Reliance Industries Limited, India

Challenges and Innovative Business Modelsfor Emerging Africa in Downstream Hydrocarbon

Sector

2

Africa – size is a challenge!

* Image and information courtesy: CITAC

Amazing geography

Challenge is to meet energy needs of 1 billion people spread over 30 million Sq. kms

(as compared to India 1.2 billion people spread over 3 million Sq.kms)

3

Demand growth shift

Source: IEA June 2009

Demand growth shifting to developing markets including Africa

4

World Per Capita Oil Consumption

Africa and India have similar challenge

Source: BP Statistical Review 2009

Figures in Tonnes for 2008

5

Per Capital Oil Consumption in Litres / Day

0

2

4

6

8

10

12

US

Korea

Norway

Japan

OECDIta

ly

Fran

ce UK ME

World FS

U

L Am

er

China

Africa

Indi

a

Litre

Large potential for growth

Demand growth will be driven by rising economic aspirations

Source: CITAC

Challenges in Refining

7

Challenges ahead in refining sector

Quality of crude oil processed

Product specifications

Refinery configuration

Refinery Capacities

Investment in Refineries

– New Refineries

– Upgradation

8

Quality of crude oil – look ahead

Quality of Crude oil processed in Africa (2007-2030)

Quality of crude oil processed in Africa is expected to improve in terms of gravity and sulphur content

Source: Hart Energy

9

Auto fuels specifications – current standards

Majority of Africa needs to improve fuel specifications

Gasoline

Gas oil

Source: ICF International

10

AFRI specificationsGasoline

Source: HART/ARA/IPIECA 2007

Challenges to formulate fuel specifications to reduce Sulphur.

Gasoil

11

Auto fuel specifications – look ahead

Gasoline Gasoil

Gradual reduction of Benzene in Gasoline & Sulphur in Gas oil is envisaged – challenge is to leapfrog

Afri 4 Sulphur 150 ppm Afri 4 Sulphur 50 ppm

Source: HART

12

Refinery configuration

Majority of Capacity falls in the complexity range below 4.0

African Refinery Complexity Ranking

Source: HART

13

Refinery configuration

African Top 10 Refinery Complexity Ranking (Capacity above 50,000 bpd)

Presence of Catalytic reformers in above refineries indicates regional orientation towards gasoline production

Source: HART

14

Product demand slate - look ahead

African Refinery, Blender Input and Production (2007-2030) mbpd

Demand slate is scheduled to shift from Gasoline to Gasoil

18%

19%

38%

29%

Source: HART

15

African Projected Capacity Requirements (2007-2030) (mbpd)

Refinery capacity

Crude Distillation is likely to be increased by over 30%, conversion and hydro processing will be doubled

Source: HART

16

Trading Zones

1999- 2004 2005 2006 2007 2008 Q1-

2009Q2-

2009Q3-

2009Oct 09

Nov 09

Singapore

(Dubai Crack)

3.1 6.9 5.6 7.6 6.1 5.6 4.1 3.2 1.20 1.72

Europe

(Brent Crack)2.2 6.2 4.9 4.9 8.2 4.7 3.2 3.3 2.93 2.82

USGC

(WTI Crack)1.6 7.9 7.9 9.8 6.2 7.5 4.9 3.6 1.11 0.29

Investment in refineries

US $/bbl

Investment in quality up gradation, conversion and new refinery assets is a challenge considering current uncertain view on refining margins

Refinery Margins

Source: Reuters

Challenges in Marketing

18

Marketing - Challenges

Deregulation started in the 90s

Previously, markets dominated by Majors in almost all countries

Main reforms implemented included– End of monopolies and liberalization of the

marketing activities– Privatizations– Free imports, transport, storage, supply– Free prices in some countries– Still a long way to full deregulation

Consequences impacted the competitive landscape– Pressure on margins– New marketing companies appeared– Emergence of local African champions– Exit of traditional players

19S

ou

rce

: S

ou

rce

:

A new paradigm in marketing…

So

urc

e :

S

ou

rc

e :

Chevron, BP whollyfocused on SADC

Source: PFC Energy

20

Africa: Service Station Networks (2004-2009)

0

5,000

Total Shell Engen Chevron OiLibya BP PetroCI-MRS

ExxonMobil Oando Kenol Sasol Reliance

Service Stations

+16%

-20%

+14%

-38%

+596% -12%

-67%

+0% +117%

n/a

+47%n/a

Source: PFC Energy – Downstream Africa Service

Africa: Changes in Service Station Networks (2004-2009)

-1,500

0

1,500

OiLibya PetroCI-MRS

Total Reliance Kenol Engen Sasol Oando BP Shell Chevron ExxonMobil

Service Stations

Source: PFC Energy – Downstream Africa Service

… Impacting the competitive landscape

Source: PFC Energy

21

Product Transportation, Distribution and Storage Infrastructure

Main Downstream Infrastructures

Lamu

Mombasa

Port Sudan

Durban

Nacala

Beira

From Mangalore refinery (India)

Maputo

Tamatave

Djibouti

Nouadibou

Nouakchott

Walvis Bay

Windhoek

Lobito

Luanda

Muanda/MatadiPointe Noire

Port Gentil

Ndola

Cape Town Mossel Bay

Addis Ababa

Massawa/Assab

Dar es Salam

Dakar

Abidjan

Skikda

Mohamedia

Alexandria

Suez

Richards Bay

Refinery (crude, GTL, CTL)

Refinery Project

Crude oil pipeline

Oil products pipeline

Planned pipeline

Main Oil Products Terminal (with port on the sea)

Transport by truck

Transport by Rail

Transport by Boat

Main imports Terminals

Refinery (crude, GTL, CTL)

Refinery Project

Crude oil pipeline

Oil products pipeline

Planned pipeline

Main Oil Products Terminal (with port on the sea)

Transport by truck

Transport by Rail

Transport by Boat

Main imports Terminals

Main Downstream Infrastructures

Lamu

Mombasa

Port Sudan

Durban

Nacala

Beira

From Mangalore refinery (India)

Maputo

Tamatave

Djibouti

Nouadibou

Nouakchott

Walvis Bay

Windhoek

Lobito

Luanda

Muanda/MatadiPointe Noire

Port Gentil

Ndola

Cape Town Mossel Bay

Addis Ababa

Massawa/Assab

Dar es Salam

Dakar

Abidjan

Skikda

Mohamedia

Alexandria

Suez

Richards Bay

Investment in infrastructure of Ports, Terminals and Pipelines essential to meet growth in demand

Source: PFC Energy

Main Downstream Infrastructures

Lamu

Mombasa

Port Sudan

Durban

Nacala

Beira

From Mangalore refinery (India)

Maputo

Tamatave

Djibouti

Nouadibou

Nouakchott

Walvis Bay

Windhoek

Lobito

Luanda

Muanda/MatadiPointe Noire

Port Gentil

Ndola

Cape Town Mossel Bay

Addis Ababa

Massawa/Assab

Dar es Salam

Dakar

Abidjan

Skikda

Mohamedia

Alexandria

Suez

Richards Bay

Refinery (crude, GTL, CTL)

Refinery Project

Crude oil pipeline

Oil products pipeline

Planned pipeline

Main Oil Products Terminal (with port on the sea)

Transport by truck

Transport by Rail

Transport by Boat

Main imports Terminals

Refinery (crude, GTL, CTL)

Refinery Project

Crude oil pipeline

Oil products pipeline

Planned pipeline

Main Oil Products Terminal (with port on the sea)

Transport by truck

Transport by Rail

Transport by Boat

Main imports Terminals

Main Downstream Infrastructures

Lamu

Mombasa

Port Sudan

Durban

Nacala

Beira

From Mangalore refinery (India)

Maputo

Tamatave

Djibouti

Nouadibou

Nouakchott

Walvis Bay

Windhoek

Lobito

Luanda

Muanda/MatadiPointe Noire

Port Gentil

Ndola

Cape Town Mossel Bay

Addis Ababa

Massawa/Assab

Dar es Salam

Dakar

Abidjan

Skikda

MohamediaAlexandria

Suez

Richards Bay

22

Transition to LPG from Bio fuels

Like India, transition to LPG from biomass necessary due to environment and health impact

Barring Oil Rich Countries in North Africa, LPG Penetration in other countries is low

Government support is necessary to enable investments in upgrading infrastructure such as terminals, bottling plants etc. by – Import Duty waiver on capital equipment required for

Import terminals, Bottling plants, Cylinders etc.– Collaborating with multilateral financing agencies – Arranging Micro financing to customers

Priority attention by stake holders for promoting LPG is the need of the hour

Innovative Business Models

24

Refining – Adopt Hub and Spoke model

Regional Economic Communities (RECs) expanding in Africa which should facilitate rapid integration of economic and energy projects.

COMESA, EAC, and SADC, create a single African Free Trade Zone, consisting of 26 countries with a GDP of an estimated $624bn (£382.9bn).

AFTZ would ease access to markets within the zone

REC Image courtesy: Wikipedia

Refining hubs to serve Zones on regional basis rather than country basis may help develop large size and complex

refineries

25

Undertake Policy initiatives for…

Refinery revamps

Stake Buy-outs in existing refineries / RO networks

Building new refineries

Provision of Skills to refineries

Building cost-efficiencies in Logistics, marketing and distribution through collaborations

Process Automation

Enabling networking operations on regional basis for IOCs

Enabling harmonized tax structures within regions

Building cost-efficiencies in Logistics, marketing and distribution through collaborations and economies of scale

26

Innovative Financing

– Diaspora Bonds*/ Partial risk guarantees by World Bank/IDA/MIGA

Collaboration structures and project management for refining, infrastructure projects

Developing structured risk management

Technology based innovations

E-learning and blended learning

Improving infrastructure

Managing Oil Major Legacies of systems and processes effectively

Improving service orientations at ROs through exchange of best practices

Explore innovative collaboration for…

* Estimated potential:5-10 billion USD annually Source: Innovative financing for development- World Bank

27

Cooperate for sustainable growth and development

International co-operation is essential to effect the transition to more sustainable patterns of consumption and production .

Cooperation with India would help Africa to attract scarce investment capital, to maximize Africa's energy potential, and to increase India’s energy security Thank

you!