India’s place in the new Asian

landscape –
Petchem supply demand and
competitiveness
Kishor Jhalaria
Reliance Industries Ltd.
20 Aug 2018
Forward Looking Statement
This presentation contains forward-looking statements which may be identified by their
use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,”
“estimates” or other words of similar meaning. All statements that address expectations
or projections about the future, including, but not limited to, statements about the strategy
for growth, product development, market position, expenditures, and financial results, are
forward-looking statements.

Forward-looking statements are based on certain assumptions and expectations of future

events. The companies referred to in this presentation cannot guarantee that these
assumptions and expectations are accurate or will be realised. The actual results,
performance or achievements, could thus differ materially from those projected in any
such forward-looking statements. These companies assume no responsibility to publicly
amend, modify or revise any forward looking statements, on the basis of any subsequent
developments, information or events, or otherwise.

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AGENDA

1.Indian Economy: Growth & Outlook

2.Implications for Petrochemicals in India
3.Indian Petchem Demand and supply
and competitiveness

3
A few interesting facts about India
7th largest country by area, 2nd most populous ~ 1.3 Bn People

At ~ 7.4 % GDP 2018-19 (F), India is the fastest growing economy

Growth in per capita purchasing power - Household savings 3x in last
8 years
Youngest Nation – Expected average age of ~29 years by 2025
Burgeoning Consumption – Will have largest middle class population
by 2027
Low cost YET highly skilled manpower: 2nd most no. of English
speakers
Highly diversified: 29 states, multiple languages, dialects – Allows
mass customization of goods and services

India – World’s most diverse nation

Sources: IMF, Reuters, World Bank, World Economic Forum 4

Economy is Scaling new heights, against all odds
Sensex crosses 37500
for the first time even as
Brent crude spiked
above $75/barrel in July
2018

After 150 years, India emerges as

India overtakes 2nd fastest
UK to become growing market in
the world’s 5th passenger cars
largest and aviation
economy

5
Sources: IMF, Reuters, World Bank
Indian Economy is at an inflection point

India’s GDP In the midst of an expansion

Sustained & to position India as one of
$3 Trn. 5 Faster growth
rates
the three largest
economies in the world

$2 Trn. 8 Has reached an

inflection
This inflection point reflects the
growth trajectory of developed
point economies
$1
Trn. 60 Requires sustained
India’s GDP
growth pegged at investment in basic
~7- 8% p.a. building blocks, like
Years taken to
Petrochemicals
reach

Sources: IMF, Reuters, World Bank 6

Rising Incomes Feeding Aspirations

India – GDP Growth Rate Forecast, IMF Growth in %

8.1
7.7 7.8 7.9

7.2
6.8

2016 2017
2018 2019 2020 2021

➢ Consumption spiking across markets

➢ Affordable housing Avg. Household 2441 6393 18448
➢ White goods Income ($)

➢ Branded goods & apparels

➢ Automobiles
➢ Electronics

Continued growth is driving up purchasing power

Source: BCG CCI proprietary income database; BCG analysis, IMF forecast July’17 7
Well Structured Government Initiatives such as…
GST
• Robust integrated comprehensive tax compliance
• Widening tax base, reducing cost of operation
Make in India
• To raise share of manufacturing from 16% of GDP (current)
to 25%
• Built on four pillars: New Processes, New Infrastructure, New
Sectors, New Mindset
Infrastructure Development Initiatives
• Investing in roads, railways and ports
• Connectivity to remote parts of the country
• Shelter and power to all Indians
….Causing a tectonic shift from Un-organized to Organized
economy

8
 Changing macro trends driving growth across
industries
• Economic & Population
Growth
• Increasing Urbanization
& Changing
Demographic Mix CAGR 20.6% CAGR 41.4% CAGR 15.7%
• Increasing Energy
Demand & Production
• Higher Disposable
Incomes
• Rapid Digitization
• Sustainability CAGR CAGR 15.9% CAGR
PV 13.4% | CV 12.2% 8.7%

CAGR estimates for FY 16-20 (E)

Primary “enablers”(aka Petrochemicals) set to grow to at

an exceptional rate
Sources: Assocham-TechSci Research report | NEC Technology and Assocham study | CMA, CMIE Database, TechSci
Research | SIAM, NEMMP 2020, TechSci Research; | ASSOCHAM-IITTM study; | PHD Chamber of Commerce 9
AGENDA

1.Indian Economy: Growth & Outlook

2.Implications for Petrochemicals in India
3.Indian Petchem Demand and supply and
competitiveness

10
Petrochemicals: Demand Drivers

• Rising middle class • Infrastructure

• Higher disposable • Housing
Income • Automobiles
• Imp in standard of Eco • Electronics good
living Growth
• LOCAL SUPPLY
• Retail –Food • Make in India
packaging Demand
Drivers • Swachh Bharat
• Agriculture/ • Smart Cities
Irrigation
• GST
• Healthcare
• Automobiles New Govt. • Food Security
end Policies /
• White Goods
uses Program

Robust macro trends & evolving demographics driving demand

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 Petchem Per Capita Consumption - India v/s
World Per Capita Consumption –(Kg/person)
2017 (E)
PE ➢ India’s Per Capita
Polymers
4.0

PP
consumption
12.8 20

3.7
lower across
9.2 18.3

PVC
2.6 all key 5.7 12.4

PET
0.9 Petrochemical
2.9 3.8
Elastomer

PBR /
products
SBR 0.39 ➢ Low Consumption
0.96 1.55

and a large
Fibre

Fibre
5.8population →
12 17.2

India
Huge volume
Global Avg. China

Strong, growing & sustainablepotential

consumption
and demand
Sources: Consultant Estimates, RIL Internal Estimates 12
In Summary …………
India getting uniquely positioned for RAPID
Petrochemicals Growth:

➢ Conducive Government Policies

➢ Economical Stability – Robust Fundamentals
➢ Young and Skilled Man Power
➢ Huge Demand Potential across all Sectors
➢ But a HIGHLY Competitive Market

Best of India is yet to arrive….

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AGENDA

1.Indian Economy: Growth & Outlook

2.Implications for Petrochemicals in India
3.Indian Petchem Demand and supply and
competitiveness

14
Polyolefins Capacity in India
Polyolefins Players & Capacities in India
PP PE

Doubled in past 2 years

Domestic PE capacity
• ~2.5 MMT PE capacity addition by RIL, OPAL,
2.9 GAIL & BCPL (past 24-36 months)
• Sizeable proportion of PP integrated with
refinery FCC’s
• PP capacity nearly at par with PE (no on-
2.2 purpose
0.4 C3”)
0.6
0.3
1 0.9 0.1
0.7 0.7 0.5 0.4 0.2

Sources: Consultant Estimates 15

 Global Ethylene Cash Cost Curve Steepened
with Rising Crude…
1200 Other Smaller
European & JKT Gas Crackers &
Q2/2019 Q1/2019 Q2/2018 Naphtha Crackers MTO

1000 Asian
Naphtha
Cash Cost ( $ / MT E+P)
Crackers Q1 2019: Crude ~72.1 $/bbl
US Gas
800 Crackers

Q4 2018: Crude 63.9 $/bbl

600 Middle East
Gas
Crackers
Q1 2018 Crude 49.7 $/bbl
400

Various Indian Crackers

200

0
2 11 21 32 39 45 52 58 64 72 79 84 89 94 100 106 114 121 128 137 143 147 151 157 162 166 169

Cumulative Global Ethylene Capacity (MMT)

Note: Crude prices are average of Dubai Crude for the quarter (Source: RIL internal estimates) 16
 Indian PE market balance
10
Demand Capacity
8

6
MMT

0
2010 2017 2025E
• HPCL Mittal Energy planning to add 1.2 MMT PE
capacity over next 4-5 years (refinery integrated)
• GAIL / HPCL JV Mixed feed cracker in East Coast of
India (20??)
• Mega-refinery cum petchem complex in West Coast of
Sources: Consultant Estimates India (20??) 17
Indian PP market balance
10
Demand Capacity
8

6
MMT

0
2010 2017 2025E
• IOCL’s 700 KTA PP capacity (Paradip) is expected to come in 2019
• HPCL Mittal Energy planning to add 500 KTA PP capacity over next
4-5 years (refinery integrated)
• GAIL / HPCL JV Mixed feed cracker in East Coast of India (20??)
• Mega-refinery cum petchem complex in West Coast of India (20??)

Sources: Consultant Estimates 18

India PVC Supply Demand
6
Demand Capacity

4
MMT

0
2010 2017 2025E

• DCW Ltd to add 60 KTA PVC capacity

• GAIL/HPCL JV to build 300 kta PVC in East
Coast India (20??)
Sources: Consultant Estimates 19
In Conclusion ……………

Unparalleled Demographic Advantage in India

Various initiatives of Government of India

Home market with high growth potential

Improvement in Purchasing Power, wealth distribution

Integration with oil refining - Reasonably competitive
cost position

INDIA POISED FOR RAPID GROWTH ACROSS

MULTIPLE PETCHEMS FAMILIES

Sources: IMF, Reuters, World Bank, World Economic Forum 20

 Quote from IMF (Aug-2018)

• Indian economy is an elephant that’s starting to run

• India can be almost what China was for the world

economy

• India has 3 decades before it hits the point where the

working age population starts to decline

• IMF views India as a “long run source of global growth”

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