Supervisory Economics

Project On
GFT: Gains From Trade

Submitted By
MMS B Sem 1
Group No 7
Chirag Bhatt (67)
Dhaval Dave (77)
Mahek Jhunjhunwala (87)
Meera Panchal (97)
Chirag Shanbhag (107)
Tanvi Indalkar(117)

Introduction
Petroleum products are materials derived from crude oil (petroleum) as it is
processed in oil refineries. Unlike petrochemicals, which are a collection of welldefined usually pure chemical compounds, petroleum products are complex
mixtures. The majority of petroleum is converted to petroleum products, which
includes several classes of fuels.
Primary source of automotive fuels and lubricant oils, petroleum is a complex
mixture of hydrocarbons and paraffin in some areas, and aromatics and cycloparaffins in other areas. Thought to have been formed from decomposition of
animal and vegetable life under heat and pressure during geologic periods, it
occurs usually in deep rock strata but sometimes near to the surface. When
'cracked' and refined, it produces hundreds of petrochemicals that are converted
into tens of thousands of products, with new ones appearing continually.
Crude petroleum (crude oil) contains about 80 percent carbon compounds, 11
percent hydrogen, and 1 to 2 percent of nitrogen, oxygen, and sulfur. In most oil
fields, oil and natural gas occur together, gas being the top layer on crude oil under
which water may lie. One barrel of petroleum equals 5604 cubic-feet of natural
gas, 1.45 barrels of liquefied natural gas (LNG), or about one barrel of gas oil also
called crude oil or mineral oil.
Refine Petroleum Product:
Refined petroleum products are derived from crude oils through processes such as
catalytic cracking and fractional distillation. These products have physical and
chemical characteristics that differ according to the type of crude oil and
subsequent refining processes. Several examples of refined petroleum products and
their properties include:
Gasoline: a lightweight material that flows easily, spreads quickly, and may
evaporate completely in a few hours under temperate conditions. It poses a risk of
fire and explosion because of its high volatility and flammability, and is more toxic
than crude oil. Gasoline is amenable to biodegradation, but the use of dispersants is
not appropriate unless the vapors pose a significant human health or safety hazard.

Kerosene: a lightweight material that flows easily, spreads rapidly, and evaporates
quickly. Kerosene is easily dispersed, but is also relatively persistent in the
environment.
Fuel Oil: a lightweight material that flows easily, spreads quickly, and is easily
dispersed. This fuel oil is neither volatile nor likely to form emulsions, and is
relatively non-persistent in the environment.
Fuel Oil: a medium-weight material that flows easily, and is easily dispersed if
treated promptly. This fuel oil has a low volatility and moderate flash point, and is
fairly persistent in the environment.
Fuel Oil (Bunker B): a medium-weight to heavyweight material with a low
volatility and moderate flash point. Preheating may be necessary in cold climates,
and this fuel oil is difficult, if not impossible, to disperse.
Fuel Oil (Bunker C): a heavyweight material that is difficult to pump and requires
preheating for use. This fuel oil may be heavier than water, is not likely to dissolve,
is difficult or impossible to disperse, and is likely to form tar balls, lumps, and
emulsions. It has a low volatility and moderate flash point.
Lubricating Oil: A medium weight material that flows easily and is easily
dispersed if treated promptly. This oil has a low volatility and moderate flash point,
but is fairly persistent in the environment.

Sector Overview
Indian Oil Corporation (IOC), Indias flagship national oil company and
downstream petroleum major, was incorporated on June 30, 1959 as Indian Oil
Company. The company was renamed as Indian Oil Corporation on September 1,
1964 following the merger of Indian Refineries (established 1958) with it. The
Indian Oil Group of companies owns and operates ten of India's 20 refineries with
a combined refining capacity of 60.2 million metric tonnes per annum (MMTPA,
.i.e. 1.2 million barrels per day). The corporation's crosscountry network of crude
oil and product pipelines, spanning over 10,000 km and the largest in the country,
meets the vital energy needs of the consumers in an efficient, economical and
environmentfriendly manner.
The company operates the largest and the widest network of petrol and diesel
stations in the country, numbering over 18,278. It reaches Indane cooking gas to
the doorsteps of over 53 million households in nearly 2,700 markets through a
network of about 5,000 Indane distributors.
IOC has joined the league of global technology providers with the selection of its
inhouse developed INDMAX technology (for maximizing LPG yield) for the 4
MMTPA Fluidized Catalytic Cracking (FCC) unit at the Corporation's upcoming
15 MMTPA grass roots refinery at Paradip in Orissa, as well as for the FCC unit
coming up at BRPL. A whollyowned subsidiary, Indian Oil Technologies, is
engaged in commercializing the innovations and technologies developed by Indian
Oil's R&D Centre.
IOC is currently forging ahead on a well laidout road map through vertical
integration upstream into oil exploration and production (E&P) and downstream
into petrochemicalsand diversification into natural gas marketing, bio fuels, wind
power projects, besides globalization of its downstream operations.
Overseas ventures of the corporation includes two blocks (86 and 102/4) in Sirte
Basin and Areas 95/96 in Ghadames basin of Libya, Farsi Exploration Block in
Iran, onshore farmin arrangements in one block in Gabon, one on land block in

Nigeria, one deep water offshore block in TimorLeste and two onshore blocks in
Yemen. In all, Indian Oil has 12 domestic exploration blocks, including two blocks
where gas discoveries have been made and nine overseas exploration blocks, and
the Farsi block in Iran where commerciality of gas discovery has been established.
In natural gas business, IOC sold 1.849 million tonnes of the product in 200809.
A technology innovation has been initiated to reach LNG (Liquefied Natural Gas)
directly to the doorstep of bulk consumers in cryogenic containers for industrial as
well as captive power applications.
For over two decades now, Indian Oil has been providing technical and manpower
secondment services to overseas companies. Such services have been extended to
Emirates National Oil Company (ENOC), Kenya Pipeline Company and Aden
Refinery, Yemen. For the first time, SAP implementation / IT consultancy was
provided in Sri Lanka. Consultancy on pipelines was provided to Greater Nile
Petroleum Operating Company (GNPOC), Sudan.
Indian Oil has set up subsidiaries in Sri Lanka, Mauritius and the United Arab
Emirates (UAE), and is simultaneously scouting for new business opportunities in
the energy markets of Asia and Africa.
Shell Oil Company is the United States-based subsidiary of Royal Dutch Shell,
multinational "oil major" of Anglo-Dutch origins, which is amongst the largest oil
companies in the world. Approximately 22,000 Shell employees are based in the
U.S. The U.S. head office is in Houston, Texas. Shell Oil Company, including its
consolidated companies and its share in equity companies, is one of America's
largest oil and natural gas producers, natural gas marketers, gasoline marketers and
petrochemical manufacturers.
Shell is the market leader through approximately 25,000 Shell-branded gas stations
in the U.S. which also serve as Shell's most visible public presence. Shell Oil
Company is a 50/50 partner with the Saudi Arabian government-owned oil
company Saudi Aramco in Motiva Enterprises, a refining and marketing joint
venture which owns and operates three oil refineries on the Gulf Coast of the
United States.

Shell products include oils, fuels, and car services as well as exploration,
production, and refining of petroleum products. The Shell Oil Refinery in
Martinez, California, the first Shell refinery in the United States, supplies Shell and
Texaco stations in the West and Midwest.
Shell gasolines previously included the RU2000 and SU2000 lines (later there was
a SU2000E) but they have been superseded by the V-Power line.
In 1997, Shell and Texaco entered into two refining/marketing joint ventures. One
combined their Midwestern and Western operations and was known as Equion. The
other, known as Motiva, combined the Eastern and Gulf Coast operations of Shell
Oil and Star Enterprise, itself a joint venture between Saudi Aramco and Texaco.
After Texaco merged with Chevron in 2001, Shell purchased Texaco's shares in the
joint ventures. In 2002, Shell began converting these Texaco stations to the Shell
brand, a process that was to be completed by June 2004 and was called "the largest
retail re-branding initiative in American business history. In the year 2016, Shell
Nederland Raffinaderij BV (Shell Pernis) said that it has started a new aromatics
unit at the large Pernis refinery in Rotterdam, the Netherlands.
GROSS DOMESTIC PROGRESS
India is the 6th largest consumer of petroleum
By the year 2010, India is expected to rank 4th in terms of consumption of
energy
The contribution of the Indian Oil and Natural Gas Industry is nearly US$
13.58 billion
All of the oil refineries in India, apart from two are operated by the states
The total refinery output in the period 2005-06 was 130.11 million tonnes
The growth rate of the refinery output was increased by 2.1 % in the year
2005-06
The crude oil output at the end of 2006-07 was 33.98 million tonnes
The growth rate of the crude oil output was increased by 5.6% in the year
2006-07
The production of natural gas in the year 2006-07 was 31.55 billion cubic
meters

 Indian petroleum demand depends highly on import of oil and natural gas
Around 70% of the demands are fed by the imports of oil and natural gas

OIL SUPPLY AND DEMAND IN INDIA

In June 2015, total crude oil imports were valued at US$ 8.7 billion. In FY14,
imports accounted for more than 80 per cent of the countrys total oil demand.
Despite being a net importer of crude oil, India has become a net exporter of
petroleum products by investing in refineries designed for export, particularly in
Gujarat
Backed by new oil fields, domestic oil output is anticipated to grow to 1.0
mbpd by FY16
ELASTICITY
To better understand petroleum markets, the authors established the importance of
the deviation of inventory levels away from a normal level, where the normal
level is comprised of seasonal movement and a general trend. Since supply and
demand for petroleum are less elastic to price in the short run than is inventory, it
is this deviation or relative inventory level that plays the role of absorbing
unexpected shifts in demand and supply. They demonstrated theoretically that the
demand for relative inventory must be negatively related to price. They estimated
the relative inventory levels and associated short-run price elasticity for several
OECD countries and groups of countries, and found that short-run price elasticity

of demand for relative inventory is negative and statistically significant,

supporting the theoretical arguments. (JEL Q40)

FINANCIAL REPORT
Parameter(2015 Indian Oil
-16)
Corporation (IOC),
( Cr.)
Net Profit
Revenue
Net Income
Share Capital
Assets

1,03,99
4,45,526
4,871
2,427.95
111,917

Shell Oil
Company
( Cr.)
1,93,900
26,500
27,215.6
2613
34015.7

FINDINGS AND INTERPRETATION

Brand Indian Oil Corporation

Name
Limited IOCL
Royal Dutch Shell
Category
Oil & Gas
Oil & Gas
Sector
Energy
Energy
Lets Go; You can be sure of Shell; Made
Tagline/ Slogan
The energy of India
move further
India's
most
well
USP
reknowned brand
One of the six world's "supermajor"
STP
Corporates,
countries,
individuals looking to fulfill Corporates, countries, individuals looking
Segment
energy needs
fulfill energy needs
Enterprises looking for
energy for production, Enterprises looking for energy f
people for petrol diesel for production, people for petrol diesel f
Target Group
vehicles and domestic uses vehicles and domestic uses
IOCL provides energy to The leading oil and natural gas brand in th
Positioning
entire India
world
SWOT
Strengths
1.India's largest commercial
enterprise with a strong
brand name
1.Biggest name in the field of energy
2.Has
around
50% 2.Strong brand equity being the 2nd large
petroleum products
energy company
3.Operates 10 refineries in
India
3.High financial growth
4.Huge distrubtion network
through retailing
4.Latest technology
5.Accounts for a 47% share 5.Co-branding with Ferrari
in the petroleum products
market, 34.8% share in
refining capacity and 67%
downstream
sector
pipelines capacity in India

Weaknesses

Opportunities

6.Has
over
35,000
employees
7.
Loyalty
programs
like XTRAPOWER Fleet
Card Program is aimed at
Large Fleet Operators
1.Legal issues
2.Employee management

6.Operations in over 90 countries havin

44,000 stations

1.Bharat Petroleum
2.Hindustan Petroleum
3.Reliance
Industries
Limited
4.ONGC

1.Chevron Corporation
2.Exxon Mobil

1.Legal issues
2.Over statement of oil reserves controversy
3.Ambiguous corporate communicatio
3.Bureaucracy
affected marketing
4.Volatility in the crude 4.Human Rights and environmental issu
market & subsidy burden
degraded image
1.Increasing fuel/oil prices 1.Acquisitions by buying out competition
2.Increasing natural gas
market
2.Increasing demand for fuel
3.More oil well discoveries
4.Expand export market
1.Government regulations
1.Government regulations
2.High Competition
2.High Competition
3.Environmental laws
4.Economic instability

Threats
Competition

Competitors

3.BP
4.Total

FUTURE SCOPE
INDIAN OIL
The company should utilize the debt funds more efficiently to maximize
shareholders return.

 Increasingly firms are moving from secured debt to unsecured debt in order to
free their assets.
For IOCL, to issue maximum number of share to the public and they have to
reduce the share price is minimum. And IOCL try to fulfill the limit of authorized
share capital.
IOCL have to reduce total debts of the company against of issuing more share to
the public.
IOCL, Need to minimize the degree of financial leverage .otherwise which will
be affect in future period of time.
The company should try to increase the profit before interest and tax so that the
Investments in the firm are attractive as the investors would like to invest only
where the return is higher.
The company can invest in marketable securities to improve its cash position.
IOCL can try to reduce the secured loan because secured loan can be affect the
assets of the company in future.
SHELL:
Global energy demand will continue to increase through 2050, potentially
doubling from the level consumed in 2000
Carbon dioxide emissions "must be half today's [level] to avoid serious
climate change"
Renewables "could supply up to 30 percent of the world's energy" in 2050
In 2050, coal will still provide three times as much total energy as solar; the
global proportion of wind energy will be far smaller yet
Natural gas will play an increasing role in electricity generation

 It will also become more important as a vehicle fuel, both in liquid natural
gas (LNG) form for commercial vehicles and as a feedstock for synthesized
motor fuels
Liquid fuels are the sole alternative that can be used by every form of
transport: city cars, long-distance cars, light and heavy trucks, rail,
ships, and aircraft
Natural gas (in compressed form or as liquid petroleum gas) can be used for
city and long-distance cars and light trucks
Hydrogen, too, can be used for city and long-distance cars and light trucks
But the H2 Mobility Hydrogen initiative in Germany shows that building a
hydrogen-fueling infrastructure requires collaboration among many parties
Those include automakers, Federal and local governments, transnational
bodies like the EU, other funders, and third-party suppliers
Electric cars are suitable for city use; for long-distance travel and in light
trucks, they can be used "only with major restrictions

CONCLUSION
What is clear about petroleum is that it will continue to play a large role in our
lives in the near to medium term future. While technologies are being invented to
reduce our dependence on fossil fuels, it will be several decades before they
become commonplace and affordable. Some of the major car manufacturers across
the world estimate that it will be at least 2025 before electric vehicles are
competitive in terms of cost and performance with petroleum powered vehicles.
Even if the world the world switched to an energy source independent of
petroleum, one must not forget the fact that petroleum is an integral part of modern
life in terms of the things it is used to make beyond a gasoline and other fuels.
Objects as diverse as plastics, pharmaceuticals, and cosmetics use various aspects
of petroleum as foundations in chemical reactions. In fact, our tremendous reliance
on petroleum for manufacturing and not for fuel is all the more reason to be
conservative about simply burning it to drive across town.