Reliance Industries Limited Challenges, Opportunities, Strategies & New Paradigms.

Reliance Industries Limited

Challenges, Opportunities, Strategies

& New Paradigms

2

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.

3

Outline

Emerging

Global Trends Energy Imperatives for India

Reliance

Response

Emerging Asia – Key Driver of World Demand

Energy Producing and Delivery Systems are stretched globally

“Easy Oil” over

Heightened competition

Sustainable Development Gaining emphasis

Technology may hold answers for potential solutions

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence

E&P in India and Overseas

East West Pipeline

Refining in Jamnagar

Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal

4

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




5

Key driver of world’s energy demand growth – Emerging Asia

India is one of the key players of Emerging Asia

World Economy expected to treble from US$ 47 Tn in 2002 to 113

Tn by 2025.

Emerging Asia accounts for 48% of the increase

The world’s population is set to increase from 6.3 Billion to about

7.9 Billion


World’s energy needs set to increase from 10, 300 to 16,125

MTOE


Oil and Gas to account for 64% of the increase in

consumption

6

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




7

Energy producing and delivery systems are stretched

Supply Side measures are a key to solve the energy

related issues

Little surplus capacity in major oil producing nations Geopolitics, accidents and weather related incidents resulting in

supply disruptions Global Refining Capacity is stretched Futures markets indicate higher prices Resultant high oil and Gas prices impact the entire energy space

8

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




9

“Easy Oil” over

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

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

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

Low hanging fruits already plucked, new reserves are in difficult

logistics, unconventional plays, adverse fiscal regimes, politically

unstable geographies

10

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




11


National Oil Companies (NOC) are aggressively increasing their share of reserves worldwide, resulting in less share for IOCs

Additionally, competition from smaller oil companies leading to higher acquisition costs

NOCs striving for national supply-security, easily outbid IOCs

acquiring solely on “hurdle rates”

National Oil Company International Reserves in mmboe

1998 2004

Petronas, Malaysia 2000 6288

Statoil, Norway 700 888

Petrobras, Brazil 298 1251

CNOOC, China - 647

ONGC, India - 1459

12

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




13

Sustainable development gaining emphasis

Global warming will have serious consequences of

rising sea levels, species extinction, epidemic disease,

drought and severe weather events.

– In 50 years, greenhouse emissions must be reduced by 60

percent.

In 5 to 15 years carbon exposure management could

create or destroy shareholder value.

Carbon regulation, will raise costs across the

globe

Carbon Trading has become a reality A lower carbon footprint should be woven in into every

greenfield project

14

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




15

Need for new energy pathways

Technological innovations key to commercially tap “hard

oil”/ “unconventional oil” and other abundant energy

sources

R/P ratio for oil and gas is declining, currently close to 40 years for oil and 65 years for gas

Iran and Russia contributed to increased reserves, which are difficult to access

R/P for Oil

0102030405060708090

NorthAmerica

S. & Cent.America

Europe &Eurasia

Middle East Africa Asia Pacific

R/P for Gas

0

50

100

150

200

250

300

NorthAmerica

S. & Cent.America

Europe &Eurasia

Middle East Africa Asia Pacific

16

Advanced technological solutions

New technologies expanding the existing frontiers

Integrated bitumen processing for syn-crude generation

SAGD (Steam Assisted Gravity Drainage) for tar sands

Latest technology in deepwater drilling and drilling tools

Technology to reduce exploration risks

Gas hydrate production

Biomass, Coal to Liquid, Integrated Gasification Combined

Cycle etc.

17

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




18

Energy Challenges

India – the fifth largest energy consumer

Energy demand estimated to grow by 40% in 5 years

Widening Demand-Supply Gap

Energy volatility affects economy considerably

Funding of US$ 225 Bn by 2012; Government ?? Any takers ?

It is not just energy….It is “affordable energy”

19

Energy Challenges

Industries faced an average of 17 power shutdowns a month (2005)

Investment in transmission & distribution upto 2012 is US$ 40 Bn

Nuclear Power is long term and needs support

Electricity generation must go up by 90 GW in 7 years. Equal to wiring up the entire United Kingdom.

The new power infrastructure estimated at US$ 170 Bn

20

Energy Resources Gap*

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

21

Coal

Supply – Demand gap expected to be 100 million tonnes in 2012

Govt monopoly in coal production – short of targets Commitment to power plants down to 89% from 96% two years

ago Needs US$ 10-15 Bn for upgradation / new mines Opex is 50% higher – needs newer technologies

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

Major investments for infrastructure – US$ 45 - 50 Bn

Market related coal price

22

Oil & Gas

32 33

4560

96110

195

368

0

50

100

150

200

250

300

350

400

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

million

ton

nes

Production

Demand

2472

4273 4979 4979

5332

8158

11053

13807

0

2000

4000

6000

8000

10000

12000

14000

16000

2001-02 2007-08 2011-12 2024-25

MM

SC

FD

Supply

Demand

Oil Projections Natural Gas Projections

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

Demand supply gap for Gas may climb up from ~50% to over 60%

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

Demand and Supply Side measures to create Interim

Petroleum Security

23

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




24

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




25

Emerging Imperatives for India

Strengthen Energy Security

Accelerate domestic E&P

Policy Measures for supply/ demand management

Strengthen Delivery Infrastructure

Investments required in Refining / Power /Pipelines

Thrust on Renewable /Alternate Fuels

Coal /Nuclear Power / Bio Fuels / Gas hydrates

Use of new technologies

26

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




27

Textiles Polyester PlasticsPetroleum Downstream

PetroleumUpstream

Reliance – Business Segments

Vertical integration, participation in sectors with strong growth potential and international competitiveness

1970s 1980s 1990s 2000s

RetailGasPipelines

Infrastructure

28

Consistently Accelerating Growth

( US $ million)

India’s first and only private sector company to feature in the Fortune Global 500 list

10

years

CAGR

28%

18% 29%

32%

FY 2005 FY 2006

Revenue

s 16,72519,97

6

Net Profit 1,7312,03

3

5 years

29

Reliance Philosophy

• Invest in businesses for future

• World scale

• Best technology

• Best people

• Integration

• Superior Project Execution

• What is good for India is good for Reliance

Reliance benchmarks itself with global best practices in all aspects of its operations

30

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




31

Reliance Vision

India Energy Imperatives Reliance Initiatives

Strengthen Energy Security

~ Accelerate domestic E&P

~ Policy Measures for overseas Investment

Strengthen Delivery Infrastructure

~Investments required in Refining / Power /Pipelines

Thrust on Renewable /Alternate Fuels

~ Coal /Nuclear Power / Bio Fuels

Sustainable development

Expanding Upstream in India & Abroad

~ Extensive E&P in India

~ International Acquisitions

Expanding Delivery Infrastructure

~ Refining / Pipelines / Retail

Energy Convergence

Renewable /Alternate Fuels

Managing Carbon exposure

32

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal

Nuclear



“Easy Oil” over




33

Extensive Exploration Acreage in India

A diversified and balanced portfolio

Producing Assets – 30% Interest in 90,000 BOEPD Panna-Mukta & Tapti fields

Exploration Blocks - 34 blocks in India

Exploration Area - about 350,000 sq.km, Predominantly in deepwater

Coal Bed Methane - 5 blocks (4,000 sq.km.)

Reliance holds about 10% of country’s sedimentary basin and has the largest private sector exploration acreage

34

International Acquisitions – Current positions

OMAN

YEMEN

COLOMBIA

21,140 square km

2,464 square km

15,718 square km

East Timor

Sunri

se

Bayu - Undan

JPDA

Area

TIMOR LESTE

2,380 square km

35

International Acquisitions – Vision

2020

One of Top 10 Global Companies (pvt +

govt.)

Production :

Overseas Reserves :

~250,000 bopd

~1,500 mm bbl

2015

2006

Production (bopd) :

Prod Growth (CAGR) :

Overseas Reserves :

~500,000

~15%

~3 bn bbl

Near Term Aspirations

Top Pvt. Oil Company of

Asia

One of Top 10 Global Pvt. Oil Companies

36

Largest Gas Discovery in the World in 2002 -Initial

estimates of the gas in place is upward of 14 tcf

Gas Discovery established India as a world class

destination

Expected to be on production in 2008 which would

double India’s Gas Production

Proposed East West Pipeline to evacuate Gas from KG

basin is amongst the longest cross country pipelines

in India

Proposed Pipeline will link key demand and supply

centres

Extensive City Distribution networks planned for

domestic, industrial and commercial sectors

Gas Chain strategy - India

Gas Find ushering in a supply coordinated demand growth story in India

37

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




38

Proposed Refinery at Jamangar

A 580,000 barrels per day stand alone refinery

A 0.9 million tonnes per annum Polypropylene plant

‘Intelligent’ repeat design to optimize project cost and

construction schedule

Project expected to be commissioned in 2008

39

Jamnagar: Refining Hub of the World

Source: Oil and Gas Journal458,000

493,500

495,000

520,000

557,000

580,000

605,000

660,000

817,000

940,000

650,000

0 200,000 400,000 600,000 800,000 1,000,000

Shell Eastern, Singapore

Exxon Mobil, Baton Rouge, USA

Hovensa LLC, Virgin Islands

S-Oil Corp, South Korea

Exxon Mobil, Baytow n, USA

RPL's Proposed Refinery

Exxon Mobil, Singapore

LG -Caltex, South Korea

Reliance Industries, India

SK Corp, South Korea

Paraguana Refining, Venezuela

BPD

RIL – RPL combine to be the largest

refinery complex in the world

RIL Group, India 1,240,000

40

A World Class Asset

One of the highest complexity index of more than 14

Process more than 60 crude varieties, with API

ranging from 16-51

Diversified crude sourcing strategy

Crude API Range Region

Light Crudes 33 - 51 Middle East Medium Crudes 22 - 33 Middle East Heavy Crudes < 22 West Africa / Latin America / ME

Growing light - heavy crude differentials offer promise for complex refineries

41

Superior Performance

Benchmarked in the top quartile, in all performance parameters

by Solomon Associates, in 2003

Adjudged the “Most Energy Efficient Refinery” by Shell Global

Solutions in 2004

First in Asia to be awarded the “International Refiner of the

Year” in 2005, by the Hart’s World Refining and Fuels

Conference

Globally acclaimed performance

42

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




43

Nationwide network of over 2000 outlets covering highways, cities and rural areas under implementation

Supply chain covering road, rail and ocean transport designed to minimize cost of placement

Entire network connected through “Broadband” enabling operational efficiency and delivery of superior customer value

A Reliance City Outlet

Reliance – Retail Marketing Network

State-of-the-art, pan India retail network with strong value propositions

44

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




45

Energy Convergence Solutions

Fuel Cells and Hydrogen technology can transform

energy space

Current usage restricted due to prohibitive costs

Large scale commercialization of fuel cells leveraging

– Extensive city gas distribution network

– Access to natural gas

– Partnerships with technology leaders

One stop solution for energy needs of electricity , cooling , heating and automotive fuels

46

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




47

Arid Land with poor water resources, poor biomass and

biodiversity and a Fragile mangrove based coastal

ecosystem

Planted 2.2 million trees representing 200 species over

2,000 acres for horticulture and agro forestry

Represents Asia’s largest Mango plantation – 2.5

million mangoes or about 450 MT

Mega Project implementation with virtually no

ecological disturbance

Embrace ecology and environment

Jamnagar experience to be leveraged for future projects

48

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




49

Bio-diesel Initiatives

Grow energy in agriculture

Integrate with CBM wherever possible

Focus on Jatropha and source better yielding varieties from

within and outside the country

Undertake large-scale production of high yield seeds

Achieve a capacity of 100,000 tonnes of biodiesel production

by 2011

Convergence of agriculture and energy

50

Outline

Emerging


Reliance

Response

Energy Challenges

Emerging

Imperatives

Reliance

Goal Congruence


East West Pipeline


Petroleum Retailing

Energy Convergence

Carbon Footprint

Bio Diesel

Coal



“Easy Oil” over




51

Coal Initiative

Coal accounts for a large portion of India’s Commercial Energy Consumption

Coal has become attractive on account of high oil and Gas Prices

New Coal Technologies address the related issues of high carbon emissions

Reliance to acquire a billion tonne of reserves

Reliance would change the rules of the game in energy space

Thank YouThank You

Growth is Life

Reliance Industries Limited Challenges, Opportunities, Strategies & New Paradigms.

Documents

increase worlds energy

mtoe emerging asia accounts

forwardlooking statements

increase oil

forward looking statements

easy oil

consumption slide

east west pipeline refining