1

Feb. 2006 Mumbai

Contents

HPCL – A Profile

Current Scenario

Initiatives

2
HPCL - An Overview

A Fortune 500 company - 2005

Rank
Turnover 436
Profit 412
An Integrated downstream refining and marketing company
Crude Thruput : 13.94 MMT
Market Sales : 20.09 MMT
Pipeline Thruput : 6.05 MMT
Market Capitalization : Rs.110 Bn.
Shareholders : Over 1 Lac
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 Financial Highlights

Rs. Billion FY 03 FY 04 FY 05

Turnover 526.98 563.33 646.90

Net Profit 15.37 19.04 12.77

Net Worth 66.79 77.43 84.41

GRM ($/Bbl) 4.4 4.5 5.3

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 Market Sales

Market
HPC Sales
Market (MMT)
Sale (in MMT) HPC Market
Market Share
Share (Apr/Dec05)

19.5 20.1 Overall 16.9 %

0.8 0.9
20
14.4
5.8 Retail 21.5 %
15 6.0 0.8

2.3 2.5 3.9 Ind. & Cons. 10.2 %

10
1.9
10.5 10.9 Aviation 15.6 %
5 7.9

0 LPG 25.3 %
FY 04 FY 05 A/D 05

Retail LPG Direct Sales Exports Lubricants 31.6 %

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Contents

HPCL – A Profile

Current Scenario

Initiatives

6
 Crude/ Product Price Mismatch

Apr-Dec Apr-Dec % Change Current

05 04
Oil Prices

Brent Crude Oil ($/Bbl) 56.66 40.31 44.56 58.12

Indian Basket ($/Bbl) 54.29 37.55 44.58 56.86

Product Prices

MS (Sing) ($/Bbl) 63.74 47.70 33.63 64.60

HSD (AG) ($/Bbl) 64.01 45.40 40.99 63.04

SKO (AG) ($/Bbl) 68.13 47.86 42.25 70.57

LPG ($/MT) 452.78 367.09 23.34 625.00

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 International Price Trend

80
78.39
75
Fluctuations in
Crude – Product cracks 71.78
70
65.42
65
61.36 64.95
59.79
60
60.23 60.54
55 53.68

53.81
50
42.79 49.47
45

40 36.88 43.38

35
32.37
30
Apr-04

Apr-05
Jul-04

Jul-05
Jan-05

Jan-06
Oct-04

Oct-05
Indian Basket of Crude Gas Oil (AG) Gasoline (Sing)
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 30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00

1.6
A p r-0 4
M ay -0 4
Ju n -0 4
Ju l-0 4
US$ / Bbl

A u g -0 4
S ep -0 4
O ct-0 4

12.1
N o v -0 4
D ec-0 4
Jan -0 5
F eb -0 5

Brent
M ar-0 5
A p r-0 5
M ay -0 5

Dubai
Ju n -0 5
Ju l-0 5
A u g -0 5
6.4

S ep -0 5
Fluctuating Heavy / Light Crude Spread

O ct-0 5
N o v -0 5
D ec-0 5
Jan -0 6
2.6

F eb -0 6
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 Gross Marketing Margins on MS & HSD
Rs / KL
5000
MS Actual Margin
4000
3000
2000 Normal Margin
1000
0
-1000
-2000
-3000 HSD Actual Margin
-4000
-5000
Apr-04

Jun-04

Apr-05

Jun-05
Aug-04

Aug-05
Oct-04

Feb-05

Oct-05

Feb-06
Dec-04

Dec-05
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 Current Subsidies on SKO (PDS) & LPG (Dom.)

PDS SKO Dom LPG

(Rs./Ltr) (Rs./Cyl)

Total Subsidy to Customer 14.04 237.73

Subsidy given by Govt. 0.82 22.58

Subsidy absorbed by Oil Companies 13.23 215.15

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HPCL Performance in Current Fiscal

Crude Thruput : 9.7 MMT

Market Sales : 14.4 MMT

Net Loss : Rs. 16.08 billion

Loss incurred for the first time

Negative Margins on MS & HSD

High subsidies on SKO & LPG

Changes in Duty structure impacting refining margins

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Steps taken to reduce Industry losses

Increase in Retail Selling Prices : In June 2005 & Sept. 2005

Loss sharing by Upstream companies : ~ Rs. 140 billion

Loss sharing by Refineries : ~ Rs. 54 billion

Likely to issue bonds in current fiscal towards the subsidy impact

Target value for the Industry: ~ Rs. 115 billion

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 Rangarajan Committee on Pricing

Recommendations of the Committee :

MS/HSD:

Reduction in Custom duty on MS & HSD -10% to 7.5%

Trade Parity Pricing for MS & HSD

‰ Mix of Import Parity & Export Parity - 80:20

Specific Excise Duties on MS & HSD

‰ Rs.14.75/Ltr on MS and Rs.5/Ltr on HSD

Retail pricing of MS & HSD to be fully market determined

‰ Increase in RSP : MS - Rs.1.21/ Ltr, HSD - Rs.1.96/ Ltr

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 Rangarajan Committee on Pricing

Recommendations of the Committee :

SKO/LPG:

SKO Subsidy to be limited to BPL families

LPG Subsidy to be phased out by 2007.

‰ One time price increase of Rs.75/Cyl and gradual price increases

to remove subsidy.

Increase cess on ONGC/OIL crude to Rs.4800/MT –

‰ Cess to be used for subsidy on SKO & LPG

Govt. to bear total Subsidy on PDS SKO & Dom. LPG

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Contents

HPCL – A Profile

Current Scenario

Initiatives

16
Refinery Initiatives

Yield Improvements

Installing residue conversion facilities (Delayed Coker)

LPG yield increased by 40% and MS by 25%

Quality up-gradation projects

Compliance of Euro III Emission control norms ~ Rs. 35 billion

Upgradation of Lube Oil Base Stock for Grade II Lubricants

Oil Price Risk Management desk to be operational shortly

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Refinery Initiatives

Capacity Additions and Expansions

Mumbai Refinery from 5.5 to 7.9 MMTPA
Visakh Refinery from 7.5 to 8.3 MMTPA
‰ Plans to go up to ~ 12 MMTPA

New Grass Root refinery

Self sufficiency thru new refinery at Bhatinda in North
‰ Possible participation of BP being discussed
Exploring feasibility of setting up of export oriented refinery at
East Coast
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 Pipelines

Existing Pipelines
Visakh – Secunderabad 572 Kms 5.38 MMTPA
Mumbai – Pune 161 Kms 3.67 MMTPA
Mangalore – Bangalore (JV) 362 Kms 5.60 MMTPA

Pipeline Extension
Mumbai-Pune to Solapur 352 Kms 4.30 MMTPA
Target completion by Sep. 06 at a cost of Rs 3.35 billion

New Pipeline
Mundra – Delhi 1048 Kms 5 MMTPA
Target completion by May 07 at a cost of Rs. 16.24 billion
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Retail Branding

First to introduce Branded Outlets

Outstanding
36 % Retail outlets converted to Club HP Vehicle
&
50% sales thru Club HP outlets Customer
12 Club HP helpline operational Care

60 % Club HP Outlets selling Power 78 % Club HP Outlets selling Turbojet

12 % of total sale converted
Addl. margins of Rs. 120 million in
Apr/Dec 05
Targeted conversion of 18% with
addl. margin of Rs. 290 million
8 % of total sale converted
Addl. margins of Rs. 76 million in
Apr/Dec 05
Targeted conversion of 15% with
addl. margins of Rs. 210 million
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Rural Strategy

First to set up branded Rural

Outlets : Hamara Pump
Providing quality product
At right price
Near the point of consumption
Tie-ups for Agri Inputs, Farming
Equipment & Micro Financing
Over 500 pumps in operation

M/s Heart king Agency, Masamchery,

Dist Kanjipuram,Tamil Nadu 21
Community Kitchens

Responsible

Corporate

Citizen

1434 Rasoi Ghar as of Dec. 05 22

 Aviation Business : Fuelling the Growth

ATF Growth Story Only Indian company

48
HPC zooming Nominated by International Air
Growth (%)

38
ahead of Ind. Transport Association (IATA)
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18 on fuel suppliers advisory
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-2
committee
FY 02 FY 03 FY 04 FY 05 A/D 05
HPC 3.8 0.8 23.3 47.8 25.3
BPC -1.1 1.6 9.2 4.8 12.7
IOC 0.9 3.1 7.4 12.0 14.6 Among top 30 (Ranked 17th)
Continuously achieving highest Companies adjudged as
growth rate in industry 'World's best jet fuel marketer'
in survey conducted by the
Foreign airline customers base
Armbrust Aviation group, USA
expanded to 28 from 3 in FY 03
Widening ASF network for better
customer reach Having ISO 14001 certified
2 new ASFs planned Aviation Facilities
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Vertical Integration : Exploration & Production

Acquire E&P interests both in India and out of India

MOU with GAIL for overseas exploration opportunities
Participate in NELP VI on its own as well as thru collaborative
partners
Develop expertise of Prize Petroleum
Joint Venture for oil exploration and production
Awarded 1 Cambay onshore block under NELP IV in consortium with
GSPC
Service contract for development of 3 marginal onshore fields of ONGC
50% participating interest in mini oil producing field at Sanganpur,
Gujarat
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New Businesses : Gas

Have presence in Natural Gas Market

MOU with GAIL for City Gas Distribution in the States of

Gujarat and Rajasthan

Joint Venture with GAIL for the distribution and

marketing of Green Fuels in AP and in MP

Possibility of Equity Participation in Shell’s LNG terminal at

Hazira

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 Distinctions : Encouragement that propels us to greater heights

Performance

Excellent performance against

MOU for 14 years in succession
Forecourt Retailer of the year -
2005 (KSA Technopak- ICICI
Bank)

Innovation Professionalism

Golden Peacock Innovation Most Respected company in

Award for 2004 (Institute of
Directors)
Award for Innovative Brand
Strategies (DAKS Awards for
Brand Excellence)
petroleum sector (Business
World)
Best Workplace practices (Asian
Forum on Corporate Social
Responsibility, Philippines)
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 Changing face of Retail Marketing

Outstanding Contribution
Most Respected Company ‘Petro Retailing Business’
- Business World - DEW Journal
Forecourt Retailer
-KSA Technopak / ICICI Bank

Thank You… 27