Reliance Industries Limited

Reliance Industries Limited

Global Opportunities for Energy SecurityJuly 27, 2006

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Forward Looking Statements

This presentation contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates” or other words of similar meaning. All statements that address expectations or projections about the future, including, but not limited to, statements about the strategy for growth, product development, market position, expenditures, and financial results, are forward-looking statements.

Forward-looking statements are based on certain assumptions and expectations of future events. The companies referred to in this presentation cannot guarantee that these assumptions and expectations are accurate or will be realised. The actual results, performance or achievements, could thus differ materially from those projected in any such forward-looking statements. These companies assume no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events, or otherwise.

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Global Opportunities for Energy Security

► Energy Issues of India

► Global Scenario

► Global Opportunities for India

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► Global Scenario


5

6

Energy Issues of India

2005

Industry faced an average of 17 power shutdowns

a month

7


2012 – look aheadResource crunch

► Energy demand estimated to grow by 40%

► India – the fourth largest energy consumer

► Electricity generation requirement : 90 GW – equal to wiring up the entire United Kingdom

►Widening demand-supply gap

► Funding of US$ 225 billion; Government ?? Any takers ?It is not just energy ……. It is “affordable energy”

8


Deficit Supply

*Source: McKinsey

Energy in MTOE 2005 FY 2012Coal 16 25-85

192 250Oil 86 125

35 40Natural Gas 6 20-25

26 50Overall 105 175

270 375

Energy Resources Gap*

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Coal

► Supply – Demand gap expected to be 85 million tonnes in 2012

► Govt monopoly in coal production – short of targets► Needs US$ 10-15 billion for upgradation / new mines

► Opex is 50% higher – needs newer technologies

► Sale price much lower than international price

► 15% drop in commitment shaves off 1% in growth rate

► Major investments for infrastructure – US$ 45 - 50 billion

► Coal Sector reforms needed ??

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0

50

100

150

200

250

300

350

400

2001-02 2002-03 2011-12 2024-25

mill

ion

to

nn

es

Production Demand

Crude Oil

► Demand supply gap for Oil may rise from current ~70% to well over 80% levels, in next 20 years

Source: ORF Energy Monitor, 23-29 Nov, 05

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The demand-supply gap will likely be filled by further domestic discoveries and imported gas (either LNG or trans-national pipeline)

India Gas Supply Likely Case

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Vo

lum

e (M

MS

CF

D)

Existing Fields

New Fields CBM

LNG Capacity (all expected capacitydoes not have contracted supply yet)

Supply will not materialize whenever demand is lower than supply

Govt of India Demand ProjectionsReference Case

Low Demand

High Demand

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STRATEGY

MANAGING DEMAND-SUPPLY GAP

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Strategy to manage the Demand-Supply Gap

► Accelerate Domestic E&P

► Build Refining capacity

► Invest in LNG sourcing and non-conventional energy sources

► Expand overseas acquisition

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► Accelerate Domestic E&P

● Reforms in Petroleum Sector

● NELP rounds

▬ 110 blocks awarded in previous 5 rounds covering approx. 1 million square kms.

▬ 55 blocks under offer in NELP-VI

▬ Excellent results 48 discoveries in previous NELP rounds Discoveries by Reliance, Cairn, GSPC etc.

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► Build Refining capacity

● Some of the new refineries are coming up in

▬ Jamnagar – 27.0 mmtpa (Reliance)

▬ Vadinar – 10.5 mmtpa (Essar)

▬ Bina – 6.0 mmtpa (BPCL)

▬ Bhatinda – 9.0 mmtpa (HPCL)

▬ Paradip – 15.0 mmtpa (IOC)

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► Invest in following:

● LNG sourcing and related infrastructure

▬ Stress on gas-based energy resource

● Cross-country pipelines

▬ Options include Iran, Turkmenistan, Myanmar

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Qatar, Oman

Iran

Yemen

Turkmenistan

Malaysia, IndonesiaAustralia

Cochin

Delhi

Dahej

GAS IMPORT OPTIONSGAS IMPORT OPTIONS

Gas Pipeline Import

LNG Import

Myanmar

LNG imports would supplement

gas pipeline imports and help in

development of pipeline grid


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► Invest in following:

● LNG sourcing and related infrastructure

▬ Stress on gas-based energy resource

● Cross-country pipelines

● Non-conventional energy sources

▬ Tar sands, heavy oils, oil shales etc.

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► Expand overseas acquisition

● Additional empowerment

▬ Acquisition of Sakhalin, Sudan, Myanmar assets

● Current scenario necessitates different strategy

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► Global Scenario


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Global Scenario

►World Population

Asia – 50%

Source: McKinsey

0

1

2

3

4

5

6

7

8

Year2002 2025

6.3 Asia – 50%

7.9

6.3

0.8

0.8

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Global Scenario

India is one of the key players of Emerging AsiaSource: McKinsey

0

20

40

60

80

100

120

2002 2025

Year

US

$ t

rilli

on

► World Economy

47

113

Asia – 48%

47

32

34

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Global Scenario

►World Energy needs

02000400060008000

1000012000140001600018000

2002 2025

Year

MTO

E

10300

10300

2680

3145

16125

Asia – 46%

Source: McKinsey

Oil & Gas responsible for 64% of increased consumption

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“Easy Oil” over

►Rising f&d costs; last ten year average $7.44/boe as against $11.37/boe in 2005

►Reduction in discoveries in the last few years, the average size of new discoveries around the world has declined three-fold to about 22 mmboe

►Exploration outlays on decline, E&P spending directed towards existing producing wells rather than exploration thru drilling new wells

0

2

4

6

8

10

12

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

$/B

OE

Low hanging fruits already plucked, new reserves are in difficult

logistics, unconventional plays, adverse fiscal regimes, politically

unstable geographies

Worldwide Fully-Loaded F&D costs (55 Independents)

($/BOE)

10-Yr Avg = $7.44

0

5

10

15

20

25

30

35

40

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

% E

&D

Out

lays

for E

xplo

ratio

n

Exploration Outlays as a Percentage of Worldwide E&D Spending (Independents)

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Oil & gas producing and delivery systems are stretched

Supply Side measures key to solve the energy related

issues

► Global Refining Capacity is stretched

► Little surplus capacity in major oil producing nations

► Geopolitics, accidents and weather related incidents resulting in supply disruptions

► Futures markets indicate higher prices

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Reserve & Production Growth

Negligible growth in reservesIncreased difficulty in finding new reserves

Production growth exceeded growth in oil & gas reserves accretion

Source: BP Statistical Review 2006

2200

2220

2240

2260

2280

2300

2320

2340

2360

2380

2001 2002 2003 2004 2005

Billio

n B

OE

108

110

112

114

116

118

120

122

124

126

128

MM

BO

EP

D

Total Reserves - MMBOE Total Production - MMBOEPD

R/P ratio:Oil 42 yearsGas 70 years

R/P ratio:Oil 42 yearsGas 70 years

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2001 2002 2003 2004 2005

Bill

ion

bb

ls o

r T

CF

Oil Reserves Gas Reserves

CAGR Oil 1.29%

CAGR Gas 0.8%

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Skewed Distribution of oil reserves

Distribution of proved oil reservesPercentage

Source: BP Statistical Review of World Energy 2006

0

10

20

30

40

50

60

70

Middle EastEurope andEurasia

Africa S & Cent.America

North AmericaAsia Pacific

1985 1995 2005

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Skewed Distribution of gas reserves

Distribution of proved gas reservesPercentage

Source: BP Statistical Review of World Energy 2006

0

10

20

30

40

50

MiddleEast

Europeand

Eurasia

Africa S & Cent.America

NorthAmerica

Asia Pacific

1985 1995 2005

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Summary

► Demand would continue to grow

► Supplies would be stretched

► Fierce competition

► Oil prices would remain high

● Fewer and smaller discoveries

● Low-hanging fruits gone

● Geo-political issues - skewed reserve distribution

► Meeting demand is a challenge

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► Global Scenario


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Issues for India in International Business

Issues impacting International Business scenario

► Branding

► Political muscle

► Technology

► Company culture

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Using our strength to our advantage

► Emerging India as a part of BRIC countries

● Leverage help to enter Indian market

► Large pool of skilled human resources which can be leveraged to

● Bag projects

● collaborative research in universities; helping train human resources

● technical BPOs contributing to on the job training

Convert Threat to Opportunity

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Using our strength to our advantage

► Target countries with good diplomatic relations or where other major countries refuse to engage themselves

► Collaborative effort with other companies

► strategic fit

Convert Threat to Opportunity

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Global Opportunities for India

► Focus on exploration; not on discovered properties

► Focus on non-conventional energy sources

● Heavy oil, Tar sands, Coal-bed-methane, Gas hydrates, Bio-diesel

● Biofuels can be a part of CSR

► Use of cutting edge technologies/ processes

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Ground Realities

► Do not spread resources too thin

► Image of the company on long term basis – speed of working/ decision making

► Understand international power play

► Corporate Social Responsibility

► Deal to be commercially driven – diplomacy only a sweetener

Thank YouThank You

Growth is Life

Reliance Industries Limited

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