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Challenges, Opportunities, Strategies

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1 Challenges, Opportunities, Strategies
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 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

5 Key driver of world’s energy demand growth – 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 Emerging Asia accounts for 50% of the increase World’s energy needs set to increase from 10, 300 to 16,125 MTOE Emerging Asia accounts for 46% of the increase Oil and Gas to account for 64% of the increase in consumption India is one of the key players of Emerging Asia

6 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

7 Energy producing and delivery systems are stretched
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 Supply Side measures are a key to solve the energy related issues

8 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

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 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

11 Heightened competition
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 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”

12 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

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 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

15 Need for new energy pathways
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 Technological innovations key to commercially tap “hard oil”/ “unconventional oil” and other abundant energy sources

16 Advanced technological solutions
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. New technologies expanding the existing frontiers

17 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

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

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$ 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$ Bn Market related coal price

22 Oil & Gas 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% Oil Projections Natural Gas Projections 32 33 45 60 96 110 195 368 50 100 150 200 250 300 350 400 million tonnes Production Demand 2472 4273 4979 5332 8158 11053 13807 2000 4000 6000 8000 10000 12000 14000 16000 MMSCFD Supply Demand Source: ORF Energy Monitor, Nov, 05 Source: ORF Energy Monitor, Nov, 05 and Reliance Demand and Supply Side measures to create Interim Petroleum Security

23 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

24 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

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 (Slide 5) In sum the opportunities and the challenges are as follows. Growing demand in the Far East for lighter products is an opportunity Tightening specifications, market volatility and high oil prices pose challenges. Take advantage of the opportunities and address the challenges is the mantra of the New Age.

26 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

27 Reliance – Business Segments
1970s s 1990s s Petroleum Downstream Petroleum Upstream Gas Pipelines Retail Infrastructure Textiles Polyester Plastics To sum up, Reliance has extended its operations into vital sectors of India’s Economy. While maintaining or enhancing our market share in our traditional polyester and polymer business, we entered the:                    E&P sector in 1993                    Refinery sector in 1995                    Telecom sector in 1996                    Infocomm sector in 1999, and                    Power sector in 2002 Vertical integration, participation in sectors with strong growth potential and international competitiveness

28 Consistently Accelerating Growth
( US $ million) 10 years CAGR 28% 18% 29% 32% FY 2005 FY 2006 Revenues 16,725 19,976 Net Profit 1,731 2,033 5 years India’s first and only private sector company to feature in the Fortune Global 500 list

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 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

31 Reliance Vision India Energy Imperatives Reliance Initiatives
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 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 (Slide 5) In sum the opportunities and the challenges are as follows. Growing demand in the Far East for lighter products is an opportunity Tightening specifications, market volatility and high oil prices pose challenges. Take advantage of the opportunities and address the challenges is the mantra of the New Age.

32 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 Nuclear

33 A diversified and balanced portfolio
Extensive Exploration Acreage in India 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 A diversified and balanced portfolio

34 International Acquisitions – Current positions
YEMEN East Timor Sunrise Bayu - Undan JPDA Area TIMOR LESTE 2,464 square km COLOMBIA 2,380 square km OMAN 21,140 square km 15,718 square km

35 International Acquisitions – Vision
One of Top 10 Global Companies (pvt + govt.) One of Top 10 Global Pvt. Oil Companies 2020 2015 Top Pvt. Oil Company of Asia Production (bopd) : Prod Growth (CAGR) : Overseas Reserves : ~500,000 ~15% ~3 bn bbl 2006 Near Term Aspirations Production : Overseas Reserves : ~250,000 bopd ~1,500 mm bbl

36 Gas Find ushering in a supply coordinated demand growth story in India
Gas Chain strategy - India Largest Gas Discovery in the World in 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 Find ushering in a supply coordinated demand growth story in India

37 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

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
BPD RIL Group, India 1,240,000 Source: Oil and Gas Journal RIL – RPL combine to be the largest refinery complex in the world

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 Growing light - heavy crude differentials offer promise for complex refineries

41 Superior Performance Globally acclaimed 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 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

43 Reliance – Retail Marketing Network
Nationwide network of over 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 These retail outlets will have a pan-India presence and will provide the Indian consumer with a unprecedented retail experience We have commissioned over 200 outlets and majority of our outlets are outselling the competition by factor of 1 ½ to 2. Reliance is currently embarked on fast rollout of our retail outlets to address this opportunity State-of-the-art, pan India retail network with strong value propositions

44 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

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 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

47 Jamnagar experience to be leveraged for future projects
Embrace ecology and environment 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 Our Jamnagar Refinery is the third largest refinery in world. Due to its high complexity and highest efficiency in energy and loss performance it ranks #1 in net cash margin in Asia Pacific Region. Jamnagar experience to be leveraged for future projects

48 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

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 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

51 Reliance to acquire a billion tonne of reserves
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

52 Reliance would change the rules of the game in energy space

53 Growth is Life Thank You


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