Oil refining is on fire in India with $100 billion investments

India’s oil refining sector is red hot ongoing investments total $100 billion
By Ninad D. Sheth

Oil refining is the next big economic thing out of India.

The sector has seen $80 billion investments in the last five years.

$50 billion investments are planned for the next five years.

Although India does not have much oil, it is the world’s fourth largest refiner of the black gold!!

Refining turns crude oil into usable and profitable commodities like petroleum!

Most of the stuff refined is for domestic consumption but amazingly oil deficit India exports a lot of petroleum, petro chemicals and diesel.

In 2016 INDIA exported 61 million metric tons  of petroleum!!

These massive investments point to the fact that despite the solar push and alternative energy focus oil will be the mainstay till at least 2070.

Battery solar wind and others could yet prove these investments costly legacy ones!

That in fact helps India, as oil giants hedge with alternative energy they continue pumping money into oil thus the boom in refining.

India is the world's 5th biggest Oil refinery player and Saudi Aramco just but $20 billion in Reliance a huge vote of confidence !

 The top 10 oil refining countries account for more than 58% of the world's total refinery capacity. The United States is the biggest refiner in the world followed by China, Russia, Japan and India.

Oil is everywhere 

It’s in your       

Dress

Golf

Faucets

Anticeptics

 TV

Eyeglasses

Aspirin

Shampoo

Heart valves

Cold creams

even toothpaste

From Russia with OILOVE

Rosneft, a Russian oil giant payed $13 billion along with Trafigura a Russian fund for ESSAR an Indian oil company.

The ESSAR group once India’s third largest conglomerate was sorta forced to sell this profitable crown jewel by the Modi government which wanted it to pay back the $20 billion debt.

ESSAR has repaid about half of that through this deal alone, though $10 odd billion still remain which at 24 % interest is a hefty outstanding!!

In a bad year for FDI 2017 the Rosneft deal constituted 40 % of all FDI in India.

The deal makes Russians owners of the 400,000 barrels per day (bpd) Vadinar refinery in western Gujarat, a port and 5000 petrol pumps.

Reliance refining plans have taken off !!

Reliance which has a capacity to refine 60 million tons per year is finishing a $10 billion push to up its refining capacity by 40% come 2030.

$10 billion is 66000 crores, lots of money, that.

Reliance has one of the fattest refinery margins in the world at $11 to a barrel of crude.

ARAMCO comes to town !!

Saudi Aramco is the world’s largest oil company.

It has teamed up with Abu Dhabi Oil Company to invest $44billion for 50% in a 60 million-ton/year integrated refining and petrochemical complex in Maharashtra.

This will be the largest ever foreign investment in India.

Gasoline and diesel will be made here meeting India’s equivalent to Euro 6 fuel-efficiency standards

This redefines BIG - the mega refinery will provide feed stock for an integrated petrochemical complex equipped to produce about 18 million ton per year of chemical products.

Kuwait can’t wait!

Kuwait Petroleum International (KPI) is in talks to buy 24 percent of the Bina joint venture refinery in central India.

The 120,000-bpd Bina plant is operated by Bharat Oman Refineries Ltd (BORL), a 50-50 JV between Oman Oil Co and state-run Bharat Petroleum Corp.

The investment would be about $7 billion in this venture.

This is why India’s downstream hydrocarbon sector is a big draw

India is the world’s third largest oil consumer after China and the USA

India is the fourth largest refiner of oil in the world

The Reliance refinery is the largest Greenfield refinery in the world

Oil majors want to go beyond selling crude oil to India 

They want value addition and want to sell petroleum, diesel aviation fuels and petro chemicals

Dharmendra pradhan, India’s oil minister was quoted in the media recently saying, "Oil refining capacity in the country stands at over 247 million ton at present and demand for petro products, which is rising rapidly, will touch 600 million ton by the year 2040,"

Why Oil Refining matters to india

It increases India’s energy security when crude majors also invest downstream they have a greater stake in continued supply to the Indian energy sector.

The $100 billion investment over the next decade and now under way will create 9.5 lakh jobs directly in this sector.

India has some fine petroleum universities that are great for a degree.

Finally, they bring in research and innovation in the business for better products helping the ecosystem.

India’s Burger Mahabharat.

By Ninad D Sheth

The burger wars have begun in earnest in India as Burger King, the second largest Burger chain in the world, has entered India with its trademark Whopper burger.  Worldwide, Burger King has 13,000 restaurants and in India It will roll out 12 more over the next 90 days. The grand entry, however, has hit a false note as the burger giant is embroiled in a trademark infringement row and may have to find a new brand name to continue in India. Burger King Restaurants Pvt., a Gujarat-based fast food joint, has been allowed by an Indian court to approach the Intellectual Property Appellate Board, to strike out the US chain’s trademark. The case is likely go to a higher court.

Dunkin' Donuts, the famous American donut chain, has innovated and entered the burger business in India. Unlike in America where it offers sandwiches, in India it has gone with burgers. The chain is likely open 100 stores by 2017-18. Dev Amritesh, President at Dunkin' Donuts India, explains the new trends in the burger market, “For the first generation of burger consumers, it was a new experience. But now consumers are 2G or even 3Gr. In this market, flavours that stand apart will matter and that is our USP. The category is democratising and in the burger market, differentiation and innovation will make for profits. We have introduced a burger called Juicy Lucy with Cheese inside the patty and that has had positive response. We see this category growing significantly over the next five years and are committed to invest robustly in developing our presence.”

 

Fast Food

350 burger restaurants likely to open In India over the next three years McDonalds will invest over Rs 750 crore for expanding its footprint over the next five years. Dunkin' Donuts that serves sandwiches in America has introduced burgers in India and plans to open about 100 outlets over the next three years. Inadequate supply chain is an issue for the sector as is the availability of raw materials availability of raw materials - especially lamb Labour shortages plague the sector with attrition rates as high as 70% The sector will create about 15,000 direct new jobs over the next three years

Johnny Rockets, another chain based in the US , is also eyeing expansion. Vishal Chaudhry, Director at its India business, comments:” We position out restaurant as a diner rather than a quick service restaurant. We believe that given the spending and demographic profile, India is set to witness great expansion in the eating out business.  We will look to open 20 restaurants including moving beyond the NCR to Mumbai and Bangalore over the next three years.”
The US burger Chain Wendy’s,  the third largest in the world, is likely likely to enter India with about 20 stores in 2015.

The burger wars in India are taking place within the overall growth in the quick service restaurant business. According to a report by National Restaurant Association of India, the organised QSR business in India is estimated to grow to reach approximately $3.23 billion by 2018.

McDonalds’ Digital Marketing Push
McDonalds, meanwhile, is not sitting still. After 18 years in India and having spent over a Rs 1,000 crore on back-end supply chain infrastructure, it is taking on the rivals with renewed zeal. It has 192 restaurants in 20 cities across 7 states. It has the advantage of brand recall and a solid network to leverage.  It is now putting in place a massive digital marketing push
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Amit Jatia, vice chairman, Westlife Development Ltd of McDonald's India says, “We at McDonald’s are trying to replicate the global success stories on mobile and digital in India. Considering that we cater to a digital savvy generation, we also have a robust mobile home delivery ordering app that offers convenience to our customers. Our online delivery has proved to be a success as almost 25 per cent of revenues come from online and web ordering. We are introducing a deals application which is currently in beta tests.”



The Big Mac will invest over Rs 750 crore for expanding its footprint over the next five years  with an additional planned capital investments of about Rs.30-35 lakh  per McCafé.

The Dining Out Culture Is Now Entrenched In India
Arvind Singhal, Chairman of Technopak, a retail industry consultancy comments, “The burger business is the most exciting retail category in India in terms of both ongoing investment and profitability outlook. Dining out culture is propelling a lot of this growth in both work time ordering and the leisure category. I see two different sorts of burger chains developing over the next three years -- one for the mass market and the other for the gourmet consumer. However, India’s supply chain needs to get better especially in the mutton and fish materials. Chicken is relatively easier to source and supply and investments will be needed for the supply chain to be up to speed with consumer expectations.” 

Infrastructure, Labour Issues Dog Expansion Plans
The new rush of burger companies are bogged down somewhat by the issues of labour availability; price and location of properties and availability of raw materials - especially lamb.

According to Riyaaz Amlani of the National Restaurant Association of India, “There is a mad rush for talent about 350 burger restaurants are expected to open over the next five years. There is also the fact that in Indian metros property prices are among the highest in the world. Without a good location this business is dead on arrival. It is also a tough business because attrition rates in burger chain can be as high as 70 percent. However the increasing spending power on food will drive the growth. We expect 80 percent CAGR growth for this sector in the coming year.”

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There was a time you could have any burger as long as it was McDonald’s. But with so many new burger stores opening that has changed forever and the consumer is loving it.