RELIANCE INDUSTRIES LIMITED PETROCHEMICAL

MACRO ENVIRONMENT
GENERAL ECONOMIC CONDITIONS Oil and Chemical industry is affected by the global financial crisis. The crisis affecting the petrochemical industry has four characteristics: a) Financial crisis in the world Economy b) Rapid decline in oil prices passed to downstream petrochemical industries c) a recession caused in the downstream market has led to the market shrinking, demand reduction, directly affecting the chemical products market d) Countries and regions are affected to varying degrees, resources and productoriented countries are affected to a significant extent. DEMOGRAPHICS India is a broad combination of a small rich class, medium sized middle class and a large poor class. As a consequence, the real progress made by middle class and rich class is swept under the carpet by the broadly visible poverty exploited by the rest of the world for donations. The middle class in India accounts for approximately 300 million people, highly educated, largest concentration of English speaking people in the world. Petrochemicals are a part of our daily lives - the carpeting on which we walk, plastic soda bottles from which we drink, clothing we wear, fertilizers that grow our crops, tires we rely on for transportation, paints we use to brighten our surroundings, pharmaceuticals we need to remain healthy, cosmetics, and many other applications. All these are raw materials for the main products used by people on a regular basis. Thus changes in lifestyles, consumption habits, attitudes and preferences may have a significant impact on this industry as a whole. Petrochemical products reaching the end consumer

THE NATURAL ENVIRONMENT The petrochemical industry is cyclical in nature. Demand for petrochemicals is linked to economic growth. Demand increases when economy is strong; consequently, profitability of players increases, leading to capacity additions by existing players and entry of new players. In the 1980s and 1990s, domestic production of hydrocarbons increased significantly, resulting in excess availability of naphtha. Many derivatives of petrochemicals such as plastics were perceived as cost effective and superior alternatives for conventional materials such as glass, wood and metals. Synthetic fibres, which were perceived to be a luxury, became critical to supplement cotton production. Low crude oil prices resulted in a decrease in price of imported petrochemicals. As a result, demand for petrochemicals rose significantly, many capacities were set up to meet increasing domestic demand.

These trends have defined the existing structure of the domestic petrochemicals industry. At present, Reliance Industries dominate the industry. In the early 1990s, Reliance Industries commissioned three downstream plants in the first phase of its cracker complex. It commissioned its 750,000 tpa mother cracker and other downstream units in 1997 at Hazira, Gujarat. IPCL started three cracker complexes - Baroda, Gujarat (set up in 1978, having an ethylene capacity of 130,000 tpa, subsequently increased to 175,000tpa); Maharashtra Gas Cracker Complex (MGCC) at Nagothane (set up in 1990, having an ethylene capacity of 300,000 tpa, subsequently increased to 400,000 tpa); and Gandhar, Gujarat (set up in early 2000, having an ethylene capacity of 300,000 tpa, subsequently increased to 400,000 tpa). Competition has increased with the commissioning of new capacities by Gas Authority of India Limited (GAIL) and Haldia Petrochemicals. In April 1999, GAIL set up a 300,000 tpa cracker at Auriya, Uttar Pradesh, as a part of its forward integration plan. The capacity has been subsequently increased to 440,000 tpa. In April 2000, Haldia Petrochemicals set up its 420,000 tpa cracker at Mednipur, West Bengal (the capacity was subsequently increased to 520,000 tpa). Looking ahead, this competition would become more intense as IOC and ONGL (OPaL) commission their crackers. POLITICAL REGULATORY LEGAL FORCES Government of India has announced an infrastructure development program of over INR 500 Billion, coupled with growth in key end-use sectors like auto, personal / lifestyle products, and retail (packaging), a boost is expected in the demand for petrochemical products in India. Also policies have been set to promote investment in the petrochemical sector, several key domestic companies have unveiled ambitious expansion plans for the next few years. Two major elements in this support are the decision to allow 100 % FDI projects in this sector, and establishment of a series of special economic zones (SEZs) and a number of petroleum, chemicals, and petrochemical investment regions (PCPIRs). With the government support slowly falling into place, the future could see more investments from multinationals as well as domestic companies. TECHNOLOGICAL FACTORS The petrochemical industry is a major source of environmental pollution. The Indian Petrochemical Industry and Environment have taken a serious note of this issue. It has taken a lead in the promotion of Environment Friendly Petrochemical Technology. This technology is at par with the world standards. India has a significant share of the petrochemical business in the world market. The main threats that led to the use of Environment Friendly Petrochemical Technology are wastes as cyanides, metal waste matter, water soluble wastes like copper, zinc, chromium, nickel etc, halogenated hydrocarbons, acids, alkali, slurry wastes, phenols, asbestos etc. This technology in India covers phases like process control, research and development, laboratory testing and quality control. The new technology includes refining technologies, heavy oil catcracking, hydrofining, hydro-upgrading, ethylene cracking, toluene disproportionation, transalkylation, aromatics extraction and C5 extraction. RIL reviews and executes profit improvement opportunities and actively pursues technology and software options to improve yields, upgrade quality and enhance operating efficiencies. SOCIAL FORCES The impact of climate change is being felt all over the world. This has resulted in growing demand for green, environment-friendly products which will boost sustainability. Social concerns about air and water pollution have forced petrochemical industries to incorporate expenditures for controlling pollution into their cost structures. GLOBAL FORCES

Petrochemicals dominates the global chemicals market with a share of almost 40 %. Growth of the chemical industry at 2-3 % above the average world GDP is likely to face a slowdown in the coming years owing to the global economic slowdown. Petrochemicals industry is undergoing a major metamorphosis, particularly with the Middle East building its strength as a major petrochemicals supplier and China emerging as a major processing hub and end-use market for petrochemicals. Flow of raw materials from the Middle East to the processing hubs

Asian Rivals India's ethylene capacity is far smaller than China's and is unlikely to rise above that of China. Thus making it impossible for India to develop applications downstream. Other problem areas are the lack of low cost feedstock and dependence on western countries for technology

Global Opportunity Basic petrochemicals are largely in a liquid or gaseous form. However, intermediates and derivatives are mostly in the form of a solid or liquid. Hence, they can be easily transported over long distances. The increasing use of specialised ships (cryogenic tankers, which can carry liquids at low temperature and high pressure), has improved transportability of basic petrochemical products. As a result, competition becomes global without being restricted to specific geographical markets The petrochemical industry is devoid of any players dominating the market. Production capacities are distributed across regions, no single region has a dominant position in the market. In 2010, of the total ethylene capacity of around 150 million tpa, the top 10 ethylene producers accounted for around 48-49 per cent. Most of the ethylene capacity is concentrated in North America, Western Europe and Asia. With the Middle East emerging as the lowest cost producer of ethylene, the industry structure is expected to change in terms of the regional distribution of capacity. The industry is undergoing consolidation, with polyolefin players merging due to increasing competition from new integrated capacities being set up in the Middle East. In 2010, the total capacity for propylene was estimated to be approximately 95 million tpa. Propylene production through the refinery route accounts for a significant share of total propylene production. .

In the polymer industry, capacities for production are distributed across regions. The industry is characterised by the absence of market dominance by any one producer or a group of producers. The capacity share of top 10-polyolefin producers is around 48 per cent of the global capacity. The industry is moving towards consolidation. National Opportunity The petrochemical industry has been one of the of the fastest growing industries in the Indian economy; it provides the foundation for manufacturing industries such as pharmaceuticals, construction, agriculture, packaging industry, textiles, automotive, etc. The petrochemical industry in India is oligopolistic with four main players dominating the market, namely Reliance Industries Ltd. (RIL) along with Indian Petrochemical Ltd. (IPCL), Gas Authority of India Ltd (GAIL), and Haldia Petrochemicals Ltd. (HPL). According to a research conducted by Tata Strategic Management Group the petrochemical and chemicals sector in India is expected to grow at the rate of 12 to 15 percent in the next five to seven years. According to industry experts this is a phenomenal growth rate as compared to current rate of 3 to 4 %. The direct impact of this growth rate would result in investments of around $12 billion to $15 billion. This rapid expansion is already creating huge amounts of surplus. Location of Petrochemical Industries in India

Local Opportunity Petrochemical plants are located at Dahej in Gujarat, Mangalore in Karnataka, Visakhapatnam in Andhra Pradesh and Haldia in West Bengal and Paradeep in Orissa. Dahej SEZ is located in Vagra

Talulka of western part of Bharuch District, Gujarat, India. It is well connected with National Highway (NH-8). Road and Railway both are having the connectivity to New Delhi, the National Capital and Mumbai, the commercial Capital of India. SEZ is a part of Dahej Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) and is within Delhi-Mumbai Investment Corridor (DMIC). Opportunities in India are: Indian offers the growing consumer markets unparalleled in the Global growth, India offers Knowledge based advantages with the higher education with technical emphasis, proximity to low cost feedstock in middle-east and China (assuming oil, natural gas and coal will remain the leading energy drivers)

INDUSTRY KEY SUCCESS FACTORS

FIRM LEVEL
Research Alliance Agreements have been signed with various entities like the IITs (Mumbai, Delhi & Chennai), NCL, V-Life Sciences (Pune), UICT (Mumbai) & Stanford University (USA) etc. to pursue basic research and technological developments in the areas of nano-composites. patents in the areas of catalysts & processes for synthesis of monomers for polyolefin and also on value added products from polymers have been filed.

FUNCTIONAL LEVEL

TECHNOLOGY-RELATED KSFs
RIL aspires to become a developer of leading edge technologies and continues to be an efficient user of technology. Creation and protection of intellectual property (IP) for the Company continues to be an on-going area of focus. RIL's portfolio for national and international patents is increasing in existing as well as new technology areas. RIL is adopting and implementing best in class business processes with state of- the-art applications to enhance technical excellence. The focus of the IP team is to transform the organisation from being an IP user to an IP creator. RIL's patent portfolio is on the upswing, both in quality and quantity terms including protection in overseas markets. In the petrochemicals area, the focus is on providing technology support to ensure efficient asset utilisation, development of specialty grades/materials, development of catalysts /additives for cost reduction, value addition to by-product streams, and leveraging opportunities at the chemicals/oil interface.

MANUFACTURING REALTED KSFs Reliance Industries Limited (RIL) acquired IPCL and consolidated its petrochemical operations. DISTRIBUTION RELATED KSFs
RIL also has facility to procure

MARKETING RELATED KSFs

SKILLS AND CAPABILITY RELATED KSFs

OTHER TYPES OF KSFs

REFERENCES http://www.ril.com/html/business/refining_marketing.html http://sector-view.com/light-industries-and-petrochemical-development-opportunities-facepetrochemical-oil-plastics-industry/ http://business.mapsofindia.com/india-petroleum-industry/environment-friendly-petrochemicaltechnology.html http://www.chemtech-online.com/events/chemtech/2010/01/indian-petrochemical-industry.php https://www.crisilresearch.com/CuttingEdge/industry.jspx? serviceId=27&userId=24263&research=false http://business.mapsofindia.com/petrochemical/