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An

Assignment

ON

“Oil and Petroleum Industry Analysis”

An Assignment ON “Oil and Petroleum Industry Analysis” A report submitted in partial fulfillment of the

A report submitted in partial fulfillment of the Requirement of MBA program of

ICFAI Business School, Ahmedabad

Submitted to:

Prof. Swaroop Dutta

SUBMITTED BY:

Hardik Barot Neha Desai Foram Thakkar

Ayush Sharma

Prashant Choksi

Indian Oi l Company Limited- SWOT and PESTEL analysis

Brief Profile of IOCL

IndianOil is India’s flagship national oil company with business interests straddling the entire hydrocarbon value chain – from refining, pipeline transportation and marketing of petroleum products to exploration & production of crude oil & gas, marketing of natural gas, and petrochemicals. It is the leading Indian corporate in the Fortune 'Global 500' listing, ranked at

the125th.

With over 34,000-strong workforce, IndianOil has been helping to meet India’s energy demands for over half a century. With a corporate vision to be the Energy of India, IndianOil closed the year 2009-10 with a sales turnover of Rs. 271,074 crore and profits of Rs. 10,221 crore.

At IndianOil, the operations are strategically structured along business verticals - Refineries, Pipelines, Marketing, R&D Centre and Business Development – E&P, Petrochemicals and Natural Gas. To achieve the next level of growth, IndianOil is currently forging ahead on a well laid-out road map through vertical integration— upstream into oil exploration & production (E&P) and downstream into petrochemicals – and diversification into natural gas marketing and alternative energy, besides globalisation of its downstream operations. Having set up subsidiaries in Sri Lanka, Mauritius and the United Arab Emirates (UAE), IndianOil is simultaneously scouting for new business opportunities in the energy markets of Asia and Africa.

With facilities at multiple locations and ever-expanding market opportunities, IndianOil is poised to become an integrated energy company with steady forays into Oil Exploration & Production, Petrochemicals and Renewable Energy.

Reach and Network

IndianOil and its subsidiaries account for over 48% petroleum products market share, 34% national refining capacity and 71% downstream sector pipelines capacity in India. With a steady aim of maintaining its position as a market leader and providing best quality products and services, IndianOil is currently investing Rs. 47,000 crore in a host of projects for augmentation of refining and pipelines capacities, expansion of marketing infrastructure and product quality upgradation.

The IndianOil Group of companies owns and operates 10 of India's 20 refineries with a combined

The IndianOil Group of companies owns and operates 10 of India's 20 refineries with a combined refining capacity of 62.7 million metric tonnes per annum (MMTPA, .i.e. 1.25 million barrels per day). IndianOil’s cross-country network of crude oil and product pipelines, spanning 10,899 km and the largest in the country, meets the vital energy needs of the consumers in an efficient, economical and environment-friendly manner.

The IndianOil Group of companies owns and operates 10 of India's 20 refineries with a combined

It has a portfolio of powerful and much-loved energy brands that includes Indane LPGas, SERVO lubricants, XtraPremium petrol, XtraMile diesel, etc. Validating the trust of 56.8 million households, Indane has earned the coveted status of ‘Superbrand’ in the year 2009.

The IndianOil Group of companies owns and operates 10 of India's 20 refineries with a combined

IndianOil has a keen customer focus and a formidable network of customer touch-points dotting the landscape across urban and rural India. It has 18,643 petrol and diesel stations, including 2,947 Kisan Seva Kendras (KSKs) in the rural markets. With a countrywide network of 35,600 sales points, backed for supplies by 167 bulk storage terminals and depots, 98 aviation fuel stations and 88 LPGas bottling plants, IndianOil services every nook and corner of the country. Indane is present in almost 2764 markets through a network of 5095 distributors. About 7,593 bulk consumer pumps are also in operation for the convenience of large consumers, ensuring products and inventory at their doorstep.

IndianOil’s ISO-9002 certified Aviation Service commands an enviable 63% market share in aviation fuel business, successfully servicing the demands of domestic and international flag carriers, private airlines and the Indian Defence Services. The Corporation also enjoys a 65% share of the bulk consumer, industrial, agricultural and marine sectors.

Redefining the horizon

Redefining the horizon In <a href=Petrochemicals , IndianOil is investing Rs. 20,000 crore (US$ 4 billion) by the year 2011-12. It offers a full slate of products including Linear Alkyl Benzene (LAB), Purified Terephthallic Acid (PTA), and an extensive range of polymers. IndianOil holds a significant market share of LAB in India and exports to 19 countries. A state-of-the-art 120,000 tonnes per annum Styrene Butadiene Rubber (SBR) unit is underway at Panipat. The SBR unit will further strengthen IndianOil’s presence in the speciality petrochemicals sector. In Exploration & Production , IndianOil’s domestic portfolio includes ten oil & gas blocks and two Coal Bed Methane blocks. The overseas portfolio includes nine blocks spread across Libya, Iran, Gabon, Nigeria, Timor-Leste and Yemen. Exploration activities are at of for various stages of progress. In addition, as part consortium, IndianOil has been awarded Project -1 in the Carabobo heavy oil region of Venezuela. To boost E&P activities, IndianOil has incorporated Ind-OIL Overseas Ltd. – a special purpose vehicle acquisition of overseas E&P assets – in consortium with Oil India Ltd. Natural Gas marketing is another thrust area for IndianOil with special focus on City Gas Distribution (CGD) business. The Corporation has entered into franchise agreements with several CGD players to market Compressed Natural Gas through its retail outlets. IndianOil’s joint venture with GAIL India Ltd. - Green Gas Ltd. – has been authorised to take up city gas distribution at Agra. A long term gas supply agreement has been signed with NTPC. Venturing into alternative fuels IndianOiI has forayed into alternative energy options such as wind, solar, bio-fuels and nuclear power. A 21 MW wind power project is operational in the Kutch district of Gujarat and the cumulative power generation from the 14 wind turbine generators has crossed 6.6 crore units (KW/Hr) since commissioning in January 2009. The solar power initiative is being spearheaded on a pilot basis in Orissa, Karnataka and the Northeast and an all-India phased roll out is underway. Solar products such as solar lanterns and torches are being sold through the Retail Outlets in " id="pdf-obj-3-4" src="pdf-obj-3-4.jpg">

In Petrochemicals, IndianOil is investing Rs. 20,000

crore (US$ 4 billion) by the year 2011-12. It offers a full slate of products including Linear Alkyl Benzene (LAB), Purified Terephthallic Acid (PTA), and an extensive range of polymers. IndianOil holds a significant market share of LAB in India and exports to 19 countries. A state-of-the-art 120,000 tonnes per annum Styrene Butadiene Rubber (SBR) unit is underway at Panipat. The SBR unit will further strengthen IndianOil’s presence in the speciality petrochemicals sector. In Exploration & Production, IndianOil’s domestic portfolio includes ten oil & gas blocks and two Coal Bed Methane blocks. The overseas portfolio includes nine blocks spread across Libya, Iran, Gabon, Nigeria, Timor-Leste and Yemen. Exploration activities are at

Redefining the horizon In <a href=Petrochemicals , IndianOil is investing Rs. 20,000 crore (US$ 4 billion) by the year 2011-12. It offers a full slate of products including Linear Alkyl Benzene (LAB), Purified Terephthallic Acid (PTA), and an extensive range of polymers. IndianOil holds a significant market share of LAB in India and exports to 19 countries. A state-of-the-art 120,000 tonnes per annum Styrene Butadiene Rubber (SBR) unit is underway at Panipat. The SBR unit will further strengthen IndianOil’s presence in the speciality petrochemicals sector. In Exploration & Production , IndianOil’s domestic portfolio includes ten oil & gas blocks and two Coal Bed Methane blocks. The overseas portfolio includes nine blocks spread across Libya, Iran, Gabon, Nigeria, Timor-Leste and Yemen. Exploration activities are at of for various stages of progress. In addition, as part consortium, IndianOil has been awarded Project -1 in the Carabobo heavy oil region of Venezuela. To boost E&P activities, IndianOil has incorporated Ind-OIL Overseas Ltd. – a special purpose vehicle acquisition of overseas E&P assets – in consortium with Oil India Ltd. Natural Gas marketing is another thrust area for IndianOil with special focus on City Gas Distribution (CGD) business. The Corporation has entered into franchise agreements with several CGD players to market Compressed Natural Gas through its retail outlets. IndianOil’s joint venture with GAIL India Ltd. - Green Gas Ltd. – has been authorised to take up city gas distribution at Agra. A long term gas supply agreement has been signed with NTPC. Venturing into alternative fuels IndianOiI has forayed into alternative energy options such as wind, solar, bio-fuels and nuclear power. A 21 MW wind power project is operational in the Kutch district of Gujarat and the cumulative power generation from the 14 wind turbine generators has crossed 6.6 crore units (KW/Hr) since commissioning in January 2009. The solar power initiative is being spearheaded on a pilot basis in Orissa, Karnataka and the Northeast and an all-India phased roll out is underway. Solar products such as solar lanterns and torches are being sold through the Retail Outlets in " id="pdf-obj-3-16" src="pdf-obj-3-16.jpg">

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Natural Gas marketing is another thrust area for IndianOil with special focus on City Gas Distribution (CGD) business. The Corporation has entered into franchise agreements with several CGD players to market Compressed Natural Gas through its retail outlets. IndianOil’s joint venture with GAIL India Ltd. - Green Gas Ltd. – has been authorised to take up city gas distribution at Agra. A long term gas supply agreement has been signed with NTPC.

Venturing into alternative fuels

Redefining the horizon In <a href=Petrochemicals , IndianOil is investing Rs. 20,000 crore (US$ 4 billion) by the year 2011-12. It offers a full slate of products including Linear Alkyl Benzene (LAB), Purified Terephthallic Acid (PTA), and an extensive range of polymers. IndianOil holds a significant market share of LAB in India and exports to 19 countries. A state-of-the-art 120,000 tonnes per annum Styrene Butadiene Rubber (SBR) unit is underway at Panipat. The SBR unit will further strengthen IndianOil’s presence in the speciality petrochemicals sector. In Exploration & Production , IndianOil’s domestic portfolio includes ten oil & gas blocks and two Coal Bed Methane blocks. The overseas portfolio includes nine blocks spread across Libya, Iran, Gabon, Nigeria, Timor-Leste and Yemen. Exploration activities are at of for various stages of progress. In addition, as part consortium, IndianOil has been awarded Project -1 in the Carabobo heavy oil region of Venezuela. To boost E&P activities, IndianOil has incorporated Ind-OIL Overseas Ltd. – a special purpose vehicle acquisition of overseas E&P assets – in consortium with Oil India Ltd. Natural Gas marketing is another thrust area for IndianOil with special focus on City Gas Distribution (CGD) business. The Corporation has entered into franchise agreements with several CGD players to market Compressed Natural Gas through its retail outlets. IndianOil’s joint venture with GAIL India Ltd. - Green Gas Ltd. – has been authorised to take up city gas distribution at Agra. A long term gas supply agreement has been signed with NTPC. Venturing into alternative fuels IndianOiI has forayed into alternative energy options such as wind, solar, bio-fuels and nuclear power. A 21 MW wind power project is operational in the Kutch district of Gujarat and the cumulative power generation from the 14 wind turbine generators has crossed 6.6 crore units (KW/Hr) since commissioning in January 2009. The solar power initiative is being spearheaded on a pilot basis in Orissa, Karnataka and the Northeast and an all-India phased roll out is underway. Solar products such as solar lanterns and torches are being sold through the Retail Outlets in " id="pdf-obj-3-59" src="pdf-obj-3-59.jpg">

IndianOiI has forayed into alternative energy options such as wind, solar, bio-fuels and nuclear power. A 21 MW wind power project is operational in the Kutch district of Gujarat and the cumulative power generation from the 14 wind turbine generators has crossed 6.6 crore units (KW/Hr) since commissioning in January 2009. The solar power initiative is being spearheaded on a pilot basis in Orissa, Karnataka and the Northeast and an all-India phased roll out is underway. Solar products such as solar lanterns and torches are being sold through the Retail Outlets in

rural and urban areas. With a view to investing in the nuclear energy sector in the country, IndianOil has entered into an agreement with the Nuclear Power Corporation of India Ltd.

IndianOil has the largest captive plantation – over 1,000 hectares – for bio-fuel production in India which is underway in Chattisgarh and Madhya Pradesh, generating rural employment of over 1.4 lakh man-days. To straddle the complete bio-fuel value chain, IndianOil has formed a joint venture with the Chhattisgarh Renewable Development Authority. IndianOil CREDA Biofuels Ltd. has been formed to carry out farming, cultivating, manufacturing, production and sale of biomass, bio-fuels and allied products and services in Chattisarh. In Uttar Pradesh, IndianOil is establishing a model value chain for the production of bio-diesel. A MoU for collaborating on commercial production of bio-diesel from algae has also been signed with PA LLC.

IndianOil. The Energy of India

rural and urban areas. With a view to investing in the nuclear energy sector in the

As a leading public sector enterprise of India, IndianOil has successfully combined its corporate social responsibility agenda with its business offerings, meeting the energy needs of millions of people everyday across the length and breadth of the country, traversing a diversity of cultures, difficult terrains and harsh climatic conditions. The Corporation takes pride in its continuous investments in innovative technologies and solutions for sustainable energy flow and economic growth and in developing techno- economically viable and environment-friendly products & services for the Benefits to the customers.

Business in which IOCL operates :

An energy self-sufficient India can alter the economic, political and manufacturing landscape of the region. Its quest for energy will create new economic and strategic challenges, right from mobilising capital to engaging in subtle diplomacy.

IndianOil’s own performance in the financial year 2006-07 was a case of 'exceeding expectations' with both turnover and profits reaching new highs, product sales registering a quantum jump, and the refineries as well as pipelines network enhancing their capacities beyond 60 MMTPA and registering record throughputs. New projects worth Rs. 10,000 crore were put on stream during the year. Among new businesses, the petrochemicals and natural gas verticals and participating interests in a clutch of oil & gas assets in India and abroad has ensured expansion of the upstream portfolio.

IndianOil has ambitious investment plans of Rs. 43,250 crore in the next five years. By 2011-12, the IndianOil Group, with 80 MMTPA refining capacity in its fold, would be playing a key role in realising India’s bid to emerge as an export-oriented hub for finished products. The pipelines network, which provides strategic logistics advantage to the marketing operations, is also set to cross the 10,000 km mark in the next two years.

In marketing, IndianOil is set to leverage the combined strength of over 32,000 marketing touch points, with focus on hitherto untapped rural markets, non-fuel revenues and pure retailing business. IndianOil aspires to be Asia’s leading commercial R&D organisation in the downstream hydrocarbon sector by building on its capabilities in developing innovative technologies, products and processes, and nodal research in alternative fuels.

Beyond core businesses, IndianOil is working to emerge as a major player in the petrochemicals business by the year 2011-12, with two petrochemical hubs shaping up at Panipat and Paradip. In natural gas business, it is attempting quantum growth in LNG imports, infrastructure and marketing, besides city gas distribution. In the high-risk business of oil exploration & production, IndianOil’s consortium approach with established players is paying off well in terms of exceptional Government support and successful forays in India and abroad. Its current interests are focussed on oil equity and sourcing of natural gas, predominantly from African and CIS countries, by leveraging its downstream capabilities to form joint venture partnerships with reputed enterprises overseas.

With India’s energy needs projected to grow by 40% in the next five years, the future is indeed full of promise for IndianOil; a future the 31,700 strong IndianOil team shall build as they fuel the dreams of over a billion of their countrymen.

Vision and Mission

Vision and Mission

Mission

To achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through value of products and services, and cost reduction.

To maximize creation of wealth, value and satisfaction for the stakeholders.

To attain leadership in developing, adopting and assimilating state-of-the-art technology for competitive advantage.

To provide technology and services through sustained Research and Development.

To foster a culture of participation and innovation for employee growth and contribution.

To cultivate high standards of business ethics and Total Quality Management for a strong corporate identity and brand equity.

To help enrich the quality of life of the community and preserve ecological balance and heritage through a strong environment conscience.

Products of IOCL :

IndianOil is not only the largest commercial enterprise in the country it is the flagship corporate of the Indian Nation. Besides having a dominant market share, IndianOil is widely recognized as India’s dominant energy brand and customers perceive IndianOil as a reliable symbol for high quality products and services.

Benchmarking Quality, Quantity and Service to world-class standards is a philosophy that IndianOil adheres to so as to ensure that customers get a truly global experience in India. Our continued emphasis is on providing fuel management solutions to customers who can then benefit from our expertise in efficient sourcing and least cost supplies keeping in mind their usage patterns and inventory management.

IndianOil is a heritage and iconic brand at one level and a contemporary, global brand at another level. While quality, reliability and service remains the core benefits to our customers, our stringent checks are built into operating systems, at every level ensuring the trust of over a billion Indians over the last four decades.

Our Retail Brand template of XtraCare(Urban), Swagat(Highway) and Kisan Seva Kendras(Rural) are widely recognized as pioneering brands in the petroleum retail segment. IndianOil’s leadership extends to its energy brands - Indane LPG, SERVO Lubricants, Autogas LPG, XtraPremium Branded Petrol, XtraMile Branded Diesel, XtraPower Fleet Card, IndianOil Aviation and XtraRewards cash customer loyalty programme.

Some of the Core products of IOCL are listed below. Indane Gas Auto Gas Natural Gas Petrol/Gasoline Diesel/Gas Oil ATF/Jet Fuel SERVO lubricants and greasess Kerosene Bulk/Industrial Fuel – Furnace Oil, Light Diesel Oil and LSHS Petrochemicals- Lab HMW, Lab LMW, PTA and Polymers Special Products- Benzene, CBFS, Food Grade Hexane, Jute Batching Oil, Propylene

Crude Oil

SWOT Analysis for IOCL

External environment

Opportunity: -

The IOCL has much opportunity in the present market conditions. This is because the petroleum products are become a need for everyone and still contains a lot of scope for customization. The various opportunities are listed below.

Since the company has the maximum number of out lets and also the maximum no. of refineries in India, it can very easily go for extension at any point of time, and can introduce any new products, which will get support from its huge market network.

The company can make the buying process more easy for the customers, by implying many more schemes in the range of XTRAPOWER AND XTRAREWARD.

The company can think over the issue to build its own pipelines, so that it will be a

independent player and it will also support its aviation fuel supply. Company has a great scope in E&P. It already operates in this business but in a limited scale.

Threats: -

Since the company is the market leader in the field , so have maximum threats from the other players and many other issues. The lists of threats are given below.

The foreign players with more advanced technology are the biggest threat

for the company. The crude oil supply is also a big issue in front of the company, because

the company cannot fix its price and so, some time had operate in loss also. it is the biggest problem because the maximum part of their crude is been imported. In future the market will welcome more private players, which will eat up its market share.

If the Govt. Policies allow the private players to set their own price, the the private player can seriously harm the market share of IOCL.

Internal environment

Strengths

IOC controls 10 refineries, by virtue of which it has a total share of around 40% of India’s overall refining capacity. IOC has also acquired equity stakes in CPCL and BRPL, and in 2001, these refineries became subsidiaries of IOC.

58% of IOC’s refining capacity is located in the Northern and Western regions, which are high demand and high growth areas.

Although its refineries are located the interior of the country, and not near the major ports IOC has a very strong distribution network by virtue of having a share of 48% in the country’s product pipelines. The total capacity of these product pipelines is 49.79 MMT.

IOC also acquired management control of the marketing company IBP, thereby

strengthening its position in these activities. It also has a dominant share in all segments in terms marketing infrastructure. Its network includes 19830 retail outlets, 8000 LPG distributors, and 6492 kerosene/LDO dealers. By virtue of entering into extensive joint venture agreements, and of its own initiative as

well, the company has a presence in various other related activities such as petroleum storage, pipelines, lube additives, exploration, petrochemicals, gas, training and consultancy, etc. The company has already entered overseas markets such as Sri Lanka, Maldives, and Oman and is presently considering entering Turkey through a JV. The company is in talks with Caliak of Turkey to set up a 10 million TPA grassroot refinery with an investment of $2 billion and establish retail business. IOC is also weighing the possibility of entering Indonesia.

IOC has also started exploring the overseas markets for increasing its scope of operations. Its interests include downstream activities in Sri Lanka, Maldives, Oman, and Nepal; interest in the lubes business in Maldives, Dubai, Bangladesh, Sri Lanka, etc; among others.

Weakness:-

The company is the market leader in the industry, but still it had many weakness. The list is given below.

The major weakness for the company is the R&D. The company starts working on it.

The petrochemical product development technology is another weakness for the company.

The technological drawback, as compared to some major foreign player is another weakness for the company.

PEST Analysis

Economic environment:

The gradual reduction of tariff protection has ensured that prices of most goods in countries like India are closer to global levels or even much lower. The lower prices are much more extensive in the services sector, which accounted for 52.4% of the Indian economy in 2004- 05.The use of GDP based on purchasing power parity in the calculation of oil intensity is also validated by the fact that the figures on oil consumption are measured in terms of volumes of input (million tons of oil equivalent-mtoe) while the GDP estimated on the market exchange rate gives only the value of output and not the actual volumes. It is only the GDP estimated on a purchasing power parity basis which gives some indicator so the volume of output which should form the basis of cross country comparisons of output and estimation of oil intensity therein. However, though the oil intensity in India is comparatively much lower than in most other developed and developing countries the negative impact of high oil prices on the economy is accentuated by the distorted pattern of oil consumption in India.

PEST Analysis Economic environment: The gradual reduction of tariff protection has ensured that prices of most

Social Cultural Environment

Social cultural variation in the Indian context, is very important for any company to work in it. The India is basically can be divided into four major regions on the basis of language , demography and also the income states. These are the south, north, east and west. The IOCL as a company also operates differently in different regions and also use different languages to attract people towards them. This is also, a reason for which the company have three refineries in the south region out of eleven in total. And that also because of the merger with MRPL a local regional company.

Natural Environment

The company IOCL is very much concern about the environmental polices of it and also very strictly follow every small norms of it. The mission of the company is very clear; “To develop techno-economically viable and environment-friendly products”. All because of it that the company wins SCOPE Meritorious Awards for Environmental Excellence & Sustainable Development and Good Corporate Governance.

Technological Environment

In today's dynamic business environment, innovation through a sustained process of Research & Development (R&D) is the only cutting edge tool for organisations to thrive. Indian Oil has, till date, invested close to Rs. 1,000 crore in setting up world-class facilities at its R&D Centre and it plans to invest about Rs. 500 crore during the period 2007-12 to maintain its leadership in downstream R&D activities in the hydrocarbon sector. This the reason , thats why IOCL have the India's first experimental H-CNG (Hydrogen-Compressed Natural Gas) dispensing unit at the

R&D Centre campus at Faridabad and has been in the forefront of technology development for Bio-diesel production from various edible and non-edible oils and its application in vehicles. Pioneering studies by India Oil’s R&D Centre established that Bio-diesel produced from Jatropha seeds were at par with that produced from vegetable oils.

Political – Legal Environment

The political and legal environment for the whole oil industry is very essential. In India the entire oil industry is been governed by OIL Ministry and OIDB a Govt body. This two institutes are responsible for all the decision related to the price, quality specification etc. Beside this the international politics also affect this international commodity “Oil” a lot and also its companies. Any company operated in India had to work according to the norms and on the prices specified earlier by Govt bodies.