SCOPE OF JOB Financial Appraisal of Marketing Installations Resitement Project at Visakhapatnam. 1. Introduction Hindustan Petroleum Corporation Ltd. (“HPCL” or “Company”) is a ‘Navaratna’ PSU and on of the largest oil refining and marketing company in India. The company is presently operating a marketing terminal , with 90000 kilolitre storage capacity of POL products and a LPG Plant with 4400 metric tonnes of LPG storage with bottling facilities at Malkapuram, Vizag. It proposes to shift the Terminals and LPG storage and bottling facilities to plots of land leased from VPT, which are about 3 km from existing location and also enchance the capacity of this new terminals (hereinafter referred to as (“Project”). 2. Detailed Scope of Services To carry out the financial appraisal of the project as described in the pre project report enclosed and the Financial appraisal shall consist of :- 2.1 Review of Technical Feasibility Report The Financial Advisor will review the Technical Feasibility Report prepared by the Technical Consultant/Company from the point of view of financial feasibility of the project. 2.2 Preparation of Detailed Financial Model The Financial Advisor will prepare a financial model proposed project to assess the project return. The financial model will be prepared based on data be furnished by the HPCL which shall be validated by the financial advisor. HPCL will provide the following data : Details of Capital expenditure including the breakup of foreign and domestic costs. Phasing of expenditure over the project execution period. Sourcing of petroleum products. Operating expenditure over the life of the project. Revenue estimates Financial Advisor to work out Working out the optimum capital structure considering the impact analysis of same on M/s HPCL. Detailed financial analysis of the project under various scenarios of capital expenditure, capital structure, revenue generation impact and financial alternatives. The financial analysis would result in the determination of the key profitability indicators viz. Project IRR, DSCR etc. A detailed computer generated financial model would be developed to represent the base case and for further financial and operative sensitivities as required.
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SCOPE OF JOB
Financial Appraisal of Marketing Installations Resitement Project at Visakhapatnam. 1. Introduction Hindustan Petroleum Corporation Ltd. (“HPCL” or “Co mpany”) is a ‘Navaratna’ PSU and on of the largest oil refining and marketing company in India. The company is presently operating a marketing terminal , with 90000 kilolitre storage capacity of POL products and a LPG Plant with 4400 metric tonnes of LPG storage with bottling facilities at Malkapuram, Vizag. It proposes to shift the Terminals and LPG storage and bottling facilities to plots of land leased from VPT, which are about 3 km from existing location and also enchance the capacity of this new terminals (hereinafter referred to as (“Project”). 2. Detailed Scope of Services To carry out the financial appraisal of the project as described in the pre project report enclosed and the Financial appraisal shall consist of :- 2.1 Review of Technical Feasibility Report The Financial Advisor will review the Technical Feasibility Report prepared by the Technical Consultant/Company from the point of view of financial feasibility of the project. 2.2 Preparation of Detailed Financial Model The Financial Advisor will prepare a financial model proposed project to assess the project return. The financial model will be prepared based on data be furnished by the HPCL which shall be validated by the financial advisor. HPCL will provide the following data :
� Details of Capital expenditure including the breakup of foreign and domestic costs. � Phasing of expenditure over the project execution period. � Sourcing of petroleum products. � Operating expenditure over the life of the project. � Revenue estimates Financial Advisor to work out � Working out the optimum capital structure considering the impact analysis of same on
M/s HPCL. � Detailed financial analysis of the project under various scenarios of capital expenditure,
capital structure, revenue generation impact and financial alternatives. The financial analysis would result in the determination of the key profitability indicators viz. Project IRR, DSCR etc.
A detailed computer generated financial model would be developed to represent the base case and for further financial and operative sensitivities as required.
2.3 Sensitivity Analysis A sensitivity analysis needs to be performed to assess the sensitivity of the base case projections to varying levels of Capital Cost, Operating Cost, Delay in Implementation and other relevant operating & financial variables to determine the financial viability of the project under stress conditions. 2.4 Risk Analysis and mitigation Risk analysis should involve identification of the various risks associated with the project such as operational risk, Technological risk and market risk etc. The appraisal would ascertain if all the risks have been identified and steps have been taken for their allocation and mitigation through various contractual obligations and insurance. 2.5 Preparation of Financial Appraisal Report The above activities should culminate in the preparation of a comprehensive Financial Appraisal Report, which would incorporate the Financial Advisor’s analysis on the techno-economic and commercial viability aspects of the projects, based on the information provided by the Company / its technical consultant. 2.6 The duties and responsibilities of the Financial Advisor shall be limited above and shall not include advice on tax, legal, accountancy or on technical matters. 3. Deliverables, Inputs and Time Frame The deliverables of this assignment are as under-
1. Draft Financial Appraisal incorporating the scope of work outlines in Clause 2 above 2. Final Financial Appraisal Report after incorporating the any comments/feedback from
HPCL. 3. All deliverables shall be submitted in two hard copies and one soft copy in CD.
The draft financial appraisal report to be submitted within three weeks from the date of receipt of LOI / Purchase Order and the required information needs to be collected from HPCL within the first one week. The final financial appraisal report shall be submitted within one week from the date of receipt of comments on the draft report from the company. HPCL shall take one week for commenting on the draft report. The total duration shall be 5 weeks from the Date of LOI/PO 4. Remuneration 4.1Appraisal Fee a) 75% of the appraisal fee shall be payable to the financial advisor on the submission of a
Draft Appraisal Report. b) Balance 25% of the appraisal fee shall be payable to the Financial Advisor on submission
of Final Appraisal Report.
The fees quoted shall be exclusive of service tax. Service Tax shall be indicated separately in the quote for evaluation purpose. 5. Validity Period The terms and conditions of offer shall be valid for acceptance by HPCL for a period of 90 working days from the date of this offer letter. ALSO PLEASE REFER TO GENERAL TERMS AND CONDITIONS ENCLOSED.
PRE FEASIBILITY REPORT (Draft DT 15/05/2008) Integrated Marketing facilities at Vizag Resitement of Marketing Facilities (POL & LPG) to Plot Opp. INS. Dega (Plot 2&5) of VPT and Black Oil Bunkering Facility to AA Steel area.
Submitted by Project Team Visakha Resitement Project
CONTENTS
Copyright & Confidentiality
Executive Summary
1. Genesis of the project idea.
a) Operational activity at existing Visakha terminal A & B and LPG Bottling Plant.
b) Project Objectives
2. Existing scenario
a) Marketing Facilities surroundings.
b) Existing Infrastructure
b) Safety and core technology regarding safety
3. System Constraints at Visakha Terminals and Bottling Plant.
4. Proposed Project brief.
4.1 Facilities proposed at Plot Opp. INS Dega (Plot 2&5) of VPT
4.2 Operational Philosophy of terminal and Bottling Plant
4.3 Facilities proposed at Black Oil Bunkering facility in AA Steel area( Plot 3).
4.4 Operational Philosophy Black Oil bunkering Facility.
5. Expected benefits from the project
6. Implementation plan:
a) Approach to implementation
(I) LSTK
(II) Proposed Alternative
b) Organizational resources required
c) Manpower
d) Plant/equipment/materials
e) Implementation schedule
7. Financial aspects of the project
8. Project Estimates
9. Project Schedule
COPYRIGHT & CONFIDENTIALITY
This work contains information and data of classified nature drawn from the business
records of Hindustan Petroleum Corporation Limited. In light of the above, all
information contained in this document is confidential & property of Hindustan
Petroleum Corporation Limited – Marketing Projects Division. It is provided for the
specific & limited purpose of inclusion in this report only. It shall not be used, copied,
shared or reproduced in any form without the written consent of Hindustan Petroleum
Corporation Limited.
Executive Summary
Hindustan Petroleum Corporation Limited’s Vision is to be world-class company known
for caring and delighting customers with quality products and innovative services. The
Corporation will be a model of excellence in meeting environmental, health and
safety norms. In order to realize this Vision, Corporation will be focusing on
enhancement of productivity, quality and caring for environmental protection.
HPCL has two port based refineries at Mumbai and Visakhapatnam. HPCL has plans to
modernize Visakha refinery and marketing infrastructure in line with its Vision.
Existing marketing infrastructure at Visakha, consisting of LPG Plant and POL Marketing
Facilities adjoining the Visakha refinery, are amongst the oldest in operation in India.
These facilities have been catering to needs of a refinery-based distribution network
comprising of Rail and Road loading facilities. Over a period of 50 years the refinery
capacity has increased manifolds and the products variants have almost doubled. There
has been continuous addition to the facilities within the available land to cater to the
increasing product variants and market demand, as well as to meet safety and statutory
norms, which have become more stringent over the years, to the extent possible. Now
the same has reached a stage wherein further augmentation/upgradation is not
possible. Added to this any infrastructure addition to the refinery is also hampered as
there is no space for the same in and around the refinery premises.
HPCL has committed to production and marketing of EURO IV standard products in
Automobile Fuel quality by 2010 and is also adding Delayed Coker Unit (DCU) to
improve the yield of middle distilleries. Further, Visakha refinery has plans to expand its
refining capacity to 15 MMT from current installed 7.5 MMT by 2015, on the basis of
market demand. This necessitates acquiring additional land contiguous to the existing
refinery premises. Hence the following action plan has been worked out:
1. Efforts were made to search for land suitable for resitement of the two
marketing terminals and LPG Plant on the outskirts of Visakh. However, it
became apparent that such land would not have the benefit of proximity to the
Port as well as Refinery , and hence would need a network of pipelines for
connectivity to Port, Refinery , LPG Cavern storage , VVSPL and GAIL’s LPG
Pipeline , which would make the project unviable.
All vacant land in and around the refinery is under the control of VPT. Hence VPT
was approached for allotting approx.400 acres of land suitable for refinery
expansion as well as setting up new Marketing terminals and LPG Plant.
2. Additional VPT land spread in four major plots (Plot opposite to INS Dega, Plot
adjacent to INS Dega, Andhra steel area and Land adjacent ATP area of refinery)
area was identified close to the refinery to put up required facilities of both
refinery and marketing. The four plots are shown in drawing in Annexure I.
3. Marketing storage Facilities for white oils, LPG and white oil Rail/Road Loading,
currently adjacent to refinery are proposed to be shifted to plot Opp. INS Dega .
Existing Tank Wagon Gantry used for POL Rail loading will be converted to load
black oils and LSHS wagon loading facilities will be added.
4. The black oil bunkering facilities and Bitumen currently at Terminal B are
proposed to be shifted to Andhra Steel area of VPT. Black oil tankages are
planned at this area.
5. Refinery requires the land currently occupied by Terminal B, LPG Plant and
Terminal A in that order of priority to put up DHU, DCU & ETP and for purpose of
refinery expansion.
At Plot Opp. INS Dega it is proposed to provide all required operating cum office
facilities in addition to large tankage up-gradation to cater to the ever-increasing
volumes of HPCL marketing divisions. The white oil tankages are planned to take care
of throughput upto 2016 including OMC transfers. Black oil tankages have been planned
on the basis of sales projections of I & C dept without OMC transfers.
The Plot opp. INS Dega(Plot 2) shall also help us to meet the statutory requirements to
provide the facilities to comply with latest OISD and Explosives norms. The facilities
shall be re-sited from the present location in view of cramped and narrow entry and exit
available and large scale flooding every year at the current premises.
New Plot opp. INS Dega(Plot 2) has been selected for marketing facilities as the same is
away from the refinery for safety reasons but close enough from operations point of
view.
It is proposed to shift Black oil and Asphalt Facilities located in Terminal B for T/T
loading operations, Bunkering and Asphalt Bulk/ drum filling to AA steel area (Plot 5) on
priority as the land presently occupied by Terminal B is required by Mar 2010 for
putting the DHU of refinery.
The project facilities are being planned to receive product from VPT Jetties as well as
from our refinery. The marketing facilities shall also be capable to support VVSPL
pumping operations of HSD product, support along with APT Tankage of MS pumping
operation of MS and tanker loading operation in extreme exigency. Also product
transfers shall be done to other marketing company from this terminal, which is
presently being undertaken by refinery through pipeline transfer, Rail and Road loading.
The plot will have LPG facilities adjacent to the Terminal as an independent unit to
receive product from refinery/Cavern/LPG jetty and undertake T/W loading, T/T
loading, and bottling of LPG in cylinders and dispatch.
In view of the tight time frame targets project will be carried out on fast tracking basis.
The tabletop estimate of the cost of the project is 575 Crores.
The project is targeted to be mechanically completed within 18 months from the date
of handing over the land or statutory MOEF approval, which ever is later. MOEF
approvals are being obtained as part of Refinery DHT and refinery expansion project.
Keeping in view the complexity of the project, meticulous planning is required to
optimize the scope, time frame, and cost and identify project finance. For this purpose
detailed technical feasibility study and financial appraisal are also being carried out.
To sum up, it is proposed to Construct Two Major Oil Installations at Visakh
in the vicinity of the Refinery to Resite the Existing Oil Installations:
1. Black Oil handling facilities on a Plot of 34 acres
2. White Oil / LPG handling facilities on a Plot of 107 acres
a) Operational activity at Visakha Marketing Facilities:
The existing oil Marketing Facilities at Malkapuram, Visakhapatnam city was established
in 1957. It is located in the busy southern part of Visakhapatnam, which retains its old
mofussil ambience even today. The inputs for the Marketing Facilities are primarily
through pipeline running from Visakha refinery located next door. The connectivity with
Visakhapatnam Port is also well established to facilitate the occasional coastal inputs
and also regular bunkering. The POL Marketing Facilities of IOC and BPC are located in
the close vicinity. IOCL’s LPG bottling plant is located at Parwada, 30 km away from
Visakhapatnam and BPCL is taking assistance from private bottlers of M/s. SUPERGAS
(SHV Energy), Gurrapalem, Pendurthy situated at 30 kms from Visakhapatnam. Bulk
LPG Tank truck loading for BPC and IOC is taken up from EIPL / LPG Plant as per the
product availability and Industry requirements ( Key Plan enclosed).
HPCL Marketing facilities are located in four separate locations i.e. Terminal-A,
Terminal-B, POL /LPG gantry areas and LPG bottling plant located adjacent to Terminal
A.
The facilities at Terminal A include tankage of 60000 KL, pump house for tank wagon
loadings and TT loading facility (12 bays gantry). Products handled are MS, LAN, HSD,
MTO, SKO, FO, LDO AND HFHSD .
The facilities at Terminal B include tankage of 29500kl, 8 bay black oil tank truck
loading gantry, 6 bay bulk asphalt loading truck gantry, Products handled are FO, LDO,
LSHS, JBO and Bitumen. Terminal –B is having 72 conventional T/W loading (44
BTPN ) gantry in two spurs for LSHS/FO/LDO and pipe line net work for bunkering of
FO & LDO at OR1/OR2/Bunkering jetty. This T/W and bunkering facilities at Terminal B
are not used for long time as the same are carried out from Terminal A due to
economics of operation.
The LPG bottling Plant and LPG Rail loading facilities located at Malkapuram consist of
the following:
• Bottling plant in an area of 20 acres having of 3 Nos 1400 MT storage spheres,
2 Nos. 100 MT LPG / AUTO LPG bullets, and 2 Nos. 24 head Carousel for LPG
bottling with allied facilities.
• The LPG Rail loading facility is adjacent to the POL rail loading gantry and can
accommodate one full rack at a time in two half spurs. Product is pumped from
refinery.
• The plant receives LPG from refinery through 12” pipeline and also from costal/
import facilities. This is also currently connected to the Cavern storage
(60,000MT).
• Auto LPG is received in to 2 x 100 MT LPG Bullet.
• The marketing and evacuation responsibility of LPG from cavern rests with us.
• Propylene loading in Road tankers is carried out using refinery storage and
pumps.
• The dispatch of bulk from refinery and cavern is also carried out by pumping to
GAIL Booster station at EXIM Park for onward distribution to GAIL-VSPL
pipeline.
With the development of various facilities over the years, the Marketing terminal A
located in 15 acres, POL gantry located in 11.15 acres, black oil Marketing Facilities
located in 14 acres and LPG bottling plant located in 20 acres have become highly
congested and scope for future upgradation/ expansion and automation of marketing
facilities is found to be next to impossible. Also, refinery expansion is not possible
without decongesting the refinery area by re-siting marketing facilities.
Over the years, the surrounding area in Malkapuram has become thickly populated. This
coupled with narrow roads has made the operation of Oil Marketing Facilities in this
area unsafe, with large number of trucks and LPG road tankers jamming the approach
road to the extent that the disaster management efforts during mock drills are
becoming difficult.
Over and above the Marketing Facilities are affected by floods every monsoon. There
have been disruptions in operations for a few days every year due to flooding. This has
also resulted in the destruction of documents, furniture and machinery.
b) Project Objectives:
The following shall be the major Objectives of setting up of New marketing
infrastructure.
1. Shifting of Existing Marketing facilities (Both POL and LPG) to accommodate
Refinery new process units required due to product up gradation to meet EURO
IV norms by year 2010. Expansion of refining capacity to 15 MMTPA by 2015
shall be possible only if the entire marketing facilities are relocated.
2. Safer and environment friendly operations of the Marketing Facilities.
3. Increase in the storage and dispatch capacities of marketing facilities to cater
to the increasing through put of the marketing group and increasing the
product variants.
4. Making use of Plot opp. INS Dega (Plot 2) that has combined advantage of
being away from refinery in safety point of view but remaining close enough