

Kerosene 3000 30 90,000

Light fuel oil 3000 70 2,10,000

Heavy fuel oil 3000 50 1,50,000

Heavy jet fuel 3000 40 1,20,000

Light jet fuel 3000 57 1,71,000

Total 11,91,000

80

Job role salary

Table 5.4

Department Salary (rs.)

Operational manager 25000

Finance manger\ 25000

Stock and material department 25000

Security department 25000

Daily operation department 25000

Technical and engineering department 25000

Repairing department 40,000

Partner‘s salary 50,000

Shieeper‘s salary 5000

Total 3,35,000

81

Projected profit & loss a/c

Table 5.5

Particular 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Income

Sales 11,91,000 10,00,000 12,00,000 15,00,000 16,00,000

Total Income (A) 11,91,000 10,00,000 12,00,000 15,00,000 16,00,000

Expense

Rent 15,00,000 12,00,000 11,00,000 12,00,000 13,00,000

Training 15000 20000 30000 40000 50000

Electricity(500unit) 1,20,000 1,40,000 1,50,000 1,60,000 1,80,000

Municipal Tax 10000 10000 15000 20000 10000

Advertisement 50000 30000 20000 30000 50000

Salary 3,35,000 3,35,000 3,35,000 3,35,000 3,35,000

Telephone 20000 50000 40000 40000 40000

Bank Charges 10000 10000 10000 10000 10000

Insurance 90000 90000 80000 85000 85000

Misc. Expense 25000 25000 25000 25000 25000

Professional Tax 3000 3000 3000 3000 3000

Repair Expense 1500 2000 2500 3500 4500

Income before Interest& Tax 21,79,500 19,15,000 18,10,500 19,51,500 20,92,500

Less: Interest 81000 81000 81000 81000 81000

Income Before Tax 20,98,500 18,34,000 17,29,500 18,70,500 20,11,500

less: Tax (30%) 6,28,550 5,50,200 5,18,850 5,61,150 6,03,450

Net Profit (AfterTax) 14,69,950 12,83,800 12,10,650 13,09,350 14,08,050

82

Projected balance sheet

Table 5.6

PARTICULAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Partner‘s Capital

Total Partner’s Capital 20,00,000 20,00,000 20,00,000 20,00,000 20,00,000

Secured Loan(sbi) 30,00,000 30,00,000 30,00,000 30,00,000 30,00,000

Share capital 20,00,000 20,00,000 20,00,000 20,00,000 20,00,000

Reserves and Surplus 2313778 2494008 2910748 3347990 3906984

Total Liabilities 21313778 21494008 21910748 22347990 22906984

Assets

Fixed Assets

Computers 40000 50000 55000 60000 61000

Water purifier 10000 12000 13000 15000 17000

Plant 70,000 70000 70000 70000 70000

Machinery 50000 50000 50000 50000 50000

TOTAL FIXED ASSETS 1,70,000 1,82,000 1,88,000 1,95,000 1,98,000

TOTAL 1,53,000 1,63,800 1,69,200 1,75,500 1,78,200

Current Assets

Cash & Bank 5125000 4505463 6354751 4351420

TOTAL CURRENT ASSETS 5125000 450463 6354751 4351420 4556560

Dep 17000 18200 18800 19500 19800

83

Cash flow

Table 5.7

PARTICULAR 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Cash received fromcustomer 11,91,000 10,00,000 12,00,000 15,00,000 16,00,000

Cash paid to employers (3,35,000) (3,35,000) (3,35,000) (3,35,000) (3,35,000)

Total 856000 665000 856000 1165000 1265000

Cash flow from investing

Purchase from plant 70,000 70000 70000 70000 70000

Purchase machinery 50000 50000 50000 50000 50000

Net cash in investing activates 120000 120000 120000 120000 120000

Cash flow financing

Share capital 2000000 2000000 2000000 2000000 2000000

Loan payment - - - - -

Total cash flow 2120000 2120000 2120000 2120000 2120000

84

CHAPTER-6

CONCLUSION &

LIMITATIONS

85

6.1 CONCLUSION :-

The oil and gas market is highly fragmented. India has one of the fastest growing

economies in the world, and the demand for oil and gas is rising at a matching rate.

There has been a president gap between demand and domestic availability of oil and

gas. India has emerged the world‘s largest importer of oil and gas. Now india has

entered this cut-throat competitive market by the import contract of oil and gas.

According to SGM model ONGC is leading indicator in oil and gas industry with

highest profit and provide highest number of products compare to other two players.

According to analysis of five force model threats of new entrants is low because of

requirement of investment is in very lager amount of money and threat of substitute

products is very high because other competitive firm also provide more number of

products. According to trend analysis the trend of operating income of oil and gas

industry is increase readily except ONGC. The net profit of oil and gas industry is

very good and it increases year by year.

6.2 LIMITATION :-

We take only those company‘s data which are available in market.

We are not considering all analytical models.

86

CHAPTER 7

BIBLOGRAPHY

87

BOOKS:

By,

Thomsan Arthur, A. J Strickland, Gamble E John, Arun K. Jain

“Crafting and Executing Strategy”( Special Indian Edition), 14th

Edition, TMH Production.

WEB SITES:

www.way2wealth.com

www.indiainfoline.com

www.atmaindia.com

WEB LINKS:

http://www.atmaindia.org/Export.htm

http://www.atmaindia.org/Radialisation.htm

http://www.atmaindia.org/Redreadin

88

CHAPTER-8

ANNEXURE

89

ONGC BALANCESHEET:-

Table 7.1

(Rs in Crs)

Year Mar 14 Mar 13 Mar 12 Mar 11 Mar 10

SOURCES OF FUNDS :

Share Capital 4,277.76 4,277.76 4,277.76 4,277.76 2,138.89

Reserves Total 1,32,447.25 1,20,175.46 1,08,678.97 93,226.67 85,143.71

Equity Share Warrants 0 0 0 0 0

Equity Application Money 0 0 0 0 0

Total Shareholders’ Funds 1,36,725.01 1,24,453.22 1,12,956.73 97,504.43 87,282.60

Secured Loans 0 0 4,500.00 0 0

Unsecured Loans 0 0 0 0 16,405.65

Total Debt 0 0 4,500.00 0 16,405.65

Other Liabilities 26,904.98 23,311.61 21,875.05 21,405.97 0

Total Liabilities 1,63,629.99 1,47,764.83 1,39,331.78 1,18,910.40 1,03,688.25

APPLICATION OF FUNDS :

Gross Block 1,08,504.44 97,014.14 90,512.34 80,938.59 71,553.78

Less : Accumulated Depreciation 78,013.26 69,321.75 68,656.70 62,137.55 55,900.09

Less:Impairment of Assets 211.93 208.91 175.49 161.5 5.18

Net Block 30,279.25 27,483.48 21,680.15 18,639.54 15,648.51

Lease Adjustment 0 0 0 0 0

Capital Work in Progress 25,557.79 24,891.24 26,879.28 21,724.12 15,791.03

Investments 17,204.31 9,173.05 5,216.24 5,182.79 5,772.03

Current Assets, Loans & Advances

Inventories 6,423.65 6,158.74 5,533.59 4,477.95 5,052.02

Sundry Debtors 8,165.67 6,863.72 6,194.82 3,994.68 3,058.64

Cash and Bank 10,798.88 13,218.59 20,124.56 14,481.09 18,231.04

Loans and Advances 4,996.21 4,640.16 4,247.69 3,328.76 27,803.07

Total Current Assets 30,384.41 30,881.20 36,100.66 26,282.48 54,144.77

Less : Current Liabilities and

90

Provisions

Current Liabilities 18,298.64 16,563.66 18,955.36 18,230.83 12,087.56

Provisions 1,322.23 1,364.53 2,610.74 1,284.76 7,785.85

Total Current Liabilities 19,620.87 17,928.19 21,566.10 19,515.59 19,873.41

Net Current Assets 10,763.54 12,953.01 14,534.56 6,766.89 34,271.36

Miscellaneous Expenses

not written off 0 0 0 0 841.32

Deferred Tax Assets 9,705.38 8,470.05 6,481.81 6,619.03 6,238.76

Deferred Tax Liability 26,284.06 21,358.03 17,679.68 16,569.42 15,156.97

Net Deferred Tax -16,578.68 -12,887.98 -11,197.87 -9,950.39 -8,918.21

Other Assets 30,620.52 33,711.32 35,842.59 32,971.79 0

Total Assets 1,63,630.00 1,47,764.83 1,39,331.78 1,18,910.40 1,03,688.25

Contingent Liabilities 67,871.33 34,993.33 23,963.37 18,338.43 16,463.94

91

ONGC PROFIT AND LOSS ACCOUNT:-

Table 7.2

(Rs in Crs)

Year Mar 14 Mar 13 Mar 12 Mar 11 Mar 10

INCOME :

Sales Turnover 84,202.78 83,308.96 76,887.06 68,648.80 60,204.82

Excise Duty 356.39 338.91 399.04 332.63 241.04

Net Sales 83,846.39 82,970.05 76,488.02 68,316.17 59,963.78

Other Income 6,711.90 5,446.82 7,593.52 3,406.85 4,186.69

Stock Adjustments -104.28 23.02 91.34 12.91 118.04

Total Income 90,454.01 88,439.89 84,172.88 71,735.93 64,268.51

EXPENDITURE :

Raw Materials 92.15 190.95 283.58 294.4 290.53

Power & Fuel Cost 380.77 334.96 316.18 285.6 260.38

Employee Cost 9,667.20 9,043.22 6,041.58 5,838.84 5,268.50

Other Manufacturing Expenses 12,638.87 10,059.95 8,664.41 20,087.11 15,093.71

Selling and Administration Expenses 37,525.02 34,775.15 28,249.40 25,323.36 23,374.38

Miscellaneous Expenses 10,095.11 14,978.12 12,461.69 16,014.58 15,270.35

Less: Pre-operative Expenses Capitalised 23,303.28 19,888.00 16,017.26 25,989.16 21,505.43

Total Expenditure 47,095.83 49,494.36 39,999.58 41,854.73 38,052.42

Operating Profit 43,358.18 38,945.54 44,173.31 29,881.20 26,216.09

Interest 0.36 27.64 34.83 25.11 14.42

Gross Profit 43,357.82 38,917.90 44,138.48 29,856.09 26,201.67

Depreciation 10,925.89 8,373.57 7,495.92 2,239.72 1,220.07

Profit Before Tax 32,431.93 30,544.33 36,642.56 27,616.37 24,981.60

Tax 6,484.59 7,928.52 10,277.58 7,668.21 7,098.06

Fringe Benefit tax 0 0 -5.41 -8.02 0

Deferred Tax 3,852.54 1,690.11 1,247.47 1,032.18 1,115.98

Reported Net Profit 22,094.81 20,925.70 25,122.92 18,924.00 16,767.56

Extraordinary Items 171.54 -35.19 2,106.23 0 0

Adjusted Net Profit 21,923.27 20,960.89 23,016.69 18,924.00 16,767.56

Adjst. below Net Profit 0 0 0 0 0

92

P & L Balance brought forward 0 0 0 0.03 0.01

Statutory Appropriations 0 0 0 0 0

Appropriations 22,094.81 20,925.70 25,122.92 18,924.03 16,767.54

P & L Balance carried down 0 0 0 0 0.03

Dividend 8,127.72 8,127.72 8,341.61 7,486.05 7,058.28

Preference Dividend 0 0 0 0 0

Equity Dividend % 190 190 195 175 330

Earnings Per Share-Unit Curr 24.21 22.94 27.81 20.7 72.96

Earnings Per Share(Adj)-Unit Curr

Book Value-Unit Curr 159.81 145.47 132.03 113.97 408.07

93

OIL INDIA BALANCE SHEET:-

Table 7.3

(Rs in Crs)

Year Mar 14 Mar 13 Mar 12 Mar 11 Mar 10

SOURCES OF FUNDS :

Share Capital 601.14 601.14 240.45 240.45 240.45

Reserves Total 20,107.04 18,610.34 17,480.89 15,361.42 13,525.23

Equity Share Warrants 0 0 0 0 0

Equity Application

Money 0 0 0 0 0

Total Shareholders

Funds 20,708.18 19,211.48 17,721.34 15,601.87 13,765.68

Secured Loans 1,971.78 1,021.86 10.13 1,005.54 0

Unsecured Loans 7,810.91 35.95 8.75 21.25 37.5

Total Debt 9,782.69 1,057.81 18.88 1,026.79 37.5

Other Liabilities 755.13 448.13 403.76 325.1 0

Total Liabilities 31,246.00 20,717.42 18,143.98 16,953.76 13,803.18

APPLICATION OF

FUNDS :

Gross Block 3,346.06 3,123.43 3,534.03 3,320.24 3,211.05

Less : Accumulated

Depreciation 2,196.41 1,920.97 2,475.68 2,330.54 2,135.83

Less:Impairment of

Assets 0 0 0 0 0

Net Block 1,149.65 1,202.46 1,058.35 989.7 1,075.22

Lease Adjustment 0 0 0 0 0

Capital Work in

Progress 2,077.16 1,769.01 1,131.50 1,218.24 328.66

Investments 11,456.61 1,857.07 2,614.19 890.41 859.44

94

Current Assets, Loans

& Advances

Inventories 1,022.91 691.88 581.14 555.5 490.37

Sundry Debtors 465.67 902.67 1,051.81 932.2 659.67

Cash and Bank 11,543.68 12,132.93 10,935.48 11,767.45 8,542.91

Loans and Advances 2,263.80 1,850.43 2,014.76 1,295.32 2,613.58

Total Current Assets 15,296.06 15,577.91 14,583.19 14,550.47 12,306.53

Less : Current

Liabilities and

Provisions

Current Liabilities 1,520.59 1,708.55 2,304.83 2,135.88 1,804.53

Provisions 847.89 1,185.03 1,621.52 1,047.57 1,501.75

Total Current

Liabilities 2,368.48 2,893.58 3,926.35 3,183.45 3,306.28

Net Current Assets 12,927.58 12,684.33 10,656.84 11,367.02 9,000.25

Miscellaneous

Expenses not written

off

0 0 0 0 18.38

Deferred Tax Assets 402.94 307.18 162.99 125.79 151.09

Deferred Tax Liability 1,717.13 1,525.81 1,239.72 1,274.84 1,171.99

Net Deferred Tax -1,314.19 -1,218.63 -1,076.73 -1,149.05 -1,020.90

Other Assets 620.11 630.77 324.65 378.85 0

Total Assets 31,246.00 20,717.42 18,143.98 16,953.76 13,803.18

Contingent Liabilities 1,614.02 1,436.83 1,005.35 1,111.24 1,024.07

95

OIL INDIA LIMITITED PROFIT AND LOSS ACCOUNT:-

Table 7.4

(Rs in Crs)

Year Mar 14 Mar 13 Mar 12 Mar 11 Mar 10

INCOME :

Sales Turnover 9,612.70 9,947.57 9,863.23 11,613.68 9,470.54

Excise Duty 0 0 0 0 16.17

Net Sales 9,612.70 9,947.57 9,863.23 11,613.68 9,454.37

Other Income 1,628.64 1,530.45 1,416.67 873.89 954.18

Stock Adjustments -7.87 27.37 8.82 7.64 -10.57

Total Income 11,233.47 11,505.39 11,288.72 12,495.21 10,397.98

EXPENDITURE :

Raw Materials 0 0 0 0 5.7

Power & Fuel Cost 32.94 27.98 38.02 24.52 51.52

Employee Cost 1,956.42 1,751.26 1,904.60 1,510.92 1,178.71

Other Manufacturing Expenses 865.58 725.32 529.52 544.42 1,550.71

Selling and Administration Expenses 2,913.68 3,077.33 2,419.05 3,314.33 4,030.43

Miscellaneous Expenses 291.85 240.67 814.45 2,261.04 489.45

Less: Pre-operative Expenses Capitalised 483.24 440.63 413.39 306.02 1,027.55

Total Expenditure 5,577.23 5,381.93 5,292.25 7,349.21 6,278.97

Operating Profit 5,656.24 6,123.46 5,996.47 5,146.00 4,119.01

Interest 68.78 2.6 9.37 13.13 3.65

Gross Profit 5,587.46 6,120.86 5,987.10 5,132.87 4,115.36

Depreciation 1,177.02 837.63 885.24 819.67 220.31

Profit Before Tax 4,410.44 5,283.23 5,101.86 4,313.20 3,895.05

Tax 1,333.58 1,551.99 1,727.26 1,297.32 1,163.46

Fringe Benefit tax 0 0 0 0 0

Deferred Tax 95.56 141.9 -72.32 128.15 121.07

Reported Net Profit 2,981.30 3,589.34 3,446.92 2,887.73 2,610.52

Extraordinary Items 0 0 0 0 0.17

Adjusted Net Profit 2,981.30 3,589.34 3,446.92 2,887.73 2,610.35

Adjst. below Net Profit 0 0 0 0 0

96

P & L Balance brought forward 0 0 0 0 0

Statutory Appropriations 0 0 0 0 0

Appropriations 2,981.30 3,589.34 3,446.92 2,887.73 2,610.52

P & L Balance carried down 0 0 0 0 0

Dividend 1,292.45 1,803.41 1,142.15 901.7 817.55

Preference Dividend 0 0 0 0 0

Equity Dividend % 215 300 475 375 340

Earnings Per Share-Unit Curr 45.94 54.79 135.65 113.94 102.85

Earnings Per Share(Adj)-Unit Curr

Book Value-Unit Curr 344.48 319.58 737.01 648.86 572.5

97

HINDUSTAAN OIL EXPLORATION LIMITED BALANCESHEET :-

Table 7.5

(Rs in Crs)

Year Mar 14 Mar 13 Mar 12 Mar 11 Mar 10

SOURCES OF

FUNDS :

Share Capital 130.51 130.51 130.51 130.51 130.51

Reserves Total 398.05 525.93 1,076.82 1,043.74 971.14

Equity Share

Warrants 0 0 0 0 0

Equity Application

Money 0 0 0 0 0.04

Total Shareholders

Funds 528.56 656.44 1,207.33 1,174.25 1,101.69

Secured Loans 9.22 22.69 36.74 39.82 82.72

Unsecured Loans 937.6 863.1 553.95 549.61 569.75

Total Debt 946.82 885.79 590.69 589.43 652.47

Other Liabilities 106.21 96.44 90.81 79.82 0

Total Liabilities 1,581.59 1,638.67 1,888.83 1,843.50 1,754.16

APPLICATION OF

FUNDS :

Gross Block 17.92 17.92 17.84 17.89 18.34

Less : Accumulated

Depreciation 9.21 8.8 8.3 8.13 8.14

Less:Impairment of

Assets 0 0 0 0 0

Net Block 8.71 9.12 9.54 9.76 10.2

Lease Adjustment 0 0 0 0 0

Capital Work in

Progress 337.1 339.18 123.88 101.09 65.43

98

Investments 27.21 27.6 71.79 110.29 2.91

Current Assets,

Loans & Advances

Inventories 36.87 39.18 46.89 44.04 43.25

Sundry Debtors 6.36 14.89 19.96 47.4 41.23

Cash and Bank 12.72 87.27 42.37 16.37 79.98

Loans and Advances 8.88 16.9 10.61 10.53 59.7

Total Current

Assets 64.83 158.23 119.83 118.34 224.16

Less : Current

Liabilities and

Provisions

Current Liabilities 69.91 108.98 59.64 54.05 67.58

Provisions 0.06 0.14 0.17 0.33 80.82

Total Current

Liabilities 69.97 109.11 59.81 54.38 148.4

Net Current Assets -5.14 49.12 60.02 63.96 75.76

Miscellaneous

Expenses not written

off 0 0 0 0 0

Deferred Tax

Assets 130.74 117.4 207.91 179.06 135.94

Deferred Tax

Liability 130.74 117.4 251 211.45 130.63

Net Deferred Tax 0 0 -43.09 -32.39 5.31

Other Assets 164.75 144.21 141.55 110.84 0

Total Assets 1,581.58 1,638.67 1,888.83 1,843.50 1,754.16

Contingent

Liabilities 105.93 70.32 73.75 116.62 135.02

99

HINDUSTAN OIL EXPLORATION LIMITED PROFIT AND LOSS

ACCOUNT:-

Table 7.6

(Rs in Crs)

Year Mar 14 Mar 13 Mar 12 Mar 11 Mar 10

INCOME :

Sales Turnover 59.85 108.61 151.4 329.85 140.06

Excise Duty 0 0 0 0 0

Net Sales 59.85 108.61 151.4 329.85 140.06

Other Income 5.78 11.63 25.01 8.81 13.86

Stock Adjustments -2.89 0.17 -7.39 -1.39 4.97

Total Income 62.74 120.41 169.02 337.27 158.89

EXPENDITURE :

Raw Materials 0 0 0 0 0

Power & Fuel Cost 0.22 0.23 0.19 1.23 0.86

Employee Cost 10.06 9.94 10.83 10.36 13.05

Other Manufacturing Expenses 65.47 17.14 34.86 34.81 12.23

Selling and Administration Expenses 15.28 24.42 24.78 55.34 30.58

Miscellaneous Expenses -7.33 564.58 2.53 -17.05 -18.12

Less: Pre-operative Expenses Capitalised 0 0 14.72 0 0

Total Expenditure 83.71 616.31 58.47 84.69 38.6

Operating Profit -20.97 -495.9 110.55 252.58 120.29

Interest 13.65 10.57 10.9 12.39 8.04

Gross Profit -34.62 -506.47 99.65 240.19 112.25

Depreciation 103.05 87.45 55.46 122.29 47.19

Profit Before Tax -137.67 -593.92 44.19 117.9 65.06

Tax -12.86 0 0 0 0.37

Fringe Benefit tax 0 0 0 0 0

Deferred Tax 0 -43.09 10.7 37.7 23.1

Reported Net Profit -124.81 -550.83 33.49 80.2 41.59

Extraordinary Items 1.98 -112.58 0.02 0.05 0

Adjusted Net Profit -126.79 -438.25 33.47 80.15 41.59

100

Adjst. below Net Profit 0 0 0 0 0

P & L Balance brought forward -257.75 293.08 259.59 186.99 145.4

Statutory Appropriations 0 0 0 0 0

Appropriations 0 0 0 7.6 0

P & L Balance carried down -382.56 -257.75 293.08 259.59 186.99

Dividend 0 0 0 6.52 0

Preference Dividend 0 0 0 0 0

Equity Dividend % 0 0 0 5 0

Earnings Per Share-Unit Curr 0 0 2.57 6.06 3.19

Earnings Per Share(Adj)-Unit Curr

Book Value-Unit Curr 40.5 50.3 92.51 89.97 84.41