gggasoasoasolll ttttt - motilal · pdf filejanuary 2013 3 1. dgh - pace of e&p approvals...

January 2013

KEY TRENDS

IEA/EIA up 2013 oil demand forecasts

1-M Relative Stock Performance

the oil & gas monthly

Reuters Singapore GRM (USD/bbl)

GGGGGASOASOASOASOASOLLLLLINEINEINEINEINE TTTTTANKANKANKANKANKSpecial Report .................................... 2

Oil Market Trends ............................ 16

GRM and Product Spreads .............. 18

Petchem Margin Trend .................... 19

Key India Statistics .......................... 23

News Updates .................................. 25

Stock Price Performances ................ 29

Global Peer Valuations .................. 30

Data sources: Bloomberg, Reuters, Ministry of

Petroleum, PPAC, various companies

Investors are advised to refer through disclosures made at the end of the Research Report.

1

M Cap P/E (x) P/B (x) EV/EBITDA (x)

USD b FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E

Integrated/UpstreamRel iance Inds* 50.4 12.7 12.4 12.2 1.5 1.4 1.3 8.3 9.9 9.2 ONGC 44.2 9.4 10.0 8.8 1.8 1.6 1.4 3.8 4.2 3.5 Ca irn Indi a 11.7 6.9 5.3 6.2 1.3 1.1 1.0 5.4 3.8 3.6 Oi l Indi a 5.3 8.6 8.4 8.0 1.6 1.5 1.3 3.8 4.5 3.5

OMCsIOC 12.4 5.7 12.1 10.2 1.1 1.1 1.0 8.5 10.9 8.1 BPCL 4.9 34.5 15.2 14.9 1.7 1.6 1.5 11.9 10.3 8.3 HPCL 1.9 11.7 13.4 12.4 0.8 0.8 0.7 10.2 11.5 8.1

Independent RefinersMRPL 2.1 12.7 22.9 7.7 1.6 1.5 1.3 6.9 8.7 4.8 CPCL 0.4 33.8 (8.2) 5.4 0.6 0.6 0.6 43.8 25.8 5.0

Gas CompaniesGAIL** 8.5 9.7 9.1 8.9 1.6 1.5 1.3 6.4 6.6 6.8 GSPL 0.8 8.7 9.2 9.0 1.8 1.6 1.4 5.3 5.2 4.8 Petronet LNG 2.2 11.6 11.6 11.2 3.5 2.8 2.3 8.3 8.1 6.9 IGL 0.6 11.5 9.5 8.3 2.9 2.4 2.0 6.2 5.0 4.2

*No. of shares adj. for treasury s hares ; **P/E adj. for investments

SUMMARY - December 2012

Special Report: (a) Key takeaways from our Delhi meetings; (b)

Update on GRM's; (c) Cairn India - receives exploration approvals

and (d) Rangarajan Committee - imply USD8/mmbtu gas price.

Weak global economics' lead to flat crude prices - marginal uptick in

2013 demand estimates: Brent prices continued to hover around USD

110/bbl during Dec-12 (averaged flat at USD 110/bbl in the last 3

quarters). IEA/EIA has marginally increased 2013 oil demand growth

estimates led by positive demand sentiments.

Reuters Singapore GRM up 4% MoM; but down 29% QoQ: MoM

increase is led by increase across product cracks except LPG. 3QFY13

GRM averaged USD6.5/bbl, -29% QoQ led by lower FO cracks. Outlook

remains subdued led by demand issues and addition in world refining

capacity, amidst delays in closures of uneconomical refiners.

Polymer/Polyester margins up MoM: Headline margin trend was

weak on QoQ basis in 3QFY13 led by weak demand. In chemicals,

Benzene prices increased to an all-time high led by tight supplies.

Valuation and view - 2013 - A Year of Reforms? As we entered 2013,

talks of strong reforms (diesel de-regulation/cutting LPG & Kero

subsidy) are gathering pace. If followed by action; oil PSU's will be

the key beneficiaries. We remain positive on ONGC (expect ~5%

production CAGR thr' FY15 incl. OVL acquisitions), Oil India in upstream

and while OMC's are trading at attractive valuations, BPCL is our top

pick for its E&P upside. RIL's new projects are likely to add to earnings

from FY15/FY16, however medium-term outlook on core business

remain weak with RoE reaching sub-15%, Neutral. Maintain Neutral

on GAIL and GSPL due to headwinds on incremental gas in medium

term. However, domestic gas scarcity augurs well for Petronet LNG.

Harshad Borawake ([email protected]); +91 22 3982 5432

Kunal Gupta ([email protected]); +91 22 3982 5445

Valuations: Coverage Universe

1

6

6

2

12

6

5

2

(4)

12

(10) (5) 0 5 10 15

RIL

ONGC

OIL

GAIL

HPCL

BPCL

IOC

Cairn

IGL

PLNG

GSPL

0

4

8

12

Dec-09 Dec-10 Dec-11 Dec-12

0.89

0.800.800.70 0.800.80

0.870.90 0.90 0.92

1.00

0.80

0.80

Jul-

12

Aug

-12

Sep

-12

Oct

-12

Nov

-12

Dec

-12

IEA EIA OPEC

2013E world oil demand estimate

January 2013 2

Increased positivity; 2013 to be a year of reforms?Key takeaways from our meetings in Delhi

SPECIAL REPORT

We met various companies, government officials and industry experts in New Delhi. Some of

the key issues discussed include subsidy sharing, E&P approvals, long-term company specific

strategies, M&A opportunities and gas prices, among others.

Increased positivity in the environment: Government officials sounded more

positive and indicated that the pace of decision making has improved (v/s few

quarters back). Sector regulators, DGH and PNGRB are working towards improving

the Indian E&P attractiveness and trying to bring in more transparency.

Upstream sharing unlikely to be >40% in FY13E: On the under recoveries front,

while we will have to wait till 4QFY13 for clarity on FY13 sharing, upstream

companies do not expect >40% sharing as their cash outlflow will be higher in

FY13 led by higher absolute under recoveries and higher cess rate.

Hopes from Rangarajan committee report and its implementation: Sector participants

are, in general, looking forward to likely recommendations/implementation of the

Rangarajan committee report on production sharing contracts and guidelines for

fixing domestic gas prices. Historically, though, government has never implemented

any expert committee recommendations in totality.

Company-specific takeaways:

1. Acquisition focus of ONGC and Oil India seems to be more on acquiring developed/

producing assets (v/s exploration) so as to add to the production growth.

2. IGL is awaiting SC decision on its case against PNGRB, while Petronet LNG is on

track to commission Kochi terminal in 4QFY13.

3. Gail India expects the near term transmission business utilization to be low and

expects earnings growth post commissioning of petchem expansion.

4. Cairn India management expects the exploration approval to come through soon.

5. Downstream oil marketing companies will not be surprised if the cap on cylinders

is increased for 6 to 9.

Oil & Gas Sector: Key pending issues for the upstream and gas companies

January 2013 3

1. DGH - Pace of E&P approvals to gather pace post Rangarajan committeereport

More positivity at DGH: As against the earlier (a year back) environment of

unavoidable delays in decision making due to enquiries by various government

agencies, the current working environment is much more positive.

Long-pending issues getting sorted out: DGH has recently been able to resolve

the long pending issues like defense clearances (Ministry of Defense) for NELP

blocks. It has secured conditional approval for exploration in the blocks falling

under defense area, with conditions like limited / nil surface facilities. This

permission, in our view, at least paves the way for seismic surveys. For all the

future bidding rounds, DGH has decided that it will not put blocks for bidding,

unless it gets all the clearances and further added that they will have a single-

window clearance cell for all the necessary approvals required by an E&P company.

Expect some positives in Rangarajan Committee report: DGH expects the pace of

E&P approvals and policy decisions to increase post the report by Rangarajan

Committee (expected in Dec-12). Post the criticism by CAG of the PSC's, government

had appointed Rangarajan committee to study the existing PSC's and suggest the

best possible alternatives. Further, the terms of reference also asked committee to

suggest "guidelines for determining the basis of price of domestic gas".

Various initiative undertaken by DGH: DGH is working on various policy as well as

procedural initiatives like:

a) Working to set-up National Data Repository (NDR): DGH is in process to award

the work of NDR, which will consolidate all the E&P data of the country under

single database and which can be accessed online globally. The online

availability of the quality data will help promote India's E&P sector and also

streamline the associated procedures.

b) Shale gas policy by end-2013: DGH is currently working the framework of shale gas

policy and expects to call for bidding by end-2013. Many of the identified shale gas

acreages are common to the currently allocated nomination/NELP acreage and

DGH is also working towards framing the exploration policy for the same.

c) Simultaneous exploration in CBM blocks: Along with coal ministry, DGH is

trying to facilitate the simultaneous exploration of coal and CBM and is

currently working towards the same.

DGH has awarded 0.8m exploration acreage in nine …however, Indian basins still continue to remain underNELP rounds.. explored (% of sedimentary basin)

Company-wise share ofallotted NELP acreage (%share)

Company-wise discoveries till-date in NELP acreage(number)

January 2013 4

2. GAIL India - Expect subdued operational performance in medium-term Expect gas volumes to remain flat in medium-term: GAIL India's current

transmission volumes of ~107mmscmd (transmission business contributes ~50%

to EBITDA) are unlikely to see any increase in the medium-term despite

contribution from Kochi and Dabhol terminal due to fall in the KG-D6 volumes.

KG-D6 currently contributes ~16mmscmd.

Likely tariff revision of KG-basin network to have one-time impact of INR1.5b:

PNGRB is likely to fix the transmission tariff for GAIL's KG-basin network in Andhra

Pradesh in the coming few weeks. Company expects a one-time impact of ~1.5b

due to the downward tariff revision, which is applicable for Dec-08.

Petchem expansion commercial production by 1QFY15: GAIL expects the

mechanical completion at its petchem expansion by Dec-13 and assuming 3 months

for stabilization in 4QFY14, company expects the commercial production to start

in 1QFY15. While, company maintained that the gas for the expansion would be

sourced from domestic sources, we believe, however it would also require some

RLNG to operate at full capacity.

E&P - Myanmar production to start in May 13: GAILexpects the commercial

production from its Myanmar gas block to start from May-13 and annual revenue

contribution would be INR3-5b.

Valuation and view: We expect GAIL's earnings to remain flat in the medium term

as headwinds on incremental gas availability continue. We model transmission

volumes of 107/116mmsmcd in FY13/14. Adjusted for investments, the stock trades

at 8.4x FY14E EPS of INR32. Our SOTP based fair value stands at INR385/sh. We have

a Neutral rating due to: (1) low near-term visibility of transmission volume growth,

(2) lower return ratios in near term due to under-utilization of new capitalized

pipelines, and (3) ad-hoc subsidy sharing risk.

Our FY14E volume assumptions clearly under risk due to lower likely KG-D6 supplies

Source: Company, MOSL

3. Indian Oil - Planned projects on track, Panipat cracker stabilized Expect Paradeep refinery to commission by 3QFY14: IOC expects its new 15mmtpa,

Paradeep refinery to be mechanically complete by April-13 and post the

stabilization period could start commercial production by Nov-13. Of the planed

INR300b capex, IOC has spent INR190b till date on this refinery.

Panipat Petchem plant now stabilized: After continual stabilization issues, IOC

has now stabilized its new Naphtha cracker at Panipat and does not expect to

report any operating loss due to stabilization issues in future.

January 2013 5

LPG cylinder cap could be increased: IOC indicated that it will not be surprised if

government increases the recently announced cap of 6 subsidized cylinders per

household to 9 cylinders.

Capex: Apart from its maintenance capex of INR40b, IOC plans to spend INR 100b

towards capital projects.

Valuation and view: We model Brent oil price of USD110/105/bbl in FY13/FY14. We

expect OMCs to be fully compensated by upstream (40% share) and government

(60% share) for under-recoveries. Key events to watch (apart from subsidy sharing)

are: (a) positive contribution from Panipat petchem division, and (b) GRM

performance. The stock trades at 10.9x FY13E EPS of INR23.8 and 1x FY13E BV.

Valuations are attractive in our view. Maintain Buy.

4. Petronet LNG - Kochi on track, domestic gas deficit augurs well Kochi terminal to commission by March-13: As against the media reports of likely

delay in the Kochi commissioning, management indicated that the BPCL will start

taking the gas from terminal in Feb/March-13, thus maintaining the commissioning

guidance of 'by March-13'. Company expects a minimum off-take of 0.8mmt in

FY14 and some of the key customers for Kochi LNG include BPCL refinery, FACT,

Mangalore Chemicals, BSES etc. The commissioning of Phase-2 of the Kochi-

Mangalore-Bangalore pipeline is critical for the volume ramp-up and PLNG expects

the pipeline to commission by Dec-13. (Separately, our interaction with Gail India

indicated that the scheduled completion is by Mar-13, however 1-2 month delay

is possible). Management maintained its re-gas charge guidance of ~USD1/mmbtu.

HPCL is likely to take minority stake in Gangavaram terminal: PLNG is likely to

reduce its stake to 74% in the new 5mmt terminal at Gangavaram in East Coast of

India. HPCL and Gangavaram port authority are likely to take 7-8% stake each, in

the terminal. In order to capture the market, PLNG is going to commission a floating

LNG terminal till the land-based terminal commissions by FY16/17. RoE/RoCE on

floating terminal is likely to be lower than the land based terminal. PLNG is

currently awaiting the environmental clearance for the project. Its gas evacuation

strategy also includes to lay a pipeline to connect with RGTIL's east-west pipeline,

which can be connected through a 130km pipeline.

Spot LNG prices up; long-term contract price softening: Spot-LNG prices have

strengthened in the recent weeks (could be due to winter demand) by USD2/

mmbtu and are hovering at ~USD14/mmbtu. However, interestingly, the long-

term contract prices have softened a bit, and sellers are now ready to link the gas

prices to a "blend of gas and oil benchmarks" as against earlier stand of linking to

price to "oil only".

Regulations unlikely to have an impact: MoPNG recently notified the regulations

on eligibility conditions for registration of new LNG terminals. PLNG indicated

that as their Dahej and Kochi terminals being already into existence will not be

impacted by these regulations, however any new terminal will have to register

with PNGRB. Further, the condition of providing third-party access for 20% of the

short-term or 0.5mmtpa (whichever is higher), will also not impact PLNG as at

Dahej it already provides such access for ~2mmtpa and also will be providing

more than 0.5mmtpa at Kochi. Further, PLNG continues to believe that the trading

gains (marketing margin) will not be controlled by the government

January 2013 6

Dahej expansion on track - throughput to rise by 60-80% by FY15/16: PLNG is on

track to setup new jetty (USD180m) at Dahej by 4QFY14 and expand capacity

(USD650m) to 15mmt by 4QFY15. However, new jetty would help PLNG to increase

throughput to 12-13mmt and post the capacity expansion, throughput would

increase to 16-18mmt.

Valuation and view: Strong visibi lity in earnings growth; Maintain Buy: PLNG's

next earnings growth cycle would come post FY13 led by (1) volume ramp-up at

Kochi and (2) second jetty commissioning at Dahej. At assumed full utilization of

Kochi terminal in FY17; we expect PLNG to report earnings CAGR of >15% over

FY13-FY17 period. The stock trades at 11.2x FY14E EPS of INR14.8. We value stock at

INR207 - the average of two valuation methodologies (1) P/E (13x FY14E EPS), and

(2) DCF (INR214). Maintain Buy.

PLNG capacity to expand to 28mmtpa by FY16/17


5. Indraprastha Gas - Awaiting SC verdict; volume growth steady Expects steady volume growth: Over the next 2-3 years, IGL expects overall volume

growth of 12-13%, with 10-12% in CNG business and 15-20% in PNG business.

Commercial PNG volume growth volatile: Commercial PNG business is witnessing

meaningful volati lity in volumes due to alternative fuel prices. Recently, the fall

in Fuel Oil (FO) prices have resulted in commercial establishments shifting back

to FO, thus impacting IGL's volumes.

LNG prices have strengthened recently: Imported LNG contributes ~30% of IGL

gas purchase and recently the LNG prices have strengthened by ~USD2/mmbtu to

~USD14/mmbtu. IGL's 2QFY13 EBITDA at INR6.1/mscm (v/s average of INR5.3/mscm

in the last 5 quarters) was highest in recent quarters, however with increase LNG

prices and no price increase effected by the company in 3QFY13, we expect 3QFY13

profitability to be lower.

Capex plans: IGL will spend INR4-4.5b each in FY13 and FY14 and would be focusing

more on increasing its PNG network and would be adding ~20 new stations each

year.

Supreme Court Case decision awaited: Given that the case is sub-judice,

management did not offer any comments. The next hearing at Supreme Court is

scheduled on January 4, 2013.

Valuation and view: Our rating for IGL is under review due to lack of clarity in

predicting earnings for IGL and would await the Supreme Court decision. Our

January 2013 7

analysis indicates that the PNGRB order would impact the company's EBITDA by

20-60% and PAT by 30-90%. Our current estimates do not factor in any impact of

PNGRB order.

IGL has reported steady volume growth historically (mmscmd) …however recent quarter growth rate has been subdued


6. Cairn India - Awaiting government approvals; next Rajasthan ramp-upin 1QFY14

Production ramp up likely only in 1QFY14: Rajasthan field production to remain at

~175kbpd till March-13. Post pipeline capacity de-bottlenecking, production to

reach 200kbpd by June-Sept 2013 helped by Bhagyam ramp-up and Aishwariya

production start.

Expects exploration approvals soon: Company is eagerly awaiting the exploration

approval at its Rajasthan block and mentioned that the pace of approvals seem to

have increased at MoPNG and expects to get the approvals soon. Cairn expects

exploration approval to be part of existing PSC and does not expect government

to impose new PSC for the new exploration.

Opened office in London: Cairn India has opened a office in London to tap the

M&A opportunities. Company mentioned that the M&A deals, particularly for the

African continent takes place in London.

Update on exploration blocks:

South Africa: The recent offshore block acquisition in South Africa is in the

final stages of regulatory approval. Once the approvals are in place, Cairn will

start with the seismic surveys in the block.

KG-Onland block: Company plans to drill the first of the two planned wells in

1QFY14. Reserve guidance remains at in-place resources of 550mmbbl.

However, given the tight reservoir, recovery rate would be lower at this block.

Sri Lanka: Will commence appraisal drilling in 2013.

Maintain Neutral: For FY13/FY14/FY15/long-term, we model in Brent oil price at

USD110/105/100/90 and INR/USD at 54/53/50. The stock trades at 5.9x FY14E EPS of

54.6. Our SOTP stands at INR350/sh. Neutral.

January 2013 8

Expect Rajasthan field production stable at 172kbpd


7. Oil India - Steady production growth; focusing on acquiring producingassets

Does not expect higher upstream subsidy sharing in FY13E: While, the uncertainty

continues on the likely upstream subsidy sharing in FY13, company believes that

the sharing is unlikely to be higher than FY12 i.e. 40%. However, overall revenue

contribution from upstream (ONGC and Oil India) is still going to be higher due to

absolute higher subsidy and also higher cess rate in FY13.

Write-offs unlikely to be higher in 2HFY13: As against the unusually high well

write-off of INR9.3b in FY12, it expects FY13 write-off to be subdued with 2HFY13

write-off largely in-line with 1HFY13 write-off of INR1.9b.

Production growth on track: Oil India expects steady production growth and expects

oil production of 3.9mmt in FY14 and 5mmt by FY17. Gas production is expected to

jump post the commissioning of Assam gas cracker (Brahmaputra Cracker and

Polymer Ltd) in Dec-13.

Likely to acquire developed/producing asset: Oil India is currently focusing on

acquiring discovered/producing asset and has already submitted non-binding

offers. Company expects to announce an acquisition by end-FY13.

Update on key blocks:

Overseas: (a) Venezuela - Carabobo: Oil production is expected to commence

by 4QFY13 and would ramp-up from initial production rate of 4kbpd to planned

plateau of 400kbpd. Oil India has 3.5% stake in this block. (b) Gabon: Expects

to commence exploration drilling in Nov-12.

Domestic: (a) Mizoram block MZ-ONN-2004/1: To commence exploration

drilling by 4QFY13; (b) KG on-land block KG-onn-2004/1: To commence

exploration drilling by 4QFY13.

Valuation and view: We model Brent oil price of USD110/105/100/90/bbl for FY13/

FY14/FY15/long term. We remain positive on OIL due to its strong operational

foothold: (1) steady production growth, (2) high share of oil (55% in 1P and 62% in

2P) in its reserves, and (3) attractive valuations - trades at >50% discount to its

global peers on EV/BOE (1P basis). While subsidy rationalization is a long-term

trigger, gas price hike is a medium term trigger. The stock trades at 7.5x FY14E EPS

of INR63.2 and implied dividend yield is ~4%. Maintain Buy.

January 2013 9

Cairn India - Further exploration approved in RajasthanPaves way for 300kbpd production pleateau

SPECIAL REPORT

The Petroleum Minister indicated that the government has given further

exploration approval in the producing blocks of Cairn India (CAIR IN, Mkt Cap

USD11.7b, CMP INR337, Neutral) and Reliance Industries.

The approval has been attached with the ring-fencing provision, whereby cost

recovery will be allowed only from a commercial new discovery, thus protects

government's profit share from the current production.

Exploration approval would likely to result in higher reserves, as well as help to

increase plateau production (vision of 300kbpd v/s current guidance of 240kbpd)

in the medium-term. Of the in-place resources of 7.3bboe, Cairn has fully explored

2.2bboe, partly explored 2bboe and rest of 3.1bboe is yet to be explored. Cairn

India stock price of INR337/sh is currently factoring in long-term Brent price of

USD85/bbl (USD99 without factoring in any exploration upsides). Our SOTP stands

at INR350/share. We would be reviewing our recovery estimates post the clarity

from further exploration in the block. We have a Neutral rating, but believe that

the risk-reward is turning favorable.

Exploration approval to lead to increase in production, however, productionmight reach 300kbpd, but unlikely before FY16 In our interaction with the company management, it had indicated that they are

'drill ready' and will start the exploration in the block immediately.

However, considering the timelines for exploration, filing and approval of the

revised FDP (current approval only for 200 kbpd), de-bottlenecking the pipeline

capacity and dealing with other infrastructure requirements, we believe that the

production can reach 300kbpd not before FY16. We currently model in 250 kbpd of

production from the Rajasthan block in FY16.

If FY16E production average were to increase to 300kbpd (20% upside); then Its

EPS will increase by 18% (refer exhibit below for further sensitivity analysis)

Further exploration drilling will likely add reserves and increase fair value The approval is with the ring-fencing caveat, i.e. exploration cost recovery will be

permitted after commercial discovery. We believe that despite ring-fencing, this

is a significantly positive news for Cairn India as it allows the company to add

reserves from its high prospect Rajasthan block.

As per Cairn India, of the 7.3bboe of in-place resources, it has (a) developed

2.2bboe, (b) partly explored 2bboe (includes Barmer Hill), and (c) not yet explored

3.1bboe. This approval will help to (a) explore the 3.1bboe of unexplored

resources, and (b) further explore the partly explored 2bboe resources.

Currently we have modeled in recoverable reserves of 1.2 bboe from the Rajasthan

block.

If we assume higher recoverable reserves in the range of 1.3-1.7 bboe, the SOTP

of CAIR increases to INR 369-419/share at a long term crude average of USD 90/bbl

(refer the table below for sensitivity to crude prices).

January 2013 10

Earnings to increase by 18% in FY16,if production rises to 300 kbpd Every 100 mmbbl addition in reserves add INR10/share to SOTP

Source: MOSL

Cairn India: Rajasthan resource potential


Cairn has historically increased Rajasthanin-place resources (mmbbl) Cairn India: Our base case assumptions

Our current SOTP is based on long-term Brent of USD90/bbl and Fx rate of INR51/USDUSDb INR/sh Remarks

Rajasthan 7.9 227 DCF based, net recovery of 720mmbbl, WACC: 11.5%

Ravva 0.2 6 DCF based

Cambay 0.1 2 DCF based

Less: Net Debt / (Cash) (2.5) (73)

Base Value 10.7 308

Potential Upsides

Rajasthan upside 0.7 20 DCF based, additional 180mmbbl from Barmer Hill

Rajasthan other 0.0 0 530mmbbl prospective resources

prospective resources

Other exploration assets 0.8 22 1bboe resources valued at USD5/boe; 15% of GCoS

Target Price 12.1 350



Y/E March FY11 FY12 FY13 FY14 FY15 FY16

Exchange Rate (USD/INR) 45.6 47.9 54.5 53.0 53.0 51.0

Brent Crude Price (USD/bbl) 86.7 114.5 110.0 105.0 100.0 90.0

Rajasthan gross production (kbpd) 99 128 170.8 195 221 250

Disc. % for Rajasthan Crude (USD/bbl) 12.0 9.4 10.8 12.0 12.0 12.0

Rajasthan net realization (USD/bbl) 76.3 103.7 98.2 92.4 88.0 79.2

January 2013 11

Energy: Singapore GRM up 4% MoM in Dec-12Improved L-H spreads give some respite to RIL; GRM outlook remain subdued

SPECIAL REPORT

3QFY13 Singapore GRM at USD6.5/bbl v/s USD9.1/bbl in 2QFY13: Regional

benchmark, Reuters Singapore GRM was up marginally MoM in Dec-12 to USD5.7/

bbl v/s USD5.4/bbl in Nov-12 led by improvement in all the product cracks (except

LPG). 3QFY13 average now stands at a 2 year low of USD6.5/bbl (v/s USD9.1/bbl in

2QFY13 and USD8/bbl in 3QYFY12) primarily driven by decline in FO cracks

(averaged USD-5.5/bbl in 3QFY13 v/s USD-0.6/bbl in 2QFY13 and USD4.0/bbl in

3QFY12). While, simple refiners (with higher share of FO in product slate) will be

impacted more, complex refiners will not be majorly impacted (lower/nil share

of FO in product slate).

Higher L-H spreads provides respite to RIL; expect 3Q GRM at USD8.5/bbl: The

extent for GRM decline would be lower for complex refiners like Reliance

Industries' (RIL IN, Mkt Cap USD50b, CMP INR848, Neutral) as the (a) Reuters

Singapore GRM fall is driven by Fuel oil (23% in Reuters v/s 4% in RIL slate) and (b)

Light-heavy crude differentials have improved. We peg RIL's 3QFY13 GRM's at

USD 8.5/bbl and given that the headline GRM fall is driven by FO, we believe our

2HFY13 GRM assumption for RIL of USD8.7/bbl might not see downward revision.

Refining segment contribute ~52% to RIL's EBIT and a USD1/bbl variation in GRM

changes RIL's EPS by ~12%.

GRM outlook subdued; global economic rebound key for growth: We expect GRM's

to remain subdued in medium-term due to (a) weak global oil demand (0.8mmbbl/

d in 2013) led by escalated crude prices (still at ~USD 110/bbl); and (b) additional

refining capacity coming up with almost nil refinery closures in last 8-9 months.

Resistance by European governments to shut down the uneconomical refineries

has contributed to the lower overall utilization impacting margins.

Valuation and View: OMC's are trading at attractive valuations and BPCL is our top

pick for its E&P upside potential. RIL's new projects (petcoke gasification and off-

gases cracker) are likely to add to earnings from FY15/FY16, however medium-

term outlook on core business remain weak with RoE reaching sub-15%, Neutral.

RIL GRM premium on Singapore show high correlation to Expect RIL premium on Singapore to increase in 3QFY13Arab L-H differentials (USD/bbl) (USD/bbl)


January 2013 12

MoM GRM movement Analysis: up 4% MoM GRM's MoM were marginally higher at USD 5.7/bbl for Dec-12 against USD 5.4/bbl

in Nov-12. The increase was led improvement in product cracks (except LPG cracks

which declined MoM). LPG cracks declined during the month due to decrease in

prices internationally.

Arab L-H spread improved 16% MoM to USD 4.5/bbl due to increase in premium

charged by Gulf countries on light crude.

Brent oil and USD/INR averages were flat MoM at USD 110/bbl and 54.7 respectively.

QoQ GRM movement Analysis: down 29% QoQ 3QFY13 Singapore GRM stood at USD6.5/bbl v/s USD9.1/bbl in 2QFY13 primarily

due to fall in FO (fuel oil) cracks.

FO cracks averaged USD-5.5/bbl in 3QFY13 v/s USD-0.6/bbl in 2QFY13 led by

weak global demand, especially from Power and Industrial customers Share

of FO is high in simple refiners, while it is lower in the complex refiners

(positive for RIL).

Light-Heavy differentials up meaningfully: US's LLS-Maya Recent drop in Singapore was driven by lower FO cracksand Arab L-H trend (USD/bbl) (USD/bbl)

Source: Company, Reuters, Bloomberg, MOSL

Valero's analysis suggests net capacity additions> demand Our data suggests atleast 1mmbbl/d of capacity additionsin next 2 years

Source: Valero, Industry, MOSL

January 2013 13

Product cracks have also declined for gasoline (-17% QoQ), diesel (-8% QoQ),

jet/kero (-4%), however improved for naphtha (+29% QoQ) and LPG (+24%

QoQ). Gasoline cracks have corrected due to subdued demand (seasonally

weakest quarter of the year) from Europe and US, but cracks are expected to

improve due to planned maintenance shutdowns in 4QFY13.

Light-Heavy differentials up QoQ and YoY: Arab L-H differentials has averaged

USD4.0/bbl in 3QFY13 against USD 3.2/bbl in 3QFY12 and USD 2.5/bbl in 2QFY13.

Also, if we compare differentials as % of Brent prices, then 3QFY13 average is

130bps higher from 2QFY13 average.

Brent-WTI spread widens during 3QFY13: Brent-WTI spread has widened to

average USD22/bbl in 3QFY13 (v/s avg. USD18/bbl in 2QFY13) led by lower Brent

production in North Sea and continued off-take bottleneck at Cushing for WTI.

After reversal of Seaway pipeline, spread has come down from peak of USD29.7/

bbl in Sep-11. As the crude carrying capacity of Seaway increases (from 150 to

400kbpd), and post the likely approval for 700kbpd Keystone XL pipeline, the

differential is likely to come down.

Brent broadly remains flattish; INR remained weak: Brent prices very range bound

at USD ~110/bbl amidst mixed reactions on supply concerns and weakening demand

due to slowdown. INR continued to remain weak and is still hovering at 55 mark.

Historical product crack trend indicates weak FO (new complex refiners have nil FO output) and Naphtha cracks

Brent flat YoY (CY basis) in USD but up 13% YoY in INR terms GRM down YoY (CY basis) in USD but up in INR terms

Source: Company, Reuters, MOSL

* monthly average Source: Company, Reuters, MOSL

January 2013 14

Rangarajan Committee implies gas price at ~USD8/mmbtu

Also refer our detailed report

dated 3 January 2013

SPECIAL REPORTRecommends scrapping cost recovery in PSCs; implementation hinges ongovernment PSC related recommendations suggest moving to revenue sharing (prospectively) from

current cost recovery, thus reducing continuous cost monitoring by the government. Other

recommendations (applicable to current PSCs) suggest setting up of inter-ministerial

committee for fast decision making.

On gas pricing, the committee-suggested formula implies gas price at ~USD8/mmbtu. While

the government would take a final decision on gas pricing, if applicable to all gas producers,

will be most positive for ONGC followed by Oil India and RIL.

The key Rangarajan Committee recommendations are:

(1) To do away with the current cost recovery mechanism and government to share

overall revenues of the contractor without setting off costs, (2) extend income tax

holiday from 7 to 10 years, (3) extend exploration time period for frontier/deep-

water blocks from 8 to 10 years and (4) perform audit by CAG/CAG-empanelled auditors

on the basis of financial materiality of a block.

On domestic natural gas pricing, committee noted that though the PSC provides

for arms-length pricing, it is not possible in India to adopt this route for several

years and hence recommended an unbiased arm's length pricing based on

international prices. Committee suggests to take trailing 12-month average of (a)

volume-weighted net-back pricing at well head for gas producers and (b) volume-

weighted price of US's Henry Hub, UK's NBP and Japan's JCC linked price. The gas

pricing will be uniformly applicable to all sectors and domestic gas allocation will

be based on government's gas utilization policy.

Our view: It is to be noted that historically the government has never implemented

any expert committee's recommendations in totality.

Since the PSC-related key financial recommendations are on prospective basis,

they would not impact current PSCs and hence would not impact the profitability/

NAV of current producing blocks of RIL/Cairn India.

However, the proposed gas pricing formula will have a meaningful impact on

domestic gas producers (RIL, ONGC, Oil India) as RIL's KG-D6 gas price revision is

due in March 2014 and would also influence prices for other gas producers.

Committee's recommendation to determine gas price through arms-length is

positive. However, views/affordabi lity of the key consuming sectors like power

and fertilizer would also weigh heavily on the final gas price decision in March

2014. The higher input price for fertilizer will have implications for the government

through higher subsidy, unless commensurate end-product prices are increased.

Sensitivity of gas price change on domestic producers: While the government would

take a final decision on the recommendations, our sensitivity analysis indicates that

domestic producers shall meaningfully benefit from the proposed gas price formula.

If the gas pricing formula were to be uniformly applied to all domestic gas producers,

ONGC will be the largest beneficiary, and at USD8/mmbtu of gas price, its FY15E EPS

would increase by 30%. While EPS sensitivity for RIL is lower at 6%, it shall benefit

from increased commercial viability of other discoveries, thus increasing its reserves/

production in the future.

January 2013 15

Brent oil price trend (USD/BBL) Brent forward curve (USD/BBL)

n Dec-12 average at USD110/bbl (flat MoM and +2% YoY).

n 3QFY13 average at USD110/bbl (flat QoQ and +1% YoY).

n With continuing worries on the global economic conditions,

OPEC and IEA are reducing their near-term demand

projections, reflected in forward curve.

Crude price differentials (USD/BBL) Henry Hub gas price trend (USD/MMBTU)

YoY oi l production and demand change (%) OPEC crude supply (USD/BBL)

n Dec-12 average at USD3.3/mmbtu (-6% MoM and +6% YoY).

n 3QFY13 average at USD3.4/mmbtu (+18% QoQ and +2% YoY).

n Global product demand: Nov-12 average at 91.6mmbbl/d

was 2.1% higher than 3-yr average of 88.9mmbbl/d.

n Oil demand growth has increased in recent months,

probably due to the winter demand.

n OPEC spare capacity averaged at ~3.0mmbbl/d in the last

3 months (EIA estimate at 2.2 in 2012 and 2.4 in 2013).

n OPEC supply at 30.5mmbbl/d in Nov-12 was down 0.7%

MoM and 1.6% YoY.

Last 3 quarters Brent averaged at USD 110/bblArab Light-Heavy differentials up MoM

OIL MARKET TRENDS

n Arab L-H dif ferential averaged USD4.5/bbl (USD3.9/bbl

during November); while WTI-Maya is negative since Jun-

11 and averaged USD2.9/bbl in Dec-12.

n 3QFY13 Arab L-H at USD4.0/bbl (+61% QoQ and +26% YoY).

0.0

3.0

6.0

9.0

12.0

Dec-04 D ec-06 De c-08 Dec-10 Dec-12

-24

-12

0

12

24Ara b L-H WTI - Maya (RHS)

40

70

100

130

Dec-04 Dec-06 Dec-08 Dec-10 Dec-12

0

4

8

12

16

Dec-04 De c-06 Dec-08 Dec-10 Dec-12

79

84

89

94

Nov-04 No v-06 Nov-08 Nov-10 Nov-12

-4%

0%

4%

8%

Oi l Product Demand ( mmbbl /d) Y oY Change (%) - RHS

25

27

29

31

33

Nov-04 Nov-06 Nov-08 No v-10 Nov-12

2

4

5

7

8

Spare Capacit y (RHS) OPEC SUPPLY

0

40

80

120

160

Dec-01 Apr-05 Aug-08 D ec-11 Ap r-15 Aug- 18

Brent Spot Aug-04 Ma r-06Ma r-10 Ma r-11 Dec-12

January 2013 16

US weekly petroleum data

n US crude inventory declined 11.1mmbbl/d in last week

of December due to holiday season; however it is only

1.4% down as compared to last 1 year average.

n Distillate inventories are ~13% below the last 5-year

average.

n US refinery utilization continues to remain high

(partly assisted by WTI discount to Brent) at ~91%; 6%

above 5 year average.

n Total products supplied showed some recovery and is

now only 1.5% below the last 5-year average.

US distillate inventory (mmbbl) US gasoline inventory (mmbbl)

US total product supplied (mmbbl/d) US refinery utilization (%)

US crude oil inventory (mmbbl)

90

114

138

162

186

1 18 35 52Week

Range ( 2007-11) Average (2007-11) 2012

170

190

210

230

250

1 18 35 52Wee k

Range (2007-11) Average (2007-11) 2012

17

19

20

22

23

1 18 35 52W eek

Range (2007- 11) Aver age (2007- 11) 2012

64

74

84

94

1 18 35 52Week

Range (200 7-11) Average (2007-11) 2012

US Weekly Data Summary (mm bbl)

Week ended Variation (%) from

21-Dec-12 28-Dec-12 WoW WoW (%) 30-Dec-11 YoY (%) 1-Yr Avg 3-Yr Avg 5-Yr Avg

Inventory Data

Crude Oi l 371.1 359.9 -11.1 -3.0 329.7 9.2 -1.4 1.3 4.6

Ga sol ine 223.1 225.7 2.6 1.2 220.2 2.5 6.8 4.4 5.5

Dis ti l l ates 119.4 124.0 4.6 3.8 143.6 -13.7 -2.4 -14.9 -13.2

Products Supplied

Total Produ cts 18.9 18.9 0.0 0.2 18.0 4.8 1.1 -0.5 -1.5

Ga sol ine 8.6 8.5 -0.1 -1.0 8.6 -0.4 -1.4 -4.2 -5.1

Dis ti l l ates 3.7 3.3 -0.5 -12.3 3.5 -7.7 -10.9 -13.2 -14.4

R efinery

Uti l i zation (%) 90.3 90.4 0.1 0.1 85.0 6.4 3.1 5.0 5.9

Imports

Crude Impo rts 8.0 7.1 -0.9 -11.6 9.0 -21.4 -18.1 -20.0 -22.2

Ga sol ine 0.6 0.5 -0.1 -19.1 0.7 -33.7 -25.7 -37.6 -44.1

Yearly variationWeekly variation

250

285

320

355

390

425

1 18 35 52Week

Range (2007-11) A verage (2007-11) 2012

January 2013 17

n Reuters Singapore GRM increased 4% MoM to USD5.7/bbl in Dec-12 and has

averaged USD7.4/bbl in FY13 v/s USD8.3/bbl in FY12.

n We expect GRM's to remain subdued in medium-term due to (a) weak global oil

demand (0.8mmbbl/d in 2013) led by escalated crude prices (still at ~USD 110/

bbl); and (b) additional refining capacity coming up with almost nil refinery closures

in last 8-9 months. Resistance by European governments to shut down the

uneconomical refineries has contributed to the lower overall utilization impacting

margins.

Reuters Singapore GRM (USD/bbl)

0

3

6

9

12

Dec-04 Dec-05 Dec-06 De c-07 Dec-08 Dec-09 Dec-10 De c-11 Dec-12

GRM up 4% MoM led by improvement in cracks (except LPG)

Weak demand, new start-ups, resistance to shut old refineries to lead to lower

margins

GRMS & PRODUCT

SPREADS

Reuters Singapore GRM performance (USD/bbl)Dec-11 Nov-12 Dec-12 MoM YoY 3QFY12 2QFY13 3QFY13 QoQ YoY FY12 FY13 YoY

(USD/bbl) (%) (%) (%) (%) (%) 1 Yr Avg 3 Yr Avg 5 Yr Avg

Singap ore GRM 7.0 5.4 5.7 4.2 -19.4 8.0 9.1 6.5 -29.1 23.1 8.3 7.4 -10.3 7.4 6.8 6.0

Oil, Product Prices and Cracks (USD/bbl)

(USD/bbl) Dec-11 Nov-12 Dec-12 M-o-M

(%)

Y-o-Y

(%)

3QFY12 2QFY13 3QFY13 Q-o-Q

(%)

Y-o-Y

(%)

FY12 FY13 Y-o-Y

(%)

Oil Prices

W TI 98.6 86.7 88.2 1.7 -10.5 94.0 92.2 88.1 -4.4 -6.3 97.3 91.2 -6.2

B rent 107.9 109.7 109.6 -0.1 1.6 109.3 110.0 110.4 0.4 1.0 114.5 109.8 -4.1

Du bai 106.2 107.1 105.7 -1.3 -0.5 106.2 106.2 107.2 0.9 1.0 110.0 106.5 -3.1

In dian Bas ket 107.2 106.5 107.1 0.6 -0.1 107.6 107.6 107.8 0.2 0.3 111.8 107.6 -3.7

Product Prices

LPG 71.2 84.1 79.2 -5.9 11.2 67.6 74.3 83.2 12.0 23.0 75.3 74.1 -1.6

Ga sol in e 111.6 116.5 116.0 -0.4 4.0 114.3 118.8 117.7 -1.0 2.9 121.7 117.8 -3.1

Die sel 123.6 124.0 123.6 -0.3 0.0 124.4 125.7 125.1 -0.4 0.6 128.0 124.2 -3.0

Je t/Kero 122.8 125.4 124.6 -0.6 1.5 124.7 126.7 126.8 0.1 1.7 128.4 125.3 -2.4

Na phtha 98.3 101.7 102.4 0.7 4.2 96.8 99.8 102.7 2.9 6.1 105.3 100.0 -5.1

Fuel Oi l 108.5 100.3 99.5 -0.8 -8.3 110.2 105.6 101.6 -3.7 -7.7 111.2 104.7 -5.8

Product Cracks (v/s Dubai)

LPG -35.0 -23.0 -26.5 -15.3 24.3 -38.5 -31.9 -24.0 24.7 37.6 -34.7 -32.5 6.4

Ga sol in e 5.4 9.3 10.3 10.5 92.8 8.2 12.6 10.5 -17.2 27.9 11.7 11.3 -3.4

Die sel 17.4 16.9 17.9 6.1 3.0 18.2 19.5 17.9 -8.0 -1.6 18.0 17.7 -1.9

Je t/Kero 16.5 18.2 19.0 4.0 14.6 18.5 20.5 19.6 -4.3 5.7 18.4 18.7 1.7

Na phtha -7.9 -5.4 -3.3 40.1 58.8 -9.4 -6.4 -4.5 29.2 51.9 -4.7 -6.6 -40.8

Fuel Oi l 2.3 -6.8 -6.2 9.4 nm 4.0 -0.6 -5.5 -834.5 n m 1.3 -1.8 n m

January 2013 18

Petroleum product-wise spreads

Gasoline spreads (USD/bbl)

Jet/Kero spreads (USD/bbl)

Diesel spreads (USD/bbl)

Naphtha spreads (USD/bbl)

Fuel oil spreads (USD/bbl)

LPG spreads (USD/bbl)

-25

-15

-5

5

15

Dec-04 Dec-06 Dec-08 De c-10 Dec-12

-56

-40

-24

-8

8

De c-04 Dec-06 Dec-08 Dec-10 Dec-12

0

10

20

30

40

Dec-04 Dec-06 Dec-08 Dec-10 Dec-12

-25

-15

-5

5

15

Dec-04 Dec-06 De c-08 Dec-10 Dec-12

n Dec-12 average at USD10.3/bbl v/s USD9.3/bbl in Nov-12

and USD5.4/bbl in Dec-11;

n 3QFY13 at USD10.5/bbl v/s USD12.6/bbl in 2QFY13 and

USD8.2/bbl in 3QFY12.





n Dec-12 average at USD-26.5/bbl v/s USD-23.0/bbl in Nov-

12 and USD-35.0/bbl in Dec-11;

n 3QFY13 at USD-24.0/bbl v/s USD-31.9/bbl in 2QFY13 and

USD-38.5/bbl in 3QFY12.

n Dec-12 average at USD-3.3/bbl v/s USD-5.4/bbl in Nov-12

and USD-7.9/bbl in Dec-11;

n 3QFY13 at USD-4.5/bbl v/s USD-6.4/bbl in 2QFY13 and USD-

9.4/bbl in 3QFY12.





n Dec-12 average at USD-6.2/bbl v/s USD-6.8/bbl in Nov-12


n 3QFY13 at USD-5.5/bbl v/s USD-0.6/bbl in 2QFY13 and USD4/

bbl in 3QFY12.

-4

4

1 2

2 0

2 8

D e c -04 D e c -06 D e c -08 D e c -10 D e c -12

0

1 0

2 0

3 0

4 0

D e c - 04 D e c- 0 6 D e c - 0 8 D e c - 1 0 D e c - 12

January 2013 19

Key polymer price trends (INR/kg) Premium/discount to international prices (INR/kg)

Polymer Prices and Spreads

Dec-11 Nov-12 Dec-12 MoM

(%)

YoY

(%)

3QFY12 2QFY13 3QFY13 QoQ

(%)

YoY

(%)

FY12 FY13 YoY

(%)

Exch. Rate (INR/USD) 52.6 54.8 54.7 (0.2) 3.9 50.9 55.2 54.2 (1.8) 6.4 47.9 54.5 13.6

Naphtha (USD/MT) 865 895 901 0.7 4.2 852 878 903 2.9 6.1 927 877 (5.4)

Naphtha (INR/kg) 48 52 52 0.5 8.3 46 51 51 1.0 12.8 47 50 7.5

International Prices (US$/MT)

PE 1,267 1,342 1,381 2.9 9.0 1,308 1,308 1,357 3.7 3.7 1,382 1,332 (3.6)

PP 1,308 1,405 1,431 1.9 9.4 1,375 1,397 1,413 1.1 2.8 1,481 1,401 (5.4)

PVC 945 937 966 3.1 2.2 909 971 969 (0.2) 6.6 1,050 982 (6.5)

Simple Spreads over Naphtha (USD/mt)

PE 402 447 480 7.3 19.4 456 430 454 5.5 (0.6) 456 455 (0.1)

PP 443 510 530 3.9 19.7 523 519 509 (1.8) (2.6) 555 524 (5.5)

PVC 80 42 65 54.3 (18.7) 58 93 66 (29.4) 13.7 124 105 (14.9)

Domestic Prices (INR/kg)

PE 82.4 87.9 90.4 2.8 9.7 80.3 91.2 89.4 (2.0) 11.2 79.1 90.9 14.8

PP 86.9 90.4 94.2 4.2 8.4 84.0 91.9 92.2 0.3 9.7 84.5 91.8 8.6

PVC 55.5 59.0 61.0 3.4 9.9 53.5 63.5 62.0 (2.4) 15.9 56.9 62.6 10.0

Simple Spreads over Naphtha (INR/kg)

PE 34.5 36.3 38.6 6.2 11.7 34.7 40.3 37.9 (5.9) 9.2 32.5 40.8 25.4

PP 39.1 38.9 42.4 9.1 8.6 38.5 41.0 40.7 (0.6) 5.9 37.9 41.7 10.1

PVC 7.7 7.5 9.2 23.3 20.2 7.9 12.6 10.6 (16.1) 33.5 10.3 12.5 21.6

Prem/(Disc) to International Prices (%)

PE 17.5 13.7 13.9 1.3 (21.0) 14.9 20.3 15.7 (22.5) 5.8 14.0 19.3 38.6

PP 20.2 11.7 14.6 23.9 (27.9) 14.4 13.5 14.6 8.6 1.5 13.8 14.5 5.6

PVC 6.2 9.4 9.9 5.5 58.5 10.1 13.0 12.4 (4.3) 23.2 8.3 11.7 40.6

Petchem margin trendPolymer and Polyester prices improve MoM

Polymers

n International polymer prices recovered during Dec-12 and were up 3%. Naphtha

prices also improved marginally 1% MoM while it was up 4.2% YoY.

n Similarly, even the Domestic polymer prices were up by 3%; with demand showing

signs of improvment. PVC spread over Naphtha recovered strongly from their

bottom and was up 54% MoM.

Polyesters

n Integrated polyester margins were up 3-4% MoM, led by increase in polyester

prices (up ~2% on MoM basis).

-20

0

20

40

60

D ec-04 De c-06 De c-08 De c-10 Dec-12

PE PP PVC

20

40

60

80

100

Dec-04 Dec-06 De c-08 De c-10 De c-12

PE PP PVC

January 2013 20

PP spread over naphtha (INR/kg)

PVC spread over naphtha (INR/kg)

PE spread over naphtha (INR/kg)

Polymer product-wise margins

PE spread overn naphtha (USD/mt)

PP spread over naphtha (USD/mt)

PVC spread over naphtha (USD/mt)

January 2013 21

Polyester price and margin trends

Polyester Prices and Spreads (INR/kg)

Dec‐11 Nov‐12 Dec‐12 MoM

(%)

YoY

(%)


(%)

YoY

(%)

FY12 FY13 YoY

(%)

Polyester Intermediates Prices

PTA 60.0 64.0 66.5 3.9 10.8 63.1 60.1 64.6 7.4 2.3 63.1 62.9 (0.4)MEG 60.4 64.0 64.3 0.5 6.5 63.3 57.7 64.3 11.4 1.7 60.2 59.2 (1.6)

Polyester PricesPOY 89.7 91.5 93.5 2.2 4.2 91.2 93.8 94.0 0.2 3.1 91.8 93.4 1.7

PSF 93.8 96.3 98.3 2.1 4.8 97.1 96.2 98.3 2.2 1.2 97.8 96.5 (1.3)

Integrated Polyester SpreadsPOY 51.7 50.6 52.4 3.7 1.3 55.2 53.3 53.2 (0.3) (3.6) 55.0 53.6 (2.4)

PSF 55.8 55.4 57.2 3.3 2.5 61.1 55.7 57.5 3.2 (5.9) 61.0 56.8 (6.8)

POY spread over naphtha (INR/kg) PSF spread over naphtha (INR/kg)

POY and PSF price trend (INR/kg)PTA and MEG price trend (INR/kg)

MEG spread over naphtha (INR/kg)PTA spread over naphtha (INR/kg)

20

35

50

65

80

Dec‐04 Dec‐06 Dec‐08 De c‐10 De c‐12

PTA MEG

50

70

90

110

130

Dec‐04 Dec‐06 Dec‐08 De c‐10 Dec‐12

POY PSF

6

16

26

36

46

Apr

Ma

y

Jun

July

Aug

Sep

t

Oct

No

v

Dec Jan

Feb

Mar

Min 2008‐12 5 yr range Last 5 yr avg. FY13

0

15

30

45

60

Ap

r

Ma

y

Jun

July

Aug

Sep

t

Oct

No

v

Dec Jan

Fe

b

Ma

r

Min 2008‐12 5 yr range La st 5 yr avg. FY13

28

38

48

58

68

Apr

Ma

y

Jun

July

Aug

Sep

t

Oct

No

v

Dec Jan

Feb

Mar

Min 2008‐12 5 yr range Last 5 yr avg. FY13

22

38

54

70

86

Ap

r

Ma

y

Jun

July

Au

g

Sep

t

Oct

No

v

De

c

Jan

Fe

b

Ma

r

Min 2008‐12 5 yr range La st 5 yr avg. FY13

January 2013 22

Refinery throughput trend

Monthly Comparison

KBPDNov-11 Oct-12 Nov-12

MoM

(%)YoY (%) 3QFY12 2QFY13 3QFY13 QoQ (%) YoY (%) FY12 FY13 YoY (%)

Total 3,462 3,578 3,572 (0.2) 3.2 3,330 3,381 3,575 5.7 7.4 3,354 3,446 2.8

PSUs

HPCL 332 339 311 (8.3) (6.4) 326 292 325 11.1 (0.3) 326 302 (7.4)

BPCL 480 480 431 (10.2) (10.2) 476 469 456 (2.9) (4.3) 452 466 3.0

IOC 1,150 1,107 1,170 5.7 1.7 1,135 1,050 1,138 8.4 0.3 1,120 1,096 (2.1)

MRPL 260 309 321 3.8 23.5 245 288 315 9.5 28.4 258 279 8.4

CPCL 213 193 196 1.1 (8.1) 213 151 194 28.6 (8.5) 213 183 (13.8)

Private

RIL 658 678 673 (0.6) 2.4 651 662 676 2.0 3.8 654 665 1.6

ESSAR 311 411 412 0.2 32.2 226 406 411 1.3 81.9 272 394 44.7

Annual ComparisonQuarterly Comparison

Domestic refining processing trend (kbpd)

1,30

4

1,3

71

1,48

1

1,5

48

1,5

52

1,6

41

1,7

83

1,8

56

1,93

0

2,1

61

2,2

50

2,2

43

2,2

43

2,30

2

2,4

52

2,6

02233 5

14 579

571 591 630 60

9 669 76

6

898 1

,489

1,6

28

1,62

4

1,69

7

- -

1,304 1,3711,714

2,062 2,131 2,2122,374 2,486 2,540

2,8293,016 3,141

3,7313,930 4,075 4,299

FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13E

Public Total

High Crude oi l price and exchange rate keep under

recoveries high

KEY INDIA

STATISTICS

*RIL SEZ refinery volumes not included Source: MoPNG, MOSL

*RIL SEZ refinery volumes included from FY10

We model upstream sharing at 40% in FY13 and FY14

FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E

Fx Rate (INR/USD) 40.3 46.0 47.5 45.6 47.9 54.5 53.0 53.0

Brent (USD/bbl) 82.3 84.8 69.6 86.3 114.5 110.0 105.0 100.0

Gross Under recoveries (INR b)

Auto Fuels 426 575 144 375 812 949 728 679

Domestic Fuels 347 458 316 405 573 712 518 532

Total 773 1,033 461 780 1,385 1,660 1,246 1,211

Under recoveries Sharing (INR b)

Government 353 713 260 410 835 996 648 642

Upstream 257 329 145 303 550 664 499 448

OMC's 163 (9) 56 67 0 0 100 121

Total 773 1,033 461 780 1,385 1,660 1,246 1,211

Under recoveries Sharing (%)

Government 46 69 56 53 60 60 52 53

Upstream 33 32 31 39 40 40 40 37

OMC's 21 (1) 12 9 0 0 8 10

Total 100 100 100 100 100 100 100 100

January 2013 23

Petrol consumption (KBPD) Diesel consumption (KBPD)

Total consumption (KBPD)

Domestic fuel consumption statistics

Overall petroleum consumption growth (in kbpd

terms) was flat YoY led by major fall in demand for

fuel oil. The growth is expected to be better in

2HFY13, due to seasonal factors like festivals and

weather conditions.

Diesel growth, as expected, was lower at 1.7% YoY

- lowest YoY growth since Apr-11. Growth seems to

be impacted by INR5/ltr in Sept-13; higher monsoon

and lower industrial use.

Petrol sales for Nov-12 grew by 13.9% YoY.

Cap on subsidized cylinders impacted LPG sales and

resulted in a negative 4.4% YoY growth.

ATF decline was driven by lower passenger and

cargo traffic.

kbpd

Nov‐11 Oct‐12 Nov‐12 MoM

(%)

YoY

(%)


(%)

YoY (%) FY12 FY13 YoY

(%)

Total 3,173 3,040 3,177 4.5 0.1 3,033 2,915 3,109 6.7 2.5 2,965 3,070 3.6

Key Products

Pe trol 330 363 375 3.5 13.9 347 356 369 3.7 6.4 348 362 4.1

Na phtha 298 287 320 11.3 7.2 275 309 304 (1.9) 10.5 267 297 11.2

LPG 518 488 495 1.4 (4.4) 498 497 491 (1.2) (1.3) 487 493 1.2

Die sel 1,426 1,380 1,450 5.1 1.7 1,379 1,282 1,415 10.4 2.6 1,327 1,403 5.7

Ke rose ne 177 156 163 4.0 (8.0) 172 161 159 (1.1) (7.5) 175 160 (8.8)

ATF 124 109 118 8.3 (4.9) 122 106 114 7.4 (6.4) 118 111 (6.2)

Fuel Oi l 186 149 138 (7.6) (25.9) 172 156 143 (8.1) (16.6) 169 149 (12.1)

Annual ComparisonQuarterly ComparisonMonthly Comparison

*YoY growth is 3 month average *YoY growth is 3 month average

*YoY growth is 3 month average

2,250

2,500

2,750

3,000

3,250

Nov

-08

May

-09

Nov

-09

May

-10

Nov

-10

May

-11

Nov

-11

May

-12

Nov

-12

-10%

0%

10%

20%

30%

To tal YoY (%)

700

900

1,100

1,300

1,500

1,700

No

v-08

Ma

y-09

No

v-09

Ma

y-10

No

v-10

Ma

y-11

No

v-11

Ma

y-12

No

v-12

-10%

0%

10%

20%

30%

Diesel YoY (%)

200

250

300

350

400

Nov

-08

May

-09

Nov

-09

May

-10

Nov

-10

May

-11

Nov

-11

May

-12

Nov

-12

-10%

0%

10%

20%

30%P etro l Yo Y (%)

January 2013 24

GAIL blocks LNG stake sale deal to Qatar Petroleum

GAIL has blocked the Asian Development Bank's (ADB) bid to sell its stake in Petronet LNG

Ltd to Qatar Petroleum Corporation, provoking Qatari energy minister Mohammed bin

Saleh Al-Sada to seek petroleum minister M Veerappa Moily's intervention.

"QPI (Qatar Petroleum) and ADB, with PLL support, have engaged in preliminary evaluator

discussions. I have personally endorsed QPI to move forward as it will be a milestone for

strengthening mutual cooperation between our countries. In light of GAIL's stance, there

could be a possibility that ADB will not be able to proceed further in selling its shares to

QPI," Al-Sada wrote to Moily.

The bone of contention is ADB's 5.2% stake in India's biggest importer of liquid gas in

ships. Petronet is registered as a private firm but is half owned by four state-run oil firms

of IOC, ONGC, BPCL and GAIL. If any of these promoters raise their holding, Petronet

would turn into a state firm in contravention of the basis for going public in May, 2004, and

would require approval for majority shareholders to change the status

ONGC gets project operator's nod for Kashagan stake buy

ONGC, which trumped a strong bid by arch-rival China National Petroleum Corp to bag

ConocoPhillips' stake in Kazakhstan's giant Kashagan oilfield, has won project operator

Eni's approval for its $5 billion acquisition.

In its biggest acquisition till date, ONGC Videsh Ltd, the overseas arm of Oil & Natural Gas

Corp last month agreed to pay US energy giant ConocoPhillips about $5 billion for the 8.4

percent stake in Kashagan, the biggest oilfield discovery in over four decades. The deal is

subject to the approval of governments of Kazakhstan and India and also to other partners

in the Caspian Sea field waiving their right of first refusal. Industry sources said Italy's Eni,

the operator of the first phase of the Kashagan oilfield that is due to start production in

second quarter of 2013, has publicly stated that it will not pre-empt or block the sale.

Eni, ExxonMobil of US, Royal Dutch Shell, France's Total and Kazakhstan's Kazmunaigas

(KMG) hold 16.81 percent stake each in the field, while Japan's Inpex the remaining 7.56

percent. Sources said the partners have 60 days to decide on exercising their right of first

refusal on ConocoPhillips' stake.

NEWS UPDATESIndustry newsDecember 2012

Oil Demand growth estimates from IEA, OPEC, EIA

Oil demand growth (mmbbl/d) 2012 2013 Remarks

IEA (Oil Market Report) 0.67 0.87 Revised 2013 oil demand upwards. Believes that the Chinese

growth sentiment has turned mildly positive.

OPEC (Monthly Oil Market Report) 0.80 0.80 Maintained oil demand forecasts; US oil demand moved from

deep contraction to minor growth.

EIA (Short-Term Energy Outlook) 0.80 1.00 EIA expects global inventories to build during the first half of 2013,

mostly due to continued growth in U.S. and other non-OPEC supply.

Source: IEA/EIA/OPEC/MOSL

January 2013 25

Once all the other five companies in the project waive their pre-emption rights, the deal

will go before Kazakhstan government, which contractually has 180 days to clear it. Sources

said on the previous two occasions when companies sold out of Kashagan, the other

partners pre-empted.

Kashagan holds 33 billion barrels of inplace oil reserves, of which about 10 billion are

potentially recoverable. Of this, OVL's share will be 842 million barrels. The Kazakhstan

government has approved first of the three phases and production is likely to start in

second quarter of 2013. At approved peak from phase-1, OVL's share will be close to 1.6

million tonnes, sources said adding over 25-year period the company's share comes to an

average of 1 million tonnes per annum. Kashagan, the biggest world oilfield discovery

since 1968, may produce 370,000 barrels of oil per day at peak and in subsequent phases,

the output may rise up to 450,000 bpd (22.5 million tonnes per annum). When Phase 2 and

3 are implemented, the OVL's share will be significantly higher, they added.

China finds 5 billion tonnes of oil in 2008-2011

China has made progress in finding natural resources between 2008 and 2011, including

discovery of 5.01 billion tonnes of oil reserves, according to a latest report. Besides, 2.6

trillion cubic meters of natural gas and 279.8 billion tonnes of coal have been discovered,

said the report on land administration and mining resources. China has formed a geological

exploration system that values both public and commercial interests and encourages

investment from multiple social sources, said Xu Shaoshi, the Chinese Minister of Land

and Resources.

During the four years, some 370.8 billion yuan (USD 60 billion) has been spent on mining

resource exploration, up 110 per cent year-on-year. Among the total, central and local

government funds took up only 15.3 per cent, while the rest came from social investment,

Xu said. Meanwhile, a security deposit system to protect the environment in mining areas

has been implemented in 30 provinces so far, Xu was quoted by official Xinhua news

agency as saying.

According to the system, mine owners have to pay a security fee to land administration

organs before they can begin mining. The fee will be returned to the owners if they

successfully repair environmental damage resulting from the mining. If they fail to do so,

the fee will be seized and used by the government to clean up the area.

Rosneft offers India's ONGC role in two Magadan blocks: Minister

Russia's Rosneft has invited the overseas investment arm of India's state-run Oil and

Natural Gas Corp to jointly explore two blocks in the Sea of Okhotsk, Indian Oil Minister

Veerappa Moily has said.

The firm, ONGC Videsh Ltd, is evaluating data relating to the Magadan-2 and Magadan-3

blocks, Moily told lawmakers in a written reply. India imports about 80 percent of its oil

needs and is on the hunt for supplies to power its nearly $2 trillion economy while Russia

is keen to tap its vast offshore reserves. Reuters in October reported that Russia had

offered a stake to ONGC in Magadan-2.

January 2013 26

GAIL completes first phase of Kochi LNG terminal pipeline

State-owned GAIL India Ltd has completed the first phase of pipeline that will connect the

upcoming LNG import facility at Kochi to consumers in Kerala. "Mechanical completion (of

40-km Phase-1) done and ready for gas intake subject to availability of gas from Petronet

LNG Ltd," Minister of State for Petroleum and Natural Gas Panabaaka Lakshmi said in

written reply to a question in the Rajya Sabha.

Petronet is building 5 million tonne per annum liquefied natural gas (LNG) import terminal

at Kochi in Kerala. The facility is likely to be completed in first quarter of 2013 after dredging

of the navigational port is done. The Phase-I of the piepline will connect the Kochi terminal

to Fertilizer and Chemicals Travancore's (FACT) plant, Lakshmi said. The 879-km Phase-II

pipeline to Mangalore and Bengaluru in Karnataka is under implementation and "the

actual physical progress of the project is 64.1 per cent", she added.

"Phase-II of pipeline is passing through the states of Kerala (501 km), Tamil Nadu (312 km)

and Karnataka (66 km)," she said. "As per (GAIL's) Board approval, schedule date of

completion of the project is December 2012 but the project has got delayed." GAIL, Lakshmi

said, acquired Right of Use (ROU) in land from land owners/farmers to lay the pipeline and

compensation was paid as per Petroleum & Mineral Pipelines (Acquisition of Right of

User in Land) Act, 1962. "GAIL has completed the process of acquiring ROU but is unable to

handover RoU to the contractors due to severe resistance from land owners/farmers,"

she added.

Oil marketing companies to float Rs 3,500 crore global tender for ethanol

Public sector oil marketing firms are readying to jointly float a Rs 3,500-crore global tender

to source ethanol, which will have to be mandatorily blended with petrol sold across the

country following the government's directive.

Officials of Indian Oil, BPCL and HPCL, the three state-run oil marketing firms, and the oil

ministry will be meeting over the next few days to finalise the details of the tender, a

person familiar with the matter told ET, adding that the industry will need about 1,000-

1,100 million litres of ethanol a year. The success of the tender is expected to determine

the feasibility of the pan-India roll-out of the 5% ethanol-blended petrol programme,

which is already functional in 13 states. The government had postponed the deadline for

the nationwide roll-out of the programme to June 1, 2013 from December 1, 2012.

Since the oil marketing companies are not in a position to take care of the infrastructure

needed to import, store and transport the material, the tender will involve delivery at

their depots numbering more than 350 across the country. Hindustan Petroleum had,

through its wholly-owned subsidiary HPCL Biofuels, acquired two sugar mills in Bihar that

it revived in the previous fiscal. These units can supply nearly 32.5 million litres, about 10-

12% of the company's annual ethanol requirement.

The three firms had attempted to source ethanol directly from the world's biggest

producer, Brazil, in 2006, when the blending programme was introduced subject to

commercial viability. Between 2006 and 2009, these companies floated tenders to procure

the necessary quantities of ethanol. "Our experience during those three years was that

January 2013 27

the contracted volumes were always significantly lower than the requirement and the

actual supplies would fall short of the contracted volumes," said an official, who did not

wish to be named. In 2009, the process changed with the government fixing the price at Rs

27 per litre. These companies had to float the EoI for the quantities needed, which led to

an improvement in the contracted volumes and supplies.

Though sourcing process is back to the pre-2009 period in some respects, the government

has now allowed import of the commodity. However, blending will prove costly unless

the price of ethanol is lower than the petrol price paid by the oil marketing companies to

the refineries - also known as the refinery transfer price (RTP). According to Indian Oil's

website, the RTP for BS IV petrol was Rs 42.11 per litre in Delhi on December 1, 2012 based

on the global gasoline prices and the exchange rate. "However, this can't be taken as the

maximum acceptable ethanol price straight away, since the ethanol price will have to be

committed for the whole year whereas the petrol price can fall depending on international

prices and rupee movement," said a senior official with an oil marketing company on the

condition of anonymity.

DOE macroeconomic study on LNG exports: key findings

LNG an economic winner for the entire U.S. Economy

"[F]or every one of the market scenarios examined, net economic benefits increased

as the level of LNG exports increased. In particular, scenarios with unlimited exports

always had higher net economic benefits than corresponding cases with limited

exports."

"In all of these cases, benefits that come from export expansion more than outweigh

the losses…"

"In all of the scenarios analyzed in this study, NERA found that the U.S. would

experience net economic benefits from increased LNG exports." "Even with the

highest prices estimated by EIA for these hypothetical cases, NERA found that there

would be net economic benefits to the U.S., and the benefits became larger, the

higher the level of exports."

"In conclusion, the range of aggregate macroeconomic results from this study suggests

that LNG export has net benefits to the U.S. economy."

Exports benefit consumers

"The net result is an increase in U.S. households' real income and welfare."

"All export scenarios are welfare-improving for U.S. consumers…"

"[The] additional sources of income for U.S. consumers outweigh the loss associated

with higher energy prices. Consequently, consumers, in aggregate, are better off as a

result of opening up LNG exports."

Minimal price impacts, no linkage to oil prices

"Natural gas price changes attributable to LNG exports remain in a relatively narrow

range across the entire range of scenarios."

"In particular, the U.S. natural gas price does not become linked to oi l prices in any of

the cases examined."

"However, the effects of higher price do not offset the positive impacts from wealth

transfers and result in higher GDP over the model horizon in all scenarios."

Source: http://lnginitiative.org

January 2013 28

Absolute stock performance (%)

Relative stock performance (%)

STOCK PRICE

PERFORMANCE

Broader markets outperforms O&G index in Dec-12

Value in E&P shoots up BPCL's 1 year absolute returns (our top pick)

6 MONTH ABSOLU TE

17

3

(1)

3

( 4)

1

4

9

5

14

9

(10) 0 10 20

RIL

ONGC

OIL

G AIL

HPCL

BPCL

IOC

Cai rn

IGL

PLNG

GSPL

1 YEAR ABSOLUTE

20

12

8

( 4)

36

62

10

1

(33)

4

7

(50) 0 50 100

R IL

ONGC

OIL

GAIL

H PCL

B PCL

IOC

Cai rn

IGL

PLN G

G SPL

6 MONTH RELATIVE

4

(13)

(8)

(4)

(7)

1

(3)

(9)

(10)

(17)

(11)

(20) (10) 0 10

RIL

ONGC

OIL

GAIL

HPCL

BPCL

IOC

Cairn

IGL

PLNG

GSPL

1 MONTH ABSOLUTE

3

8

8

4

13

8

3

(3)

2

3

6

(20) 0 20

RIL

ONGC

OIL

GAIL

HPCL

BPCL

IOC

Ca irn

IGL

PLNG

GSPL

1 MONTH R ELATIVE

1

6

6

2

12

6

5

2

(4)

1

2

(10) (5) 0 5 10 15

RIL

ONGC

OIL

GAIL

HPCL

BPCL

IOC

Cairn

IGL

PLNG

GSPL

1 YEAR RELATIVE

(16)

(23)

(58)

(21)

(17)

(4)

(12)

(29)

12

38

(14)

(100) (50) 0 50

RIL

ONGC

OIL

GAIL

HPCL

BPCL

IOC

Cairn

IGL

PLNG

GSPL

80

90

100

110

120

Jan

-12

Fe

b-1

2

Ma

r-1

2

Ap

r-1

2

Ma

y-1

2

Jun

-12

Jul-

12

Au

g-1

2

Se

p-1

2

Oc

t-1

2

No

v-1

2

De

c-1

2

O&G In dex Sen sex

January 2013 29

GLOBAL PEER

VALUATIONS

RIL at premium and ONGC at discount compared to global

peers

*All averages are weighted averages

MoPNG: Ministry of Petroleum and Natural Gas; OMC: Oil Marketing Company; GRM: Gross Refining Margin; GoI: Government of India;

IOC: Indian Oil Corporation; HPCL: Hindustan Petroleum Corporation; BPCL: Bharat Petroleum Corporation; ONGC: Oil and Natural Gas

Corporation; GAIL: GAIL (India); EGoM: Empowered Group of Ministers; PSU: Public Sector Unit; PDS: Public Distribution System

M. Cap PE (x ) P/B V (x ) EV/EBIDTA (x )

(USDb)

CY11/F

Y12

CY12/F

Y13

CY13/F

Y14

CY11/F

Y12

CY12/F

Y13

CY13/F

Y14

CY11/F

Y12

CY12/F

Y13

CY13/F

Y14

Integrated Oil Companies

R el i ance Indus tri es 49.1 12.2 12.0 11.8 8.0 9.5 8.8 1.5 1.3 1.2

B i g 5 avera ge 8.6 9.1 9.1 1.9 1.7 1.5 4.0 4.1 4.3

No rth Am eri ca a vera ge 8.6 10.6 10.2 1.3 1.3 1.2 4.0 4.3 4.2

Europ e avera ge 9.3 15.3 9.2 1.0 0.9 0.9 3.7 4.1 3.8

Asi a & Others average 9.3 10.8 9.4 1.5 1.4 1.3 5.6 5.7 5.1

Global Average 9.1 11.4 9.6 1.4 1.3 1.2 4.9 5.1 4.7

Upstream Companies

ONGC 41.8 8.8 8.9 8.0 1.8 1.6 1.4 3.7 3.7 3.1

Oi l Indi a 5.0 8.0 7.8 7.1 3.4 3.6 2.9 4.1 3.9 3.7

Cai rn Indi a 11.4 6.7 5.3 6.0 5.2 3.7 3.4 1.3 1.1 1.0


Europ e avera ge 11.0 10.0 9.9 1.8 1.5 1.4 4.0 3.7 3.6


Global Average 13.6 13.4 12.4 1.8 1.6 1.5 5.3 5.3 4.7


Europ e avera ge 8.8 18.8 9.8 1.3 1.2 1.1 5.6 5.4 5.2

Ja pan average 4.1 4.4 16.9 0.9 1.0 1.0 5.4 12.7 10.3


Global Average 14.4 28.9 14.3 2.0 1.9 1.8 8.6 11.2 8.7

Gas Utili ties

GAIL 8.2 9.7 9.1 8.9 1.6 1.5 1.3 6.4 6.6 6.8

GSPL 0.8 8.1 9.7 9.8 1.7 1.5 1.3 5.1 5.6 5.4

IGL 0.7 11.9 10.3 9.3 3.0 2.5 2.1 6.3 5.4 4.7

Petron et LNG 2.2 12.1 12.5 11.5 3.6 3.0 2.4 8.6 8.5 7.0



Global Average 22.2 21.3 19.6 3.0 3.0 2.8 11.3 10.9 9.7

Petrochemical Companies


Europ e avera ge 13.0 14.1 12.7 2.5 2.3 2.1 7.8 7.3 6.7

Ja pan average 15.9 61.6 24.1 1.2 1.2 1.1 6.8 7.3 7.6


Timely analysis and insights on

all economic data releases and

developments

Our findings and conclusions

based on primary research, so as

to uncover perception and

discover reality

Highlights of interactions with

corporate CEOs. The focus here is

not so much numbers, but what's

behind them

Takeaways and insights from

visits to plant sites, construction

sites, new retail outlets, etc,

with the relevant pictures

What various subject matter

experts have to say on wide-

ranging topics e.g. telecom

policy to terrorism, rural

economy to black economy

Highlights of interactions with

politicians and bureaucrats for

insights into policy matters for

the economy and various sectors

This will highlight the bright

spots in an otherwise bleak

scenario in the economy or any

sector or company Our whistleblower series to

highlight concerns which are

likely to have significant

implications for growth Notes from analysts' diary during

their extended travels, meeting

managements, visiting sites,

conducting channel checks

Sector Periodicals

Product Gallery

January 2013 31

N O T E S

DisclosuresThis report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement

to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been

furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form.

Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates

or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt

or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.

The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or its

affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its af filiates or

employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report . MOSt or any of its affiliates

or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness

for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.

This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision

based on this report or for any necessary explanation of its contents.

MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest

Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.

Disclosure of Interest Statement Companies where there is interest

1. Analyst ownership of the stock None

2. Group/Directors ownership of the stock IOC

3. Broking relationship with company covered None

4. Investment Banking relationship with company covered None

Analyst CertificationThe views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or

will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible

for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

Regional Disclosures (outside India)This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to

law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.

For U.K.This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial

Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to

which this document relates is only available to investment professionals and will be engaged in only with such persons.

For U.S.Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States.

In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state

laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein

are not available to or intended for U.S. persons.

This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional

investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major

institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended

(the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into

a chaperoning agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

This website and its respective contents does not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered

as an advertisement tool. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living

abroad may also be deemed "U.S. Persons " under certain rules.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, Marco

Polo, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.

For SingaporeMotilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors

Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore

to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.

In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:

Nihar Oza Kadambari Balachandran

Email: [email protected] Email : [email protected]

Contact: (+65) 68189232 Contact: (+65) 68189233 / 65249115

Office address: 21 (Suite 31), 16 Collyer Quay, Singapore 049318

Motilal Oswal Securities LtdMotilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025

Phone: +91 22 3982 5500 E-mail: [email protected]

gggasoasoasolll ttttt - motilal · pdf filejanuary 2013 3 1. dgh - pace of e&p approvals...

Documents