Overview of Market Conditions in the Sub-Continent: India

A.B ThosarExecutive Director-LPG

Hindustan Petroleum Corporation Ltd.

WLPGA Sub-Continent Regional Summit

Indian LPG Scenario

Overview

LPG Market Opportunities

Regulatory Influence

Infrastructure Development

Summary

About HPCL

• Mega Public Sector Undertaking withNavratna status & a Fortune 500Company

• Engaged in business of Refining andMarketing of petroleum products

• Turnover of USD 31,546 Million• HP Gas selected as Superbrand-India• Catering to 35 Millions Customers• Pan India strong network of 2750

distributors• 44 LPG bottling Plants with 3385 TMTPA

bottling Capacity and equipped withElectronic Carousel

1. Indian LPG Scenario

• LPG Marketing in Indiacommenced in 1950s by BurmahShell & Stanvac

• LPG Demand started picking upfrom 1980s when demand was 0.41MMT

• India is now fourth largest consumerof LPG in the World

• Third largest consumer of LPG indomestic sector in the World

• Total Demand of LPG: 13.9 MMT in2010-11 which shall increase to 20MMT by 2015-16

10052

10531, 5.5%

11333, 7.8%

11778, 4%

12746, 8.2%

139129.3%

8500

9500

10500

11500

12500

13500

14500

05-06 06-07 07-08 08-09 09-10 10-11

19680

1469712631

87896945

5000

10000

15000

20000

25000

China USA India Japan Mexico

LPG Demand (TMT) & Growth

Top 5 Consumers-Domestic 2010

1. Indian LPG Scenario

• Daily 3 Million LP Gas cylindersare delivered to doorstep ofconsumers

• Total 200 Million Cylinders in themarket

• 12.5 Million cylinders procuredannually

• 182 LPG Bottling Plants pan Indiawith installed capacity of11.3 MMTPA

1. Indian LPG Scenario

Demand & Supply (Indigenousproduction)

– Demand in 2010‐11: 13.9 MMT

– Indigenous Production in 10‐11:  9.5 MMT

– 31% of total LPG Demand is met from Imports

– Indigenous LPG production through State Run/Private Refineries & Fractionators

Demand Vs Supply (TMT)

10531 11333 1177812746 13912

8409 8973 928710323

9516

0

5000

10000

15000

 06‐07  07‐08  08‐09  09‐10  10‐11Demand Availability

State Run; 41%

Private, 36%

Fractionators; 23%

Indigenous Production

1. Indian LPG Scenario

Domestic Growth is 8-9%; still penetration in rural areas is low Commercial & Industrial Consumption is increasing: (from 7%

of total pie in 07-08 to 10% in 10-11) Auto LPG consumption is 2% of total pie as compared to 9%

World wide

Domestic88%

Commercial8%

Industrial2% Auto

2%

Product Share-India

Domestic47%

Chemical26%

Industrial11%

Auto9%

Agriculture2%

Refinery5%

Product Share-World

Product Portfolio

1. Indian LPG Scenario

Vision 2015 of MOP&NG1. Increase in Domestic LPG 

Connections:• Focus on areas where LPG penetration is low by giving incentives ‐ Raise population coverage from 50% to 75%. 

• Increasing LPG customer population from 107 millions to 160 millions by 2015

• Switch Over from Kerosene to LPG

2. Common LPG Kitchen‐Making LPG affordable:• Opening up Community Kitchens in villages as a part of Corporate Social Responsibility

1. Indian LPG Scenario

Vision 2015 of MOP&NG:

Rajiv Gandhi Gramin LPG VitaranYojana(Low Cost Distribution Model):

• Improving reach of LPG in rural market 

• A low cost model of distribution sustainable for cluster of villages having about 4500 families

• Expected Refill Sales: 600 cylinders of 14.2 kg  per month

2. LPG Market Opportunities

Rural Market: Domestic Segment 

Industrial/Commercial Sector

Transport/ Automobile Sector

2. LPG Market Opportunities

Rural Market: Domestic Segment

72% of population lives in rural areas

LPG penetration is 19.6%

87% of villages have population less than 2000

Reduced barriers: Road connectivity, literacy, awareness and purchasing power

Distribution of Villages in India

Population Number of Villages % of Total

< 200 114267 18%

200 ‐ 499 155123 24%

500‐ 999 159400 25%

1000‐ 1999 125758 20%

2000‐ 5000 69135 11%

5000‐ 9999 11618 2%

>10000   3064 0%

Total 638365 100%

Target Market

Formulating strategies to reach villages with population less than 2000

2. LPG Market Opportunities

Industrial & Commercial Sector:• Commercial & Industrial Segmentgrowing at 27% CAGR for last 5 years

• LPG‐ Gaining popularity in Industries

– Commitment towards climatechange

– Return on Investment:Economical than various otherconventional fuel

• In Commercial Segment

– Boom in Retail Industry: ShoppingMalls & Food Courts

353,1446

653,3

831,6963,5

1158,2

1321

0

200

400

600

800

1000

1200

1400

Sales in TMT

Commercial & Industrial LPG Sales

Create Awareness in Industries / Commercial Sector about Benefits of LPG

Opportunities in Industry 

• Calcination• Gloss Firing• Stoneware• Porcelain

Ceramic Industry

• Heating• Drying• Feedstock in Chemical Ind.

Chemical /Drugs

• Annealing• Billet Heating•Melting• Descaling• Stress Relieving• Pre‐heating

Metallurgical

•Melting• Holding• Blowing• Polishing• Stress Relieving

Glass

Opportunities in Industry 

• Drying• Singing• Calendering• Dyeing• Velvet Processing

Textile

• Heating• Drying• Feedstock in Chemical Ind.

Agriculture

• Paint Baking• Heat treatment

Automobile

• Baking• Boiling• Frying• Drying

Food

Automobile /Transport Sector:

0

1000

2000

3000

4000

5000

6000

1886

943 851

5157

1900 16671011

1646 1434

3158

451

• Auto LPG sales has increased by 30% CAGR between 2005‐06 and 2009‐10 • With 0.5 Million vehicles running on Auto Gas, per vehicle consumption is 451 Kg per annum against world average of 1428 kg per annum.  

Source: WLPGA 2009

135

200178

319 321

222327

447

892

1078

0

200

400

600

800

1000

1200

0

50

100

150

200

250

300

350

400

 06‐07  07‐08  08‐09  09‐10  10‐11

No. of A

LDS

Sales in TMT

Auto Sales ALDS

Transport-Auto LPG Consumption per Vehicle: Kg/annum

2. LPG Market Opportunities

3. Regulatory InfluenceRural Market: Focused approach of Govt. of India to increase penetration of LPG in Rural Areas:• Vision 2015 of Ministry of Petroleum & Natural Gas

Raise population coverage from 50% to 75% Low cost Distribution model (under Rajiv Gandhi Gramin LPG 

Vitaran Yojana) Deposit Free Connections to BPL customers

• Other Govt. Policies to increase purchasing power of rural folks: Direct subsidy to farmers Extension of Debt waiver  Allocation under NREGA increased (NREGA‐National Rural 

Employment Guarantee Act)

Projected Growth in LPG Demand shall be 8-9% year on year till 2015

3. Regulatory Influence

Industrial / Commercial Segment• Sectoral Initiatives taken by Govt. of India and OMCs for:

Conversions from conventional fuels to LPG

Creating Awareness about LPG as cleaner fuel

Capital Investments in Industries for LPG Installations

• Stricter pollution control norms propagating use ofefficient fuels

•FDI in retail sector

3. Regulatory Influence

Pricing of LPG

• Pricing based on Import Parity Price (Saudi CP)

• Subsidy on Domestic LPG by Govt. of India

• Market driven Prices for Commercial & Industrial LPG

4. Infrastructure Development

S.No Infrastructure Capacity in TMTPA

Project Investment

2009-10 2014-15 USD Million

1 Import Handling Terminals 4700 6500 220

2 Pipelines Capacity 4000 9400 532

3 Tankage (Storage Capacity) 685 912 700

4 Bottling Capacity 12097 18037 450

Increasing demand of LPG: State owned companies have planned for Infrastructure Augmentation

4. Infrastructure Development

Mumbai

Vizag

Panipat

Guwahati

Haldia

Vijayawada

Kochi

Barauni

Kanpur

Kandla

Jalandhar

Delhi

Chennai

MumbaiHigh

Mangalore

Secunderabad

Ajmer

Paradip

Jamnagar

Loni

Hazira

Trichy

Gurgaon

Bangalore

Chakan

Existing Pipelines

Proposed Pipelines

Ennore

JNPT

Durgapur

NEW IMPORT TERMINALSLOCATION Capacity Cost USD

Ennore 600 TMTPA 90 M

JNPT 600 TMTPA 70 M

Kochi 600 TMTPA 60 M

Existing Refinery

Bhatinda

BinaProposed Refinery

PROPOSED PIPELINES

Proposed Pipelines Length Cost USD

Paradip – Haldia – Budge Budge – Kalyani – Durgapur

673 km 202 M

Ennore – Chenglepet –Pondy – Trichy

382 km 115 M

Mangalore – Bangalore 376 km 110 M

Mumbai ‐ Uran – Chakan 166 km 105 M

5. To Summarize

• Opportunity in LPG market in India lies in Rural Domestic Segment– Focused strategies to address issues of 

Availability, Affordability and Awareness

– Opening up of low cost distribution model in large scale

• 8‐9% Growth projected in LPG Demand up to 2015

• Strategic infrastructure planned year‐wise to meet the growing demand

Thank You