Revised Detailed Feasibility Report Paradip Refinery Project

1. Background 1.1 Govt. of India accorded approval for setting up of a 9 MMTPA grass-roots refinery at Abhayachandrapur and adjoining villages (near Paradip Port) in Orissa by Indian Oil Corporation in joint venture with Kuwait Petroleum Corporation (KPC) in July 98 at an estimated cost of Rs.8270 Crore (based on May 98 prices). 1.2 In Dec'98 Govt. of Orissa granted exemption/deferment of Sales Tax on sale of finished products from Paradip Refinery for a period of 11 years from the date of commercial production. 1.3 In view of continuing uncertainties in respect of participation of KPC and to avoid delay in implementation, the Navratna Board of Directors in Aug '99 approved the implementation of the project by IOC on its own at an estimated cost of Rs.8312 crore (based on Aug '99 prices) taking into account the Sales Tax incentives granted by Orissa Govt. Subsequently, Orissa Govt. withdrew the incentives in February, 2000 thus affecting viability of the project. 1.4 In order to improve the viability of the Project, the refinery configuration was renewed with a view to reduce production of surplus products (mainly HSD) and to reduce capital cost. With the revised configuration the project cost based on October '02 prices was estimated at Rs.7,433 crore. The present configuration and Product Pattern is given in Annexure - 1 1.5 Restoration of Sales Tax Incentives by Orissa Govt. - Memorandum of Understanding (MoU) 1.5.1 In a meeting held on 30.7.2003 between IOC, MoP & NG, Ministry of Finance and Orissa Govt., it was indicated that considering the supply/demand balance projections of petroleum products in the country, IOC would like to complete the project by the end of 11th Five Year Plan i.e. 2001-012, subject to restoration of incentives already granted along with restoration of Sales Tax exemption/deferment for 11 years by Orissa Govt. The Orissa Govt. expressed it willingness to consider IOC's proposal provided IOCL agrees to complete the project much before the terminal year of 11the Five-year plan. 1.5.2 Project Evaluation Committee (PEC) of the Board in its meeting held on 18.8.2003 decided that it would be prudent to position the Paradip Refinery in the later half of 11th Five Year Plan subject to restoration of 100% Sales Tax incentives for 11 years by Orissa Govt. 1.5.3 MoP&NG was accordingly informed on 19.8.2003 that IOC would endeavour to complete the project by 2009-10 subject to: Restoration of 100% Sales Tax concessions; Removal of time cap on entry tax exemption on crude oil; and Signing of MoU to ensure irrevocability of incentives by Orissa Govt.

1.5.4 Accordingly, and MoU was finalized with Orissa Govt. and signed on 16.2.04. This was informed to the Board of Directors in its meeting held on 26.02.2004. 1.5.5 Salient Features of MoU:

Package of incentives given by the Orissa Government as per MoU includes deferment of Sales Tax on products of the refinery for 11 years from the commencement of commercial production and exemption of Entry Tax on crude oil. The incentives granted under the MoU to remain unaffected and undiminished by any change in the industrial or tax policy(ies) of the State of Orissa. The incentives will also be available to linked projects, viz., Marketing Terminal and Paradip - Rourkela Product Pipeline Projects. IOC's obligations: o IOC will initiate all necessary steps to expedite implementation of the Project to complete the construction of the refinery in the year 2009-10. However, if favorable market conditions in the country allowing higher level of domestic sale of products from the Refinery as compared to earlier estimates emerge, IOC will endeavor to complete the project in 2008-09. o In the first phase of implementation of the Project, IOC will install an SPM system with submarine pipelines and a Crude Oil Terminal at Paradip. This facility will also be utilized to supply crude oil to Barauni & Haldia Refineries of IOC for which a crude oil pipeline from Paradip to Haldia will be laid.

1.5.6 Orissa Govt. have issued the Notifications for the incentives granted under MoU, as detailed below: Exemption of Central Sales Tax for product sales in other states for 30 years from date of commercial production. Exemption of Electricity Duty in respect of power to be generated in the captive power plant for a period of 5 years Exemption of Sales Tax on purchase of material, machinery & equipment for 11 years from date of commercial production Exemption of Works Contract Tax during construction of the refinery Exemption of Royalty on Sand during construction of the refinery Deferment of Orissa Tax for product sales in Orissa for 11 years from date of commercial production Exemption of entry tax on crude oil Exemption of Entry tax in respect of project construction materials

2.0 Present Status of the Project 2.1 Acquisition of 3347 acres of land has been completed. 2.2 Basic design and FEED (Front End Engineering Design) for all the process units as well as for offsite & marine facilities (as per original refinery configuration) have been completed. 2.3 Infrastructure Development Works Status of various infrastructure development works is presented in Annexure - 2. 2.4 The total commitment and expenditure on the project as on date are Rs.1049.84 cr. and Rs.592.40 cr. respectively. 3.0 Review of Project Economics & Supply-Demand Scenario 3.1 Financial Analysis of the project with present configuration presented to PEC in August 2003 has been updated and furnished hereunder:

Parameter Estimated Cost, Rs. Cr. Feed & Product prices considered IRR % Base Case Increase in capital cost by 10 % Capacity utilization at 90% Increase in Capital Cost by 10% with 90% Capacity Utilization

As in Aug 03 7433 Apr 00 to Mar 03 11.03 9.41 10.61 8.97

As in Aug '04 (Note) 7822 Apr 01 to Mar 04 9.42 7.67 9.09 7.21

Note: Product customs duties as per recent revision in Aug '04 3.2 Demand-Supply Scenario of Petroleum Products 3.2.1 Demand: The demand numbers have been considered based on the X Plan document, which depicts a demand of 120.4 MMT in the year 2006-07, the terminal year of Xth plan document. Region-wise apportioning of demand has been done based on 2002-03 stat-wise PSU sales. The product-wise projected demand on All-India basis for the period 2006-07 to 2013-14 and also region-wise break-up of the demand of petroleum products are given in Annexure-3 & 4. 3.2.2 Supply: The region-wise refining capacity considering the planned expansions along with the expected commissioning of grassroots refineries is given in Annexure-5. The projected availability of petroleum products is based on 100% capacity utilization of the refineries. Regionwise refining capacity for the year 2001-12 and supply of petroleum products is given in Annexure - 6. 3.2.3 Supply - Demand Balance 3.2.3.1 The region-wise surplus/deficit position of Petroleum products (without Paradip Refinery) from the year 2006-07 to 2013-14 is furnished below: (Fig. in TMT) 06-07 09-10 10-11 11-12 12-13 13-14 East + North East (2930) (4996) (4596) (5363) (6159) (6985) West 21808 30976 30327 28515 26637 24689 North (9702) (10209)(11372)(12578)(13828)(15125) South 1024 (2659) (1748) (3116) (4535) (6006) All India 10199 13111 12611 7458 2114 (3427) From the above table, it is clear that Northern, Southern and Eastern Regions are deficit in petroleum products. However, there is a surplus situation on All India basis till the year 2012-13. Product-wise break-up of surplus deficit position of petroleum products for All India as well as Eastern region for the year 2011-12 (when the refinery world be fully operational) is given hereunder: Fig. in TMT Products Without Paradip RefineryWith Paradip Refinery All India Eastern Region All IndiaEastern Region

LPG (5314) Naphtha 4517 MS 1590 SKO/ATF 5064 HSD/LDO 2668 FO/LSHS (1864) Bitumen 216 Others 581 Total 7458

(1405) (1191) 317 (1026) (804) (649) 153 (758) (5363)

(4655) 5517 2676 5814 6483 (1691) 216 1412 15772

(746) (191) 1403 (276) 3011 (476) 153 73 2951

Indian Oil Corporation Limited Agenda for the Board Meeting to be Held on 24-09-04 Sub: Circular Resolution - Comments of the Comptroller & Auditor General (CAG) of India under Section 619(4) of the Companies Act, 1956 on the Accounts of Indian Oil Corporation Limited for the year ended 31st March 2004 and replies thereto. An agenda item by Circulation on the above subject was forwarded to members of the Board of Directors for information, which was noted. (R. Narayanan) Company Secretary The supply-demand position given in the above table indicates the following: Without Paradip Refinery, o There is deficit of approx. 5.3 MMT of petroleum products in Easter Region, however, surplus of approx.m 7.5 MMT of petroleum products on All- India basis will remain. o LPG, Naphtha, SK, HSD & FO are deficit in the Eastern Region. With Paradip Refinery, o HSD is surplus by 3.0 MMT in Easter Region. o MS is surplus by 1.4 MMT in Eastern Region. o Overall surplus of petroleum products in approx. 3.0 MMT in Eastern Region and 15.8 MMT on All India basis.

4.0 Reconfiguration Study In view of not so attractive IRR and projected surplus of fuel products, the configuration of the proposed refinery has been reviewed again. The growing demand of petrochemical products aromatics like Paraxylene in India as well as in Asian region provides an opportunity to orient the configuration towards petrochemicals. It may be mentioned here that during review of Panipat/Koyali Naphtha Cracker Project on13.12.03, PEC noted that there is a need to install two world-scale grass-roots crackers in India by the year 2010 due to huge supply/demand gap of poly-propylene and poly-ethylene as indicated by market consultant M/s Nexant Chem Systems. Accordingly, an in-house feasibility study has been carried out with the concept of an integrated refinery-cum-petrochemical complex instead of a stand-alone refinery at Paradip. 5.0 Feasibility study for Petrochemical Refinery 5.1 The study has been carried out at crude processing capacity of 9 MMTPA (as originally approved) as well as 15 MMTPA to achieve the benefits of economy of scale of single largest

crude/vacuum distillation unit. At both the capacities, petrochemical and Aromatic units have been considered with and without Naphtha Cracker. Processing of around 0.7 MMTPA surplus High Sulphur Vacuum Residue (VR) from Haldia Refinery has also been considered in the proposed refinery for value addition through Delayed Coking. In the Naphtha Cracker case, movement of surplus naphtha from Gujarat, Chennai and Haldia refineries has been considered. A Hydrotreater has been considered for hydrotreating the Atmospheric/Vacuum/Coker Gas oil. The hydrotreated gas oil is proposed to be processed in an FCC for producing propylene-rich LPG and aromatics-rich gasoline. A Continuous Catalytic Reformer Unit (CCR) on dual mode of operation viz. MS and Aromatics is also envisaged. 5.1.1 The following options have been considered for techno-economic evaluation: Alternative - 1 - 9.0 MMTPA Refinery (Single Train) CASE-1A : Refinery with Petrochemicals/Aromatic complex. CASE-1B: Refinery with Naphtha cracker and down-stream Petrochemicals/Aromatic complex.

Alternative - 2 - 15.0MMTPA Refinery (Single Train) CASE - 2A: Refinery with Petrochemicals/Aromatic Complex. CASE-2B: Refinery with Naphtha cracker and down-stream Petrochemicals/Aromatic complex.

5.1.2 Refinery/Petrochemical Complex without/Naphtha Cracker (Cases 1A & 2A) An integrated refinery-cum-petrochemical complex without naphtha cracker is based on maximization of propylene and aromatic-rich gasoline from FCCU. The down-stream petrochemical complex comprises mainly Polypropylene, LDPE, Styrene and Styrene Butadiene Rubber (SBR) units and an Aromatic complex for production of Paraxylene. 5.1.3 Refinery/Petrochemical Complex with Naphtha Cracker (Cases 1B & 2B) An integrated refinery-cum-petrochemical complex with naphtha cracker is based on maximization of propylene and aromatic-rich gasoline from FCC and high ethylene yield from naphtha cracker. The down-stream petrochemical complex comprises LDPE, HDPE. Styren and Styrene and Styrene Butadiene Rubber (SBR). MEG apart from larger capacities for Polypropylene and an Aromatic Complex for production of Paraxylene. 5.1.4 The capacity of various process units along with product pattern have been worked out (Refer Annexure 7 & 8). It can be seen that production of surplus fuel products (mainly HSD) has reduced considerably & Naphtha has been eliminated as given below: Products Stand along Refinery Configuration 7.3 11.1 12.1 8.3 42.4 1.93 7.2 Petrochemical Refinery Configuration Case-1A Case-1B Case-2A Case-2B 13.8 0 11.0 10.1 9.1 0 8.7 11.6 0 5.6 7.4 4.7 0 7.4 14.0 0 10.1 6.5 15.0 0 8.4 12.6 0 6.2 5.8 10.6 0 7.5

LPG Naphtha(%) MS(%) SK/ATF(%) HSD(%) FO (%) Raw Per Coke(%)

Total Fuel Products(%) 91.8 Total Petrochemicals Products(%) -Fuel & Loss (%) 7.2

54.5 29.7 15.8

39.4 41.9 18.7

55.8 29.3 14.9

45.2 37.8 17.0

5.2 Supply - Demand scenario with new product pattern 5.2.1 Fuel products: 2011-12 Total deficit of petroleum products in the year 2011-12 (when the refinery would be fully operational) is approx. 5.3 MM in Eastern Region. This deficit is wiped out with a 9 MMTPA refinery Petrochemical Refinery at Paradip (Cases-1A & 1B) as against a surplus of approx. 3.0 MMT in case of fuels refinery as planned earlier. However, in case 15 MMTPA petrochemical refinery, the region would be surplus by approx, 3.6 and 2.7 MMT in cases 2A & 2B respectively as below: Fuels Product Surplus (+)/Deficit(-) - Easter Region Figs in TMT With Petrochemical Refinery Case-1ACase-1BCase-2ACase-2B 9.0 15.0 15.0 15.0 (16) (17) 839 836 (1191) (1191) (1191) (1191) 1420 993 1932 1422 (12) (140) 7 10 113 (234) 1598 1080 (649) (496) (649) (649) 153 153 153 153 303 308 886 1030 121 (624) 3575 2692

Products

With Fuels Refinery

Capacity, MMTPA 9.0 LPG (746) Naphtha (191) MS 1403 SKO/ATF (276) HSD/LDO 3011 FO/LSHS (476) Bitumen 153 Others 73 Total 2951

The All-India surplus in Petroleum products in 2011-12 is approx. 13.0 and 12.2 MMT in cases 1A & 1 B respectively (9.0 MMTPA Petrochemical Refinery) as against 15.8 MMT with Fuels Refinery. Surplus in petroleum products with 15.0 MMTPA Petrochemical Refinery would be approx. 16.4 & 15.5 MMT in Cases 2A & 28 respectively as below: Fuels Product Surplus(+)/Deficit(-) - All India Figs in TMT Products With Fuels Refinery With Petrochemical Refinery Case-1ACase-1BCase-2ACase-2B LPG (4655) (3925) (3925) (3070) (3070) Naphtha 5517 4517 4517 4517 4517 MS 2676 2693 2265 3205 2692 SKO/ATF 5814 6078 5950 6097 6102 HSD/LDO 6483 3585 3238 5070 4552 FO/LSHS (1691) (1864) (1864) (1864) (1864) Bitumen 216 216 216 216 216 Others 1412 1642 1800 2225 2369 Total 15772 12942 12197 16396 15514

5.2.2 Petrochemical Products The domestic supply and demand scenario of polymers is based on market analysis carried out by M/s IDS for Naphtha Cracker Project at Panipat/Koyali Refineries. The supply and demand scenario of polymers for Asian region is based on the report of M/s CMAI. The domestic and Asian supply-demand scenarios for Paraxylene are based on the report of M/s PCI Xylenes. Surplus / deficit position of various petrochemical products for all the four cases for the year 2011-12 for India and Asian region is given below: (Figs in TMT) Deficit in Asian Region Case-2B (excluding India) 684 (1056) 1037 (4320) 490 (1402) 117 -1199 (3322)

Products

Surplus / deficit position in India Without With Paradip Refinery Paradip Case-1A Case-1B Case-2A Refinery Polythene (216) (154) 765 (329) Polypropylene (1460) (304) 329 415 MEG (207) (207) 423 (207) Styrene (198) 117 117 117 Paraxylene (701) 452 516 1199

From the above table it can be seen that there is a huge export potential of the surplus petrochemical products in the Asian region and these products from the Petrochemical Refinery at Paradip can be absorbed to meet the domestic and Asian demand. Detailed supply-demand position or petrochemical products on All India basis and Asian region is given in Anncxurc-9 & 10. 5.3 Estimated Cost Based on in-house data as well as inputs from licensors, broad-based cost estimates for the four options have been worked out. The OSBL cost (utility & offsite facilities) is estimated on lump sum basis. The detailed OSBL facilities shall be firmed up during DFR preparation. The details of estimated capital cost for the tour cases are as under: Sr. No. 1. Option Capital Cost (Rs. Crore) with EPCG benefits 14500

2.

3.

4.

without EPCG benefits Case-1A: Refinery with Petrochemicals 15900 / Aromatic complex @ 9.0 MMTPA crude intake. Case-1B: Refinery with Naphtha 21450 cracker and down-stream Petrochemicals / Aromatic complex @ 9.0 MMTPA crude intake. Case-2A: Refinery with Petrochemicals 20700 / Aromatic complex @ 15.0 MMTPA crude intake Case-2B: Refinery with Naphtha 26650 cracker and down-stream Petrochemicals / Aromatic complex @ 15.0 MMTPA crude intake.

19950

18900

24800

5.4 Financial Analysis 5.4. I The financial analysis for all the cases based on IOC "Guidelines for formulation of capital investment proposals' (as detailed in Annexure-II) is given below: Sr. No. Option Capital Cost (Rs. Crore)IRR % 1. Case-1A 15900 17.14 2. Case-1B 21450 21.97 3. Case-2A 20700 21.85 4. Case-2B 26650 23.36 5.4.2 An alternate financial analysis has also been carried out in line with the basis followed for Panipat Naphtha Cracker Project, considering the following. EPCG & CENVAT benefits. 100% capacity utilization from 3rd year onwards as against 90% in the currently prevailing IOC guidelines (It will be easier to achieve full capacity earlier considering port location and closer to the potential export market in Asia. Terminal value considered as 15th year cash flow divided by "Weighted Average Cost of Capital minus Cash Flow Growth Rate" as against 30% of project cost in the currently prevailing IOC guidelines.

Sr. No. Option Capital Cost (Rs. Crore)IRR % 1. Case-1A 14500 21.22 2. Case-1B 19950 25.13 3. Case-2A 18900 26.14 4. Case-2B 24800 27.46 Detailed basis of cost estimate and financial analysis is given in Annexure-II. 5.5 Sensitivity Analysis The IRR (%) for various sensitivity cases are presented below: i) Considering the case as per Para 5.4.1: Sr. No. Sensitivity cases Fuel Refinery Petrochemical Refinery Case-1ACase-1BCase-2ACase-2B 9.0 9.0 15.0 15.0 17.14 21.97 21.85 23.76 15.49 19.99 19.94 21.64 17.00 21.83 21.70 23.62 15.28 19.70 19.87 21.39 15.38 19.85 20.06 21.58 11.79 15.93 16.07 17.39

1. 2. 3. 4. 5. 6.

Capacity MMTPA 9.0 Base Case 9,42 10% Increase in Capital Cost 7.67 10% Increase in Operating Cost 9.20 10% Reduction in Gross Margin 8.47 10% Reduction in capacity utilization9.09 All the above together. 6.07

ii) Considering the case as per Para 5.4.2: Sr. No. Sensitivity cases Petrochemical Refinery

1. 2. 3. 4. 5. 6.

Case-1ACase-1BCase-2ACase-2B Capacity MMTPA 9.0 9.0 15.0 15.0 Base Case 21.22 25.13 26.14 27.46 10% Increase in Capital Cost 19.48 23.15 23.95 25.43 10% Increase in Operating Cost 24.11 25.00 26.01 27.32 10% Reduction in Gross Margin 19.28 22.82 23.87 25.25 10% Reduction in capacity utilization19.56 23.22 24.36 25.53 All the above together. 15.79 19.20 20.31 21.18

5.6 Analysis Alternatives The IRR of Case-2B, i.e., 15.0 MMTPA with Naphtha Cracker works out to be the best. The estimated capital cost & hence financial risk. however, is substantially higher in this option. Among the remaining three cases, Case-2A, i.e., 15.0 MMTPA refinery with Petrochemicals/Aromatic complex without Naphtha Cracker has the following merits as compared to the other cases: Benefit of economy of scale by installation of a single largest capacity Crude / Vacuum Distillation Unit. Option of augmentation of Petrochemical capacities at a later date by addition of blocks of similar units along with a Naphtha Cracker Unit. More balanced fuels/petrochemicals product slate. Lower Capital investment is-a-vis 9.0 MMTPA Refinery with Naphtha Cracker (Case-l B).

6.0 Detailed Feasibility Study 6.1 The financial analysis of various alternatives as illustrated above clearly shows that there is an additional incentive/improvement in the margin through an integration of refinery with petrochemical complex. The above analysis is based on certain assumptions on supply-demand balance in domestic as well as Asian Region, product yields and capital cost estimates which needs to be revalidated by a reputed consultant. 6.2 In view of the above a revised Detailed feasibility Report (DFR) for an integrated refinerycum-petrochemical complex at Paradip needs to be prepared by engaging a reputed consultant having experience in technological / operational aspects of refining as well as petrochemicals. 6.3 Accordingly, following activities are to be initiated: (i) Engaging a reputed consultant having experience in technological / operational aspects of refining as well as petrochemicals for preparation of DFR broadly covering the following scope: Worldwide Market analysis of petrochemicals products with focus on Indian sub-continent and South-East Asia. Study of various process configurations and arriving at the most optimum configuration. Preparation of' DFR with +/- 10 % accurate cost estimates considering the selected configuration.

(ii) Lining up an agency for carrying out the Environmental Impact Assessment (EIA) and Risk Analysis (RA) study in view of the proposed change in configuration. These would be required for obtaining the Environmental Clearance for the project:

7.0 Road Map As per the MoU and subsequent correspondence with the Government, the project is to be mechanically completed by Sep 2009. In view of this, the preparation of revised DFR and other activities are to be initiated. A tentative schedule for preparation of DFR and other studies / approvals is given below: Award for DFR preparation - Oct '04 Finalisation of configuration - Feb '05 Award for EIA / RA study - April'04 Finalisation of DFR - Apr '05 Receipt of EIA / RA Study Report - Sep'05 In-principle Approval of DFR by Board - Mar'05 Selection of process licensors - Dec'05 Environment Clearance (EC) - Sep'06 Final investment approval - Feb'07

8.0 Estimated expenditure for the activities upto DFR preparation An estimated expenditure of Rs. 13.5 crore shall be required for preparation of Detailed Feasibility Report (DFR) including market analysis for petrochemicals and carrying out Environment Impact Assessment (EIA) & Risk Analysis (RA) studies for obtaining Environmental Clearance. The break-up of the above expenditure is given hereunder: (Figures in Rs. Lakh) FE IC TOTAL 530 580 1110 0 200 200

Sr. No. Activity 1. Preparation of Detailed Feasibility report including Market Analysis for petrochemical products 2. EIA Study & Risk Analysis Studies including marine facilities 3. Financial Appraisal Grand Total Say (Rs. crore) 9.0 Proposal

-- 25 25 530 805 1335 5.5 8.0 13.5

In view of the above, it is proposed to obtain the approval from the Board of Directors for incurring and expenditure of Rs. 13.5 crore towards lining up agencies / consultants for Market Analysis for petrochemical products, preparation of Detailed feasibility Report, EIA / RA studies, etc. for an integrated refinery-cum-petrochemical complex at Paradip. 10.0 Resolution It is proposal that the Board of Directors may consider for above proposal and pass the following resolution with or without modifications as may deem fit: "RESOLVED that the approval of the Board of Directors be and is hereby accorded to the proposal for incurring and expenditure of Rs. 13.5 crore towards lining up agencies / consultants for Market Analysis for petrochemical products, preparation of Detailed Feasibility Report, EIA / RA studies, etc. for an integrated refinery cum petrochemical complex at Paradip."

(Jaspal Sing) Director (R) Configuration & Product Pattern 1. Configuration S.No. Process Units Capacity (TMT) 1 CDU/VDU/LRU 9000 2 Once Thru Hydrocracking Unit(OHCU) 2287 3 Resid Fludised Catalytic Cracking Unit (RFCC)1523 4 Delayed Coking Unit (DCU) 2180 5 Naphtha Hydrotreating (NHT) 551 6 Reformer Unit (CCR) 349 7 Naphtha Isomerisation Unit (ISOm) 13 8 Diesel Hydrotreating Unit (DHDT) 3075 9 Hydrogen Unit 69 10 Sulphur Recovery Unit 130 2. Product Pattern TMT %Yield Crude 9000 100 Products LPG 659 7.32 Naphtha 1000 11.11 MS 1086 12.07 LT Distillate 2745 30.50 DPK 750 8.33 HSD 3815 42.39 Mid Distillate 4563 50.72 FO 174 1.93 RPC 648 7.20 Sulphur 135 8.15 F&L 735 81.22 Distillate Yield 7310 100.00 Total 9000 Present Status of Infrastructure Development Works Land Reclamation-Completed Main Approach Road to the Refinery & Structural Bridge - Completed Bridge over Santra Creek - Completed Chain Link Fencing on periphery of the property line - The job of peripheral fencing on property line in the project area was under construction through Sri Durga Condev Pvt. Ltd. About 80% of the work has been completed. The contractor failed to complete the balance work and abandoned the site. In view of this the contract has been terminated on 16.12.2002. A fresh agency for balance work is being lined up for which bids have been received and are under evaluation. Boundary Wall, Plant Roads, Site Office & Drains - Performance of the contractor, M/s EPIL has been very poor. Only 54.02% work (Comprising of 85% boundary wall, 46%

roads, 67% buildings & 45% drains) has been completed as on date against 100% scheduled completion on 30.10.03 due to their contractual failures. Railway over Bridge - Construction of 3 span ROB has been completed. Construction of RCC box culvert below railway track completed. Construction of approaches on both sides of bridge is in progress and likely to be completed by November 2004. Construction Power Supply - Construction of sub-station buildings have been completed. All the equipment including transformers, HT/LT panels & cables etc. are available at site. The job was under hold since November 2001. Part clearance was given to M/s Petron on 30.12.2002 for lighting in site office, canteen building, gate hose and minimum area lighting. Erection of equipment for these facilities has since been completed. Action has been taken for execution of balance work and is likely to be completed by September 2004. Construction & Drinking Water Supply - The Contractor, M/s SPSEL did not perform satisfactorily and work was terminated on 29.10.02. The party had achieved 27.0% progress has already termination. Construction of resettlement colony - The work is presently under execution and 67% progress has already been achieved. Construction of Township - MECON, Ranchi (PMC for the job) have completed the layout & basic design of the township. The packages (6 nos.) are kept ready so as to invite tenders to match with implementation schedule of the project.

Annexure - 3 Product-Wise Demand - All India (As per X Plan Document) Products LPG Naphtha MS SKO ATF HSD LDO FO/LSHS Lubes Bitumen Others All Products 2006-07 11789 10519 9801 10189 2757 43886 1619 13845 1483 3726 10642 12036 2009-10 14933 9453 12109 10189 3031 51680 1619 14953 1702 4071 10566 134305 2011-12 17483 8803 13941 10189 3228 57630 1619 15741 1866 4319 9610 144427 2012-13 18916 8495 14959 10189 3331 60857 1619 16150 1953 4449 8853 149771 2013-14 20467 8198 16051 10189 3438 64265 1619 16570 2045 4582 7889 155312

Product-Wise Demand-Eastern Region Fig. in TMT Products2006-07 2009-102011-122012-132013-14 LPG 1573 2096 2332 2523 2730 Naphtha 2015 2015 2015 2015 2015 MS 1119 1382 1591 1708 1832 ATF 259 285 303 313 323 SKO 2566 2566 2566 2566 2566 HDD 6941 8050 8991 9495 10026 LDO 341 341 341 341 341 FO/LSHS 735 794 836 874 915 LSHS 0 0 0 0 0 Lubes 222 255 279 293 307

Bitumen 557 609 646 670 695 Others 1613 1613 1613 1513 1387 Total 17941 20007 21215 22311 23137 Annexure - 4 Demand of Petroleum Products - Region-Wise (Based on X Plan Document) (Fig. in TMT) 06-07 09-10 11-12 12-13 13-14 East + North East 17941 20007 2151522311 23137 West 42333 47208 5076752645 54593 North 28184 31430 3379935049 36346 South 31977 35659 3834739766 41237 All India 12043613430514428149771155313 Notes: Demand has been apportioned region wise based on 2002-03 PSU sales. Rajasthan has been considered in western region. Mugalsari/Allahabad/ Lucknow shifted to Eastern Region.

Annexure - 5 Refining Capacity - Region-Wise 06-07 08-09 09-10 10-11 11-12 13-14 Existing Refineries + Planned Expansions NE 6000 6000 6000 6000 6000 6000 East 10600 10600 10600 12000 12000 12000 East + NE 16600 16600 16600 18000 18000 18000 West 64200 64200 64200 64200 64200 64200 North 20000 23000 23000 23000 23000 23000 South 35190 35190 35190 37690 37690 37690 Total 135990138990138990142890142890142890 With Bina & Essar East + NE 16600 16600 16600 18000 18000 18000 West 64200 74700 80700 80700 80700 80700 North 20000 23000 23000 23000 23000 23000 South 35190 35190 35190 37690 37690 37690 Total 135990149490155490159390159390159390 NE: NRL/Digboi/Guwahati/BRPL East: Barauni/Haldia West: BPCL/HPC (M) Koyali/Reliance/Essar/Bina North: Mathura/Panipat South: CPCL/HPCL (V) KRL/MRPL Annexure - 6 A Refining Capacity in 2011-12

Refinery North-East East Barauni Haldia Numaligarh Guwahati Digboi BRPL

Figures in TPA Capacity 2600 800 600 2000

Sub-Total (NE) 6000

6000 6000

Sub-Total (E) 12000 18000

Total (NE + E) West North Panipat Mathura Koyali RPL Mumbai-BP Mumbai-HP Bina Essar

13700 33000 12000 5500 6000 10500

Sub-Total (W) 80700

15000 8000

 South Total

Sub-Total (N) 23000

MRPL KRL CPCL Narimannan Vizag-HP Fractionators

9690 10000 9500 1000 7500

Sub-Total (S) 37690 159390

B. Supply of Petroleum Products - Region-wise (Fig. in TMT) 06-07 09-10 11-12 12-13 13-14 Existing Refineries + Planned Expansions NE 5440 5440 5440 5440 5440 East + NE 15011 15011 16152 16152 16152 West 63863 63863 63863 63863 63863 North 18482 21221 21221 21221 21221 South 32529 32529 34849 34849 34849 Total 129885 132624136085136085136085

With Bina & Essar East + NE 15011 15011 West 63863 74878 North 18482 21221 South 32529 32529 Total

16152 79004 21221 34849

16152 79004 21221 34849

16152 79004 21221 34849

129885 143639151226151226151226

Product supply includes 4.4 MMTPA product from Fractionators. Annexure 7 Process units and Capacities Attributes Case-1A Case-1B Case-2A Case-2B

Crude Cap., MMTPa Configuration Process Units Refinery Units CDU/VDU DCU VGO-HDT FCCU Kero/HDD Hydrotreater Hydrogen Unit SRU with Amine Units CRU ISOM TAME SWS Petrochemical Units Aromatic Complex Paraxylene Unit Naphtha Craker Unit

9.0 Without Cracker

9.0 With Cracker

15.0 Without Cracker

15.0 With Cracker

KTA KTA KTA KTA KTA KTA TPD-Sulphur KTA KTA KTA M3/Hr. KTA KTA KTA Ethylene Eqv. Naphtha Feed KTA KTA KTA KTA KTA KTA KTA

9000 3000 5800 5700 2000 93 2 x 270 700 500 107 2 x 100 1200 2 x 600 --3 x 400 200 0 400 200 0 0

9000 3000 5800 5700 1400 78 2 x 270 430 126 107 2 x 100 1200 2 x 600 1000 3000 4 x 450 300 2 x 250 400 200 600 300

15000 4600 2 x 4700 9300 4700 2 x 90 2 x 450 1200 700 173 2 x 150 1950 3 x 650 --4 x 450 200 200 400 200 0 0

15000 4600 2 x 4700 9300 3700 2 x 82 2 x 450 700 366 173 2 x 150 1950 3 x 650 1000 3000 6 x 420 300 2 x 300 400 400 700 350

Polypropylene Low Density PE (LDPE) High Density PE (HDPE) Styrene & Ethyl Benzene Styrene Butadiene rubber (SBR) Mono-Ethylene Glycol (MEG) Oxygen Plant Annexure - 8 Product Pattern

Attributes Case - 1ACase - 1BCase-2ACase-2B Input Crude 9000 9000 15000 15000 Haldia - VR 700 700 700 700 Methanol 32 32 52 52 Naphtha from Gujart Refinery 0 1018 0 928 Naphtha from CPCL Refinery 779 779 Naphtha from Haldia Refinery 146 0 Ethane 1 1 1 1 Propane 5 7 8 10 Benzene Import/ex Panipat 201 0 118 0

Butadiene Import/ex Panipat 128 Oxygen 0 Butene - I 0 Total 10066 Fuel Products LPG 1389 Balance Naphtha 0 MS 1103 SK/ATF 1014 HSD 917 Total Distillates % 43.94 Sulphur 184 FO 0 RPC 877 CBFS 0 Hy. Ends 1061 HE% 10.54 Total Fuel Products 5484 Fuel Products % 54.5 Petochemical Products PP 1156 LDPE 167 HDPE 0 MEG 0 DEG 0 TEG 0 Paraxylene 1153 Benzene 0 SBR 200 Styrene 315 Butadiene 0 Sub Total -Patro. Prdoducts 2991 Petrochemical Products % 29.71 Total Products Fuel & Loss 1591 Fuel & Loss % 15.81 Grand Total 10066 Annexure - 9 Supply Demand -Petrochemicals Poly-ethylene

0 327 7 12017 1388 0 676 886 570 29.30 179 0 887 153 1219 10.14 4739 39.4 1789 300 481 630 48 7 1217 0 200 315 44 5031 41.87 2247 18.70 12017

128 0 3 16009 2244 0 1615 1033 2402 45.56 307 0 1337 0 1644 10.27 8938 55.8 1875 174 171 0 0 0 1950 0 200 315 0 4684 29.26 2388 14.92 16009

0 362 9 17842 2241 0 1105 1037 1884 35.13 301 0 1338 149 1788 10.02 8056 45.2 2497 300 600 697 53 8 1900 141 200 315 40 6751 37.84 3034 17.00 17842

Attributes 2006-072007-082008-092009-102010-112011-12 Post Panipat Cracker Demand 1951 2103 2265 2435 2620 2823 Supply 1757 2217 2542 2607 2607 2607 Surplus (Deficit) (194) 114 277 172 (13) (216) With Paradip Petrochemical Refinery Surplus/Deficit with Paradip (Case-1A) (194) 114 277 172 87 (49)

Surplus/Deficit with Paradip (Case-1B) (194) Surplus/Deficit with Paradip (Case-2A) (194) Surplus/Deficit with Paradip (Case-2B) (194)

114 114 114

277 277 277

172 172 172

456 194 527

565 129 684

Robust growth in demand projected: CAGR at 7.7% CMAI Deman Growth projections: CAGR at 7.5% Poly-propylene Attributes 2006-072007-082008-092009-102010-112011-12 Post Panipat Cracker Demand 2001 2237 2503 2804 3146 3532 Supply 1297 1527 1815 1872 1992 2072 Surplus (Deficit) (704) (710) (688) (932) (1154) (1460) With Paradip Petrochemical Refinery Surplus/Deficit with Paradip (Case-1A) (704) (710) (688) (932) (460) (304) Surplus/Deficit with Paradip (Case-1B) (704) (710) (688) (932) (81) 329 Surplus/Deficit with Paradip (Case-2A) (704) (710) (688) (932) (29) 415 Surplus/Deficit with Paradip (Case-2B) (704) (710) (688) (932) 344 1037 Robust growth in demand projected: CAGR at 12.0% CMAI Deman Growth projections: CAGR at 7.2% Mono-Ethylene Glycol (MEG) Attributes 2006-072007-082008-092009-102010-112011-12 Post Panipat Cracker Demand 776 829 886 950 1049 1096 Supply 589 709 859 889 889 889 Surplus (Deficit) (187) (120) (27) (61) (160) (207) With Paradip Petrochemical Refinery Surplus/Deficit with Paradip (Case-1A) (187) (120) (27) (61) (160) (207) Surplus/Deficit with Paradip (Case-1B) (187) (120) (27) (61) 218 423 Surplus/Deficit with Paradip (Case-2A) (187) (120) (27) (61) (160) (207) Surplus/Deficit with Paradip (Case-2B) (187) (120) (27) (61) 258 490 Robust growth in demand projected CAGR at 7.3% CMAI demand growth projections CAGR at 7.1% Styrene Attributes 2006-072007-082008-092009-102010-112011-12 Demand 460 497 538 586 639 698 Supply 0 500 500 500 500 500 Surplus (Deficit) (460) 3 (38) (86) (139) (198) With Paradip Petrochemical Refinery Surplus/Deficit with Paradip (Case-1A) (460) 3 (38) (86) 50 117 Surplus/Deficit with Paradip (Case-1B) (460) 3 (38) (86) 50 117

Surplus/Deficit with Paradip (Case-2A) (460) Surplus/Deficit with Paradip (Case-2B) (460) Currently indigenous supply not available.

3 3

(38) (38)

(86) (86)

50 50

117 117

RIL indicated a styrene unit of 500 KTA based on dilute phase ethylene ex FCC. Above analysis includes RIL capacity. Paraxylene Attributes 2006-072007-082008-092009-102010-112011-12 Post Panipat Aromatic Complex Demand 1907 1924 2105 2125 2379 2491 Supply* 1790 1790 1790 1790 1790 1790 Surplus (Deficit) (117) (134) (315) (335) (589) (701) With Paradip Petrochemical Refinery Surplus/Deficit with Paradip (Case-1A) 0 0 (136) (136) 351 452 Surplus/Deficit with Paradip (Case-1B) 0 0 (136) (136) 389 516 Surplus/Deficit with Paradip (Case-2A) 0 0 (136) (136) 829 1249 Surplus/Deficit with Paradip (Case-2B) 0 0 (136) (136) 827 1246 PX demand is projected CAGR at 5.7% PX produced by RIL will predominantly be used captively. Domestic demand for MCC PTA unit at 'H' (350-400KT) can be supplied by IOC on cost competitive basis in view of its proximity and sea approach. Annexure- 10 Supply Demand - Petrochemicals - Asia (Excl. Indian Subcontinent) Poly Ethylene (PE) 2007-082008-092009-102010-112011-12 Supply 21996 21842 21738 21631 21518 Demand 18196 19251 20333 21513 22574 Surplus(+) (Deficit(-) 3800 2591 1405 118 (1056) Poly Propylene (PP) 2007-082008-092009-102010-112011-12 Supply 17496 17378 17268 17155 17051 Demand 17858 18756 19677 20576 21371 Surplus(+) (Deficit(-) (362) (1378) (2409) (3421) (4320) Mono Ethylene Glycol (MEG) 2007-082008-092009-102010-112011-12 10296 10246 10203 10174 10142

Supply

Demand 9954 Surplus(+) (Deficit(-) 342 Paraxylene (PX)

10325 10762 11171 11544 (79) (559) (997) (1402)

2007-082008-092009-102010-112011-12 Supply 14258 14707 14401 14196 14863 Demand 15284 16303 17052 17533 18185 Surplus(+) (Deficit(-) (1026) (1596) (2651) (3337) (3322) Note: Supply includes exportable surplus from Middle East. Annexure - 11 Basis of Cost Estimates and Financial Analysis Sl. Parameter No 1 2 Basis of cost estimates Capacity Utilisation As per prevailing IOC Guidelines July '04 1st Year:60%, 2nd Year:90% 3rd Year onwards:90% 1:1 SBI PLR @ 10.75% 36.593% (35% basic with 2.5% surcharge & 2% education cess) 5.28% 3.34% 6.33% @ 8% on FOB cost of imported items As followed for Panipat Naphtha Cracker Project July '04 st Year:60%, 2nd Year:90% 3rd Year onwards:100% 1:5:1 5.8% 36.593% (35% basic with 2.5% surcharge & 2% education cess)

3 4 5

Debt: Equity Ratio Interest on borrowing Corporate Tax

Depreciation (Book) Plant & Machinery Civil Furniture & fixture Indirect charges a) Ocean Freight b) Custom Duty

5.28% 3.34% 6.33% @ 8% on FOB cost of imported items

@27.8% on imported items @5.1% on imported items (FOB + (FOB - Freight) (Basic Freight) (With EPCG benefits) :10.2% CVD:16%, SAD:nil) @ 3% (FOB of imported @ 3% (FOB of imported items) items) @ 2% on FOB and Ex@ 2% on FOB and Ex-works prices of works prices of equipment equipment for transportation of for transportation of equipment to job site within India for equipment to job site within imported and indigenous items India for imported and indigenous items. @ 16.32% (average) on all @ 16.32% (average) on all indigenous indigenous equipment and equipment and items items

c) Port Handling d) Inland Transport

e) Excise Duty

f) Sales Tax

g) Work Contract Tax h) Insurance

i) Exchange Rate j) Service Tax k) Withholding tax for technology 8. Terminal Value

@ 4.1% (Ex-works + @ 4.1% (Ex-works + Excise Duty) on all Excise Duty) on all indigenous equipment/material on the indigenous basis that 'C' form will be operable. equipment/material on the basis that 'C' form will be operable. Nil Nil At the rate of 0.5% on all At the rate of 0.5% on all indigenous indigenous and imported and imported items to cover risks during items to cover risks during transit, Storage at site and during transit, Storage at site and construction. during construction. 1 US$ = Rs.45.48, 1Euro = Rs.53.0 10.2% 20% The terminal value of the project is worked out as follows: The same is estimated based on the assumption that the plant will be a going concern and will not be dismantled at the end of 15 years. Estimated as multiple of steady state annual cash Land valued at flows. Accordingly, the 15the years original cost Other items valued (Weighted average cost of capital at 30% of original cash flow growth rate) has been considered as terminal value. cost without Financing cost

9. Plant & Machinery

Based on in-house data as well as inputs from licensors, broadbased plant cost estimates for the options have been worked out with an accuracy of + 30%. The OSBL cost (utility & offsite facilities) has been factored from the estimated total ISBL cost. 10. Royalty and Process License/know-how fees and fees for process package for the licensed units have been considered on the basis of offers made by reputed foreign licensors/in-house data. 11. Engineering/Consultancy The detailed engineering of the process units and facilities, procurement and construction supervision will be performed by a consultant. Cost towards this has been taken as per in-house information. 12. Other Items The provisions of approved cost under different heads along with physical requirements are evaluated for other cost heads like office equipment & furniture, township, construction site requirements, construction period expenses and start up expenses and current prices are considered to estimate their cost effects.

13. Crude and Product prices Last 3 years average (April 01 to March 04) prices have been considered for economic calculations. Crude prices have been considered on Import Parity basis. Products that are to be domestically consumed have been priced as sum of 80% Import Parity Price & 20% Export Parity Price. Surplus products that are considered to be exported are priced on Export Parity basis. Import Parity Price is based on last 3 years average FOB price at Singapore plus all the charges like ocean freight, port charges, customs duty, ocean loss, wharfage, etc. Export Parity Price is based on 3 years average FOB price at Singapore minus ocean freight, port charges, ocean loss, wharfage, etc.