Project Report On Petroleum Industry Commerce Essay

Project Report On fossil oil Industry Commerce EssayThe MBA programmed channels student with a fundamental cognition of business sector and organizational functions and activities as well as an exposure to strategical thinking of management. As a part of the curriculum we perk up prepargond a comprehensive project report on oil colour manufacture.The theoretical knowledge is used only when are apply in our practical study. This report contains a brief about the hit maneous stateeum industry playing a vital role in the process of Indian economy. The whole project was accomplished in very clayatic manner starting from collection of information by means of visiting divers(a) websites, books, magazines etc and than analyses it in a proper and suitable way.This report aims to provide information regarding the current position of oil color industry in India. Its growth, ch whollyenges and issues in highly competitive market by adopting liberalization and worldwideization po lices which are touch on the Indian economy particularly in fossil oil sector.ACKNOWLEDGEMENTWe would like to thank all the people who have helped us for making this project possible. first of all we would like to appreciate the tradition of our institute, J.H.P.C.M.T which encourages such(prenominal) activities. We would excessively like to thank Dr. M.R.Parekh director of J.H.PATEL COLLEGE OF MANAGEMENT AND TECHNOLOGY for providing help whenever essential. We grateful acknowledgments the apprize guidance and helpful suggestion offered by our faculty guide Miss Jenita Patel.Finally we alike thankful all our friends to helped us directly and indirectly in our project. We have also devoted with our best possible effort to complete the project.DeclarationWe Thakkar Nikita, Makwana Snehal hereby declare that the COMPREHENSIVE PROJECT REPORT en highborn raw(a) Industry in is a result of our own work and our indebtedness to other work habitualations, references, if any, have be en duly acknowledged.Place (Signature)Date (Name of Student)EXECUTIVE SUMMARYThe project titled as Petroleum Industry has been undertaken with an objective of analyzing the sparing growth in the india market its role for the development of the solid ground. It represents Indias energy films and is the most valuable public as well as private enterprise.As a collective result of private sector and public sector refinery investments in the recentpast, India will turn over known by 2012 as Asias largest refined crop exporter, surpassing Singapore. India will stay one of Asias two largest refined harvest-festival exporters for the anticipated future.India is suddenly find a global raw producing center because of having increasing the depth of product flows and strengthening supply chains oddly clean transport go offs and for high-end industrial product. It also have far-r all(prenominal)ing implications for regional product markets.The business of Indias large scale export oriented improve sector marks the increase of rate of a staple fiber shift in the design of global refining in which growing economies increasingly look to exertion hubs in Asia and the Middle East to supply additive refined product lease.Growth and Evolution of Petroleum Industry in IndiaThe petroleum industry is include the global serve welles of scantyction, exploration, refining, transporting (often by pipelines and oil tankers), and market petroleum products. The largest volume products of the industry are splasholine (petrol) and enkindle oil. Petroleum (oil) is also the raw material for many chemical products, including solvents, pharmaceuticals, pesticides, fertilizers, and plastics.The origin of the Indian oil boast industry can be traced back to the late 19th century, when oil was first struck at Digboi in Assam in 1889.In pick up of the significance of the assail oil sector for overall economic growth, the Government of India announced in1954 that petroleum would be the core sector industry.1954, petroleum exploration production activity was controlled by the governing-owned National Oil Companies (NOCs), namely Oil India Private Ltd (OIL) and Oil Natural Gas Corporation (ONGC).Indias refining capacity has more(prenominal) than trebled in the last 13 years. Reliance Industry is the first refinery industry in Jamnagar in 1999, India has an installed capacity of around 193.5 jillion tpa in April, 2011.The growth is likely to continue with refining capacities expect to touch 255 one thousand million tpa by 2012-13 and 302 million tpa by 2017-18, with a slew of projects announced by both the private and public sector. Today, private sector accounts for 76.5 million tpa (around 39.5 per cent) and public sector oil companies account for close to 117 million tpa (around 60.5 per cent).There has been a healthy growth in Indias petroleum refining capacity in the last five years, is as described by the given table below-Domestic crude oil production million tpa2005-062006-072007-082008-092009-10(Provisional)Total consumption113.2120.7128.9133.6138.2Products from indigenous crude26.628.428.227.027.2Indigenous crude processing28.330.230.028.828.9Products from fractionators4.24.04.14.24.4Total indigenous production30.832.432.331.231.6Import dependence (%)72.873.275.076.777.2Self-sufficiency (%)27.227.025.023.322.8The capacity utilization of Indian refiners for the last a couple of(prenominal) years is described in the table. Indian refiners have also operated at higher operating pass judgment or capacity utilization compared to their regional/global peers implying efficiency in operations.But, import of Indias refining industry is growing, as the interior(prenominal) crude oil production is stable at around 30 million tpa for the last few years.Generally, GDP growth rates and petroleum product consumption are linked. But, in our case, factors like availability of better roads, more fuel efficient vehicles, improvem ents in mass urban transport modes and increased availability of inwrought bollix for industrial sector contributed to more moderate growth in recent times. Indian refineries are clocking higher Gross Refining Margins compared to regional benchmarks a clear sign for competitiveness in refining operations.If all the planned projects materialize, India will have an exportable surplus petroleum product of around 100 million tpa by 2012 and 140 million.Product profileThis component provides a brief description of the technology and production process. An understanding of these issues is critical as it helps understand industry structure.Crude oil is a liquid medley of hydrocarbons chemical compounds consisting roughly of six part of carbon and one of hydrogen, both of which are fuels it generally also carries small quantities of salts sulphur, oxygen, metals and nitrogen.The principal products obtained from the crude oil are-Petrol-Petrol is used to fuel internal combustion engines , mainly vehicular. It is early use as a killer of lice and their eggs has completely disappeared. liquefied petroleum gas (LPG)-LPG is mostly a combination of propane and butane. It is heavier than air, and liquefies under pressure. It is used as a household cooking fuel, vehicular fuel and refrigerant 4 million vehicles are estimated to be world-beatered by LPG in the world.Kerosene-Kerosene is also known as paraffin, is used as an illuminant and cooking fuel in India and other poor countries, and as a space heating fuel in industrial countries.Jet fuel-It is used in squirt planes, is closely akin to kerosene.Naphtha-Naphtha is used to rag additives for high-octane petrol, and to make polymeric plastics and urea, a nitrogenous fertilizer.Lubricating oil-It is consists of greases and viscous oils used to lubricate moving parts in automobiles, industry, railway engines and carriages and marine engines.Petroleum coke-It is mostly used as fuel, but is also used to make dry cell bat teries and electrodes. fast diesel oil-It is used in engines weatherning at 750 revolutions per minute (rpm) or more. It is mostly used in diesel-powered vehicles.Light diesel-It is used in the diesel engines running at lower speed mainly irrigation pumps and generation sets.Furnace oil-It is made by diluting residual fuel oil from refining with midst distillates such as diesel oil. It is used in bunkers, boilers, furnaces, heaters, or as fertilizer feedstock.Demand role of the IndustryPetroleum industry in the country has undergone major(ip) transformation in the past several years. The country is now net exporter of petroleum products. Globalization of Indian economy along with high multinational oil prices which are a pass-through in the bulk sector has induced improvement in energy efficiency and shift of inquire from liquid to natural gas (LNG).Further, improvement in road infrastructure and better vehicles has had a sobering effect on the demand for road transportation f uels. Low demand in transport fuels like HSD and MS is also due to factors like expansion of city gas dispersal networks i.e. CNG.Demand determination factors-The Demand determination factors are based on mainly two approaches. Top-down Approach and Bottom-up Approach.Top-down Approach Overall energy requirements with share of different fuels in the primary commercial energy basket by linking GDP with energy elasticity.Bottom-up Approach End use approach considering the jounce of different parameters. fleck assessing the requirements factors like impact of Metro rail, CNG expansion, impact of high oil prices, conservation/efficiency improvement issues, aviation policy of the Government, Railways freight policy, growth of passenger and pack traffic, fleet expansion plan of airlines, National Highways Authority of India (NHAI) road construction projects, construction of freight corridor, electrification plans of railway tracks vehicle population growth, impact of gas, technologi cal improvements in engine designs, improved fuel efficiency, impact of auto LPG etc. have been measured.The demand of gas is continues to be influenced by the cost economics vis--vis alternative fuels pertaining to each of the end use sectors in India.The power and fertilizer is also the dynamics of these sectors. Currently the consumption of natural gas is shared by the fertilizer and power sector to the tune of 29% and 40% respectively.The power sector is one of the continuous major consumer of natural gas. There has set target of 70,000 generation s forecasted by he ministry of power for the next 5 year period ending 2012.The industry like Petrochemicals/Refineries and Internal Consumption sectors are estimates that the annual economic growth rate of about 7%.Similarly, the iron/steel sector is also estimates same rate for economic growth.Currently the demand for petroleum product is 131.8 MMT in 2011-12 which will increased by 160.2 in 2016-17.The demand for petroleum product i s also depend on the availability of the different products like petrol diesel kerosene naphtha etc.Their prices are the main factor of determining demand of these products.The petroleum refineries must considered the price parity and export parity which considered the transfer in price of petroleum products which depend on the past experience.Players in the IndustryThe various competitors are available in the petroleum industry which including the government and private sector. most of the petroleum companies are huge operations and with billion dollar balance sheet. The oil and gas production and distribution is dominated by government owned companies which are heavily regulated excepting for Reliance Industries. After liberalizing the operations of the companies like Indian Oil Corporation Ltd (IOCL), Hindustan Petroleum Corp. Ltd (HPCL) and Bharat Petroleum Corp. Ltd (BPCL) run billions of dollars in losses as they are forced to sell petroleum products at below their cost.The p olices of government are mostly informal compensating these companies through nones transfers and bonds. more or less government companies like OIL India, ONGC and GAIL which operates in the production and have to bear less of the subsidy burden have grown and performed very well. In the private sector companies like Aban Great Offshore, Essar and Reliance have managed to grow rapidly as well with changeable degrees of success.Here is the list of the major petroleum Companies in India-Indian Oil Corporation Ltd (IOCL)-The IOCL covers the whole hydrocarbon value chain from, pipeline transportation, marketing of petroleum products to exploration production of crude oil gas, marketing of natural gas, petrochemicals and refining. The sales turn over of Indian oil was Rs 271,074 corer and profits of Rs. 10,221 corer in 2009-10. Indian oils cross-country network of crude oil and product pipelines crosswise 10,899 km and the largest in the country, meets the crucial energy needs of th e consumers in an economical, environment and efficient manner.GAIL India-GAIL (India) Limited, is Indias Natural Gas companion, integrating all aspects of the Natural Gas value chain right from discovery to marketing. It emphasizes on clean fuel industrialization, creating a square of green energy corridors that connect major consumption centers with major gas fields in India. GAIL is growing its business to become a player in the International market. The gilds revenue genuineize in 2009-10 was Rs 24,000 corer with net profit of 11%. It is a well managed fast growing company with high competitive barriers in India.RelianceIndustries-It is Indias largest private petroleum company. The company achieving the remarkable growth in the last decade and is diversifying into Retail. In market top more than $30 billion it is Indias most valued company. It is also highly petroleum exporting company of India. The company is one of the largest oil refining and petrochemical complexes in th e world at Jamnagar.Bharat Petroleum Corp. Ltd (BPCL)-it is the major distribution of petroleum, cooking gas and diesel in the Indian market. The companys revenue of Rs 36,000 corer and net profit of 0.5%. due to the government control The company suffer low margins and terrible stock price performance. Which forces the company to sell the product at below the cost? Even after the liberalization with increased global crude prices increasing the losses very much. The company produces a various range of products, from petrochemicals and solvents to aircraft fuel and specialty lubricants and markets them to several international and domestic airlines and hundreds of industries.Hindustan Petroleum Corp. Ltd (HPCL)-The company operates the largest refinery in the country producing Oils of international standards. This Refinery accounts for 40% of the Indias total Oil production. The company has two major refineries producing a large variety of petroleum fuels specialties. one in Mumbai and the other in Vishakhapatnam. Its huge marketing network consists of its zonal regional offices facilitated by a supply distribution infrastructure comprising terminals, aviation service stations, retail issuings, pipeline networks and LPG distributorships. The companys market share accounts for about 20% and 10% of the nations refining capacity. The company revenue earned was Rs 34,000 corer and net profit margin of 0.65% in 2010.ONGC Corporation-The company ranks 3rd in petroleum Exploration Production industry. It produces 803 meg Metric Tones of crude and 485 Billion Cubic Meters of Natural Gas from 111 fields. It is the biggest multinational company with 40 oil and gas projects in 15 countries. The company earned Rs. 20,000 corer with net profit margin of 34% in 2010. NGC holds the largest share of hydrocarbon in India contributes over 79% of Indians oil and gas production.Distribution channel of the industryThe petroleum distribution segment is rapidly adopting differ ent kinds of supply chain solution. From crude oil selection to petroleum product distribution at the retail outlet it is chain with many links. The refining margins, the lead time associated with fundamental functions like product trading and crude buying unpredictability in oil prices make the entire process challenging. Implementation of these solution on a wide spread installations, however, is what the world is watching, as vast petroleum companies fight to chain the business. The petroleum industry has a vital need for both integration and implementation skills for taking the best value out of the differ distribution channel available.Underground, the gas station is quite modern. The tanks for super unleaded and for regular (the midgrade fuel) are larger than the normal tanks. Each tank is equipped with an electronic level check that conveys real time information about its status through a cable to the stations management system and then to the main stock-taking management sy stem for the oil company whose products the gas station markets.The travels from the distribution channel push to demand pull is taking place in the section, where once the challenge was in getting the best deals on buying crude, the focus is shifting to give customer what he wants.The petroleum business is separated into refining and distribution segments. The focuses more on the distribution segment.There is a specific change to focus in the industry toward the distribution segment. The big oil companies have started monitoring the inventories of crude oil or any other petroleum products. The issues at the refining level are which products to make in what quantity? Which crude to use? Which units to run? While the issues at the customer facing end or at the gas station are basic, namely run outs refines.The important functions within the distribution channel are optimization crossways alternative means of transportation, demand forecasting, replenishment method to avoid retains/ run outs finally scheduling, which sequences the dispatch.Marketing and Distribution of Petroleum Products in India-The public sector oil marketing companies (OMCs) which include Hindustan Petroleum Corporation Ltd. (HPCL), Indian Oil Corporation Ltd. (IOCL) and Bharat Petroleum Corporation Ltd. (BPCL) are in the first place responsible for the marketing and distribution of petroleum products in India.With the opening of retail sector for the private players, Shell, Essar and Reliance Industries Ltd. (RIL) have also entered the retail marketing colligate to petroleum products.The marketing and distribution infrastructure in the petroleum sector include liquefied petroleum gas (LPG) distributorships, petrol/diesel stations, lubricants and greases outletsIOCL is the market leader in terms of marketing and distribution of petroleum products.Retail outlets in India-The number of retail outlets (ROs) in India has increased from 31,650 in April 2006 to 40,819 in January 2011.IOCL has the widest network of ROs across India with 19,057 ROs as in January 2011.The number of LPG distributors in India has increased to 9,686 as in 2010 from 6,477 in 20011.Indias Navratna oil marketing companies Indian Oil, BPCL and HPCL- are set to report some other quarter of heavy losses as they have failed to get compensation from the government for selling fuels below cost.The three oil marketing companies (OMCs) sell diesel, LPG for domestic use and kerosene through public distribution system at prices that are substantially below their costs, in accordance with the permission of their majority shareholder.In return, a small part of their losses is made obedient by discounts from upstream like ONGC and Oil India. The larger share of losses is made good by the government. During the June 12 quarter, the three oil marketers together had posted an unique net loss of .Rs40,536 corer as the dues from government did not arrive.The company is expecting most of the demand for Piped na tural gas to come from domestic and commercial consumer sector. Limitation on subsidized LPG cylinders is expected to be a boon for its Piped natural gas business.Consumers dexterity come forward to get a Piped natural gas connection as its rates would be economical compared to LPG cylinders. The running cost of Piped natural gas would be about 10 percent less than the cost of LPG. Piped natural gas is safer and more eco-friendly fuel for the user.As oil marketing companies move chuck out forcefully to decrease their distribution channels for LPG cylinders, the next few months will certainly prove trying for consumers.Currently, oil companies in India are going through a tough task of maintaining positive margins in a very unstable market of crude prices and increasing distribution cost. Oil companies also need to be prepared for active pricing scenarios for the coming future.Hence, the immediate need is to have a complete real time visibility of sales and inventory for perfect de mand forecasts. Integration of different systems and different data to provide single consistent view and information to the oil company management frankincense forming a strong foundation for effective decision making.Key issues and current trendsIssues in petroleum industries-The global economy is a dynamic and ever-growing one in spite of the high cost of energy. This in turn is forging the demand for petrochemicals. The strong growth in demand is not backed by a sufficient supply so the cost is still to come down. Operating rates of major petrochemical product segments are very high presently.Problems face by the India petrochemical industry-The manufacturing units mostly use outdated format of technology and are not able to produce optimallyThere is a requirement for the modernisation of equipmentsExcise duty on synthetic fiber should be rationalizedAnticipation of reservation on Small Scale UnitsPlastic waste to be recycled and the littering habits to be discouragedIndia requ ires advantage on feedstock, so the import cost has to be brought downThe industry should have access to the primary amenities of infrastructure nonpareil of the big issues is the difficulty in predicting the advance price, which will succeed in the market in the future months. Some indications are of course available with the futures prices predominant in the exchanges. Some companies hedge their margins or crude prices by doing paper trading. The forward price is a vital input in the optimization process and can actually make the model for a particular product maximization based on its price.Current trends in petroleum industryPetroleum has proven to be the most flexible fuel source ever discovered, situated at the core of the modern industrial economy. While the industry is strong, it is subject field to some very significant stresses- Industry consolidation (24 mergers and acquisitions since 1997) Global industrial expansion resulting in increased petroleum demand Tight suppli es of economically extractible oil Political instability and terrorism High per-barrel price that accelerates development of alternative energies Safety and the need to protect workers in hostile environments Speed required to establish a presence in new markets Need to spread infrastructure risk among competitorsThese stressors are causing oil companies to change the way they do business. From their cooperation with competitors to their massive investments in technology, from a renewed focus on safety and the environment to serious investigation of alternative fuels, these firms are reshaping the industry. How they manage these changes also influences how they view their real ground holdings and how they house the scientists and engineers who play a vital role in this transformation.The challenges oil and gas companies face are having a significant impact on how they view their real estate holdings and what kind of workplaces they provide their employees. These are important issu es since many companies in this sector have vast real estate holdings. More and more these companies are managing these holdings from an enterprise-wide perspective, running their facilities like any other part of the business. They are realizing that facilities and furnishings can be a strategic tool for achieving the organizations business goals. That focus has several implications for the workplace.Petroleum includes all petroleum-based products, such as gasoline, oil, diesel fuel, kerosene, refined cleaners, and solvents. Organizations involved in upstream (exploring and extracting) and downstream activities (refining and marketing) for these petroleum products are among some of the most profitable companies in the world.Whether they are involved in upstream or downstream activities, whether they are public corporations or state-owned companies, players in the oil industry must operate within the context of significant issues and major trends that are shaping the long-term outlo ok for oil.Oil companies public corporations and state and non-state-owned enterprises are faced with increasing demand for petroleum products due to global industrial expansion.On the one hand, labors to get the conservative oil (produced from underground hydrocarbon reservoirs by means of production wells) have prompted oil companies to invest ever more heavily in technology and equipment. On the other, these firms have increased investments in producing unusual oil, including oil sands, shale oil, and extra heavy crude oil, some of which require additional processing to produce artificial crude.To spread the risk of investing in costly technology, equipment, and processes firms are enter into joint-venture relationships designed to spread infrastructure risk among competitors in order for the entire industry to remain healthy. In some cases, firms have required mergers or acquisitions in order to expand resources for highly technical exploration and advanced production..Other ch anges on the energy scene, particularly increasing prices for both oil and gas, are move several companies to take a broader view of their business. They are transforming themselves through investments in alternative energy sources, including solar, wind, biomass, geothermal energy, and fuel cell technology.The realization that alternative fuels and renewable energy technologies will play an increasingly important role as a bridge between the current focus on hydrocarbons and the clean, cheap cartel of hydrogen has prompted many oil companies to invest heavily in these areas.Using technology to boost productivityThe technology that oil companies provide their employees is principal perimeter, especially where operational efficiencies can be obtained. Management requires solid standard metrics in order to justify investing in technology.India has steadily established itself in the core of the international production of petrochemical and petrochemical related products in the presen t state of affairs. With the economic growth cycle slowing down in the United States, the Asiatic developing nations, especially India, would preferably stand in the global petrochemical market as a producer of these products. This is one of the major challenges facing India petrochemical industry.PESTEL analysisPESTEL analysis stands for Political, Economic, Social, Technological, Environmental and Legal analysis and describes a framework of macro-environmental factors used in the environmental component ofstrategic management. It is a part of the external analysis when conducting strategic analysis and gives an overview of the different macro environmental factors that the company has to take into consideration.Political-Political factors are degree to government intervenes in the economy. Specifically, political factors include areas such as tax policy, labor law, law, trade, tariffs, and political stability. Political factors may also consist of goods and services which the g overnment wants to provide or be provided and those that the government does not want to be provided. Besides, governments have great authority on the health education, and infrastructure of a nation.Economical-Economic factors include growth, interest, exchangeand the inflation. These factors have major impacts on how businesses run and make decisions. For example, interest rates propel a firmscost ofcapital and therefore to what degree a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy.Social-Social factors include the cultural aspects and include health consciousness,population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a companys products and how that company operates. For example, an old population may imply a smaller and less willing workforce (thus increasing the cost of labor). Moreover companies may change a vari ety of management strategies to adapt to these social trends (such as recruiting older workers).Technological-Technological factors include ecological and environmental aspects, such as RD activity, automation, technology incentives and the rate oftechnological change. They can find outbarriers to entry, borderline efficient production level and influence outsourcing decisions. In addition, technological shifts can affect costs, quality, and lead to innovation.Environmental-Environmental factors include weather, humour. Additionally, increasing awareness to climate change is affecting how companies operate and the products they offer it is both creating new markets and diminishing or destroying existing ones.Legal-Legal factors include discrimination, consumer, antitrust, employment law, and health. These factors can affect how a company operates, its costs, and the demand for its products.ConclusionCrude oil is one of the most necessitated worldwide required commodities. Any smal lest amount fluctuation in crude oil prices can have both direct and indirect pressure on the economy of the countries. The instability of crude oil prices group many companies away. Therefore, prices have been regularly and closely monito