Description
It expplains about Industry Trends of energy sector, PEST Analysis of energy Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about the company, it's Finance performance, SWOT analysis of essar energy, competitor analysis and Various Strategies employed by essar energy.
Company Analysis Essar Energy (Essar Group)
Energy Sector: An Overview The Energy sector has always been recognised one of the most important driving force behind economic growth and development of a nation. The energy sector assumes even more significance for developing countries, in view of their ever increasing energy needs and the huge investment required. There is a direct relationship between economic growth and consumption of energy. Economic growth is contingent upon availability of cost effective and environment friendly energy sources. The energy demand is a good indicator for economic development. The energy sector has been receiving high priority over the years in the planning process. The energy sector accounted for 23.43% of the total allocation in the 11th Five Year Plan from 2007 to 2012. The Indian power sector has almost doubled its generation capacity over the past decade, up from about 96 GW in 2000 to 170 GW in 2011. In spite of this, the electricity demand continues to surpass the supply. There was still a shortfall of 10.3 % and peak shortage of 13% in the country during 2011-12. India has seen explosive economic growth over the past few years with a 9 % growth rate. To maintain that rate, the nation will need to add another 169 GW of power capacity in five years according to the Indian Planning Commission. On the eve of the 59th Independence Day (on 14 August 2005), the President of India emphasized that energy independence has to be the nation’s first and highest priority, and India must be determined to achieve this within the next 25 years. India has always been dependent on coal for its energy generation. Nearly 70 % of India’s energy requirement is met from conventional sources like coal, oil and gas. Renewable energy sources offer viable option to address the energy security concerns of a country. Today, India has one of the highest potentials for the effective use of renewable energy. There is a significant potential in India for generation of power from renewable energy sources—wind, small hydro, biomass, and solar energy. The Indian government plans to establish 20 GW solar power generation capacity by 2022. Renewable energy is being seen as a big potential source of generating power as India owing to its geographic advantages has access to critical natural resources such as water, wind and sun. The country is gearing up to meet the challenge of mobilizing huge investments required to tap the renewable energy sources. Energy markets have improved significantly over the past few years as a result of improved economic growth, higher demand for refined products and limited supplies of crude oil. In 2010, global oil demand grew by 3.4%, which is the highest growth in the last 30 years. Emerging Asia which comprises India and China, accounted for 40% of the oil demand increase. It is expected that global energy consumption growth will average at around 1.7% per annum over the next two decades. Of this, non-OECD energy consumption is expected to be 68% higher by 2030, averaging 2.6% p.a. growth, and accounting for 93% of global energy growth. OECD energy consumption in 2030 is expected to be around 6% higher than today, with growth averaging at a measly 0.3% p.a. over the next two decades. The fuel mix is changing relatively slowly, due to long asset lifetime, but gas and non-fossil fuels are gaining share at the expense of coal and crude oil. Oil continues to suffer a long run decline in market share, while gas is steadily gaining. Natural gas is projected to be the fastest
growing fossil fuel globally. Production is expected to grow in every region except Europe, with Asia accounting for the world's largest production and consumption increments. More and more nations are moving from conventional sources like coal towards other renewable sources. Germany is the leading country for producing solar power. It produces 4 % of its energy requirement from these sources and produces solar energy equivalent to the total solar power produced by rest of the world. Recently, Germany produced a new record for solar power generation. German solar power plants produced a world record 22 GW of electricity per hour - equal to 20 nuclear power stations at full capacity. The US is also investing heavily in solar energy. Developing nations are increasingly moving towards nuclear energy, since the investment required for producing energy from renewable sources like solar energy is very high. There is an urgent need to conserve energy and reduce energy requirements by demand-side management and by adopting more efficient technologies in all sectors.
PEST Analysis: Energy Industry Political Factors 1. 2. 3. 4. 5. 6. Policy changes by countries/states where such resources are available Government elected in the state/country Events like wars between countries have huge impact on the prices and supply Foreign policy of Oil producing countries Sanctions on trade on countries producing these resources Environmental regulations
Economic Factors 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Volatility and fluctuation of crude oil prices Stoking large quantities leads to speculation in the market about the prices Huge exploration and production cost Setting up of extensive distribution network Huge subsidy bills put a burden on the government Insufficient raw material and import/export restriction Imports bills of raw materials like coal Huge investment for extracting energy from renewable sources like sun and wind Economic development growth rate Huge investment required for technological advancements
Social Factors 1. 2. 3. 4. 5. 6. Per capita energy consumption Population Availability of labour Demand by industries Rising lifestyle aspirations Bridging the gap between demand and supply
Technological Factors 1. 2. 3. 4. Drilling and exploration technologies Environment protection and management of waste Hydrocarbon recovery optimization Proper distribution network
SWOT Analysis: Energy Industry Strengths 1. Historically, the energy sector growth has traced the economic growth of a country. With GDP growth rate expected to be around 7-8 % in the long term, the energy sector would follow suit. 2. India is the 5th highest energy consumer 3. India has 4th largest reserves of coal in the world and is the 3rd largest producer in the world 4. India has total coal reserves of 293 billion tonnes 5. India has 25th largest natural gas reserves in the world 6. India’s crude oil reserves are 20th largest in the world 7. Energy sector has been growing at around 5 %, compared to world energy sector which has been growing at 2 %. 8. Oil and Gas Industry is estimated to be approximately 15 % of GDP 9. India is 5th largest producer of wind energy 10. Low rate of accidents in plants 11. Energy efficient turbine technology 12. Wind energy generation has grown at a rate of 33% over the past decade 13. Liberalization of electricity market has allowed private investors to enter the power sector 14. Incentives like tax deductions and relief are provided for generation of renewable energy 15. In case of wind energy, no fuel is required and hence no fuel costs 16. Renewable sources are clean sources of energy and hence there are no carbon emissions 17. Wind energy stations can be set up at land or at sea
Weakness 1. 2. 3. 4. 5. 6. Inadequate power generation capacity Lack of optimum utilization of existing resources. Huge transmission and distribution losses Lack of grid discipline Slow pace of rural electrification Cost of generating energy from renewable sources is still much higher compared to energy generation from conventional sources like coal and gas. 7. There are no rate based incentives provided as in Germany 8. Timescales, deadlines and pressures 9. Continuity and robustness of supply chain 10. Power generation from wind energy is intermittent 11. Company operations are bound by government regulations and fluctuations
12. Net sales are affected due to increasing cost
Opportunities 1. The Indian government plans to establish 20 GW solar power generation capacity by 2022. 2. There is huge gap between demand and supply. In 2011, India’s power requirement felt short by 13% 3. Huge scope for solar energy generation in India. India receives good amount of sunlight for nearly 9 months with annual temperature around 25-27 degree Celsius 4. The government is offering relief to SPV manufacturers and SPV based products used for solar energy generation 5. India receives high annual rainfall which can be tapped to produce hydro electricity 6. Wind energy production can be increased. Companies like Suzlon have already taken lead. 7. Large pool of highly skilled technical personnel available 8. Increase incentives on energy efficient automobiles 9. Big opportunity for renewable energy lies in creating favourable legislation like that in Europe 10. Increasing lifestyle trends of people 11. Technological development and innovation 12. New markets both vertical and horizontal 13. Larger and more efficient use of turbines (wind, water) to generate larger amount of energy at lower costs 14. Improved storage techniques and technologies 15. Heavy industrialization is causing increase in the demand for energy 16. Per capita power consumption is far below that of BRIC countries Threats 1. Bureaucracy 2. Hurdles in acquiring land for setting up of business units 3. Lack of awareness among locals regarding benefits of projects leading to opposition and protests 4. Legislation changes 5. Environmental factors 6. Operational risks 7. Industry is driven in large part by policy, making it subject to political changes 8. Economic instability
Essar Group
The Essar group is headquartered in Mumbai, India. The Essar group was established in 1969 by the Ruia brothers, Shashi Ruia and Ravi Ruia. Essar Group began its first operation with the construction of an outer breakwater in Chennai port. It quickly moved to capitalize on every emerging business opportunity, becoming India’s first private company to buy a tanker in 1976.The Company was incorporated in June 1976 under the name of Essar Construction Limited and was engaged primarily in core sector activities, including marine construction, pipeline laying, dredging and other port related activities. The Group also invested in a diverse shipping fleet and oilrigs, when the Government of India opened up the shipping and drilling businesses to private players in the 1980s. In 1984, the Company ventured into other core sectors mainly the field of exploration and development, drilling onshore and offshore oil and gas wells for Indian Public Sector oil exploration companies. In view of this the Company's name was then changed to Essar Offshore and Exploration Limited in May 1987. In August 1987, the Company's name was changed to Essar Gujarat Limited, to reflect its highly diversified business interest. In 1988, the Company made an initial public offer for its shares, which are now listed in Bombay Stock Exchange, National Stock Exchange of India and two other Indian stock exchanges. Then, in the 1990s, Essar began its steelmaking business by setting up India’s first sponge iron plant in Hazira, a coastal town in the western Indian state of Gujarat. The Group went on to build a pellet plant in Visakhapatnam, and eventually a fully integrated steel plant in Hazira. Through the 1990s, with the gradual liberalization of the Indian economy, Essar seized every opportunity that came its way. It diversified its shipping fleet, started oil & gas exploration and production, laid the foundation of its oil refinery at Vadinar, Gujarat, and set up a power plant near the steel complex in Hazira. The construction business helped the Group build most of its business assets. Essar also entered the GSM telephony business, establishing India’s first mobile phone service in Delhi (branded Essar Cell phone) with Swiss PTT as the joint venture partner. Over the last decade, it has grown through strategic global acquisitions and partnerships, or through greenfield and brownfield development projects, capturing new markets and discovering new raw material sources. Today, the Group continues to expand its global footprint, focusing on markets in Asia, Africa, Europe, the Americas and Australia. Essar invests significantly in the latest technology to drive forward and backward integration in its businesses, and on leveraging synergies between these businesses. It also focuses on in-house research and innovation to be a low-cost manufacturer with high-quality products and innovative customer offerings. Alongside its ambitious business pursuits, Essar has been committed to its social responsibility. The Group runs community outreach initiatives at all its plant locations, with a focus on education, healthcare, environmental and agricultural development, and selfemployment. Essar is committed to sustainable business practices. Its Health, Safety and Environment (HSE) management system is on par with global standards. The Group is also actively undertaking climate change initiatives to reduce its carbon footprint. This includes
several Clean Development Mechanism (CDM) projects that earn the company 'Certified Emission Reduction' credits. A look at the Essar Group's areas of business: STEEL Essar Steel is a global steel producer with a footprint in India, Canada, USA, the Middle East and Asia. It has an annual capacity of 14 million tonnes, and aims to achieve a global capacity of 20-25 million tonnes. It has a significant presence in the key markets of Asia, Europe, Africa and North America. The company has specialized plants for value-added steel products such as pipes and plates and has a leadership position in the cold rolling, galvanizing and pre-coated segments. Essar Minerals owns a growing portfolio of iron ore and coal mines in India, Indonesia, Mozambique and the USA. It also has an iron ore prospecting license in Brazil and various states in India. The company has access to over 1.6 billion tonnes of iron ore reserves and 450 million tonnes of coal reserves.
ENERGY Essar Energy is a world-class, low-cost, integrated energy company focused on India and positioned to capitalize on India’s rapidly growing energy demand. It has an established track-record and assets worth US$12 billion across the power and oil and gas industries. The combined assets of Essar Power and Essar Oil constitute Essar Energy, which was listed on the London Stock Exchange in 2010 following a highly successful Initial Public Offer (IPO), the second-largest overseas IPO ever floated by a company of Indian origin. Essar Energy is part of the FTSE 100, UK's top 100 companies by market capitalization. Essar Oil is a fully integrated oil and gas company of international scale with a strong presence across the hydrocarbon value chain – from exploration and production to oil retail. The company has access to a global portfolio of onshore and offshore oil and gas blocks, with about 45,000 sq km available for exploration. The company is also the largest coal bed methane (CBM) player in India. Currently, the company has over 375,000 barrels per stream day (bpsd) of crude refining capacity at Vadinar in Gujarat, India, that is being expanded to 405,000 bpsd; over 296,000 bpsd of crude refining capacity at Stanlow in Cheshire, United Kingdom; 50-per cent controlling stake in Kenya Petroleum Refineries, which operates a refinery in Mombasa, Kenya, with a capacity of 80,000 bpsd; and over 1,600 Essar-branded oil retail outlets in various parts of India. Essar Power is among India's top private sector power producers with a current generation capacity of 1,600 MW spread across five power plants in India and Canada. This capacity is being expanded to 6,100 MW by end-2012 and to 11,470 MW by 2014, through the addition of seven new power plants in various parts of India. It is one of the lowest-cost power
producers and owns about 800 million tonnes of coal reserves and resources in blocks spread across four continents.
INFRASTRUCTURE The Essar Group has a strong foundation in infrastructure projects, with proven capability in managing ports and handling large, complex engineering, procurement and construction projects. Essar Ports is one of the largest owners and operators of ports in India. The company has an existing aggregate capacity of 88 MMTPA across two facilities located at Vadinar (58 MMTPA) and Hazira (30 MMTPA) in the state of Gujarat, on the west coast of India. It is currently in the process of increasing its aggregate ports capacity to 158 MMTPA at a number of locations across India. Essar Projects is the second largest engineering, procurement and construction (EPC) companies in India. Its EPC capabilities have helped build all of Essar's industrial assets in India in the sectors of steel, oil and gas, power, and ports and terminals. The company is increasingly using its expertise to execute large external projects across the world.
SERVICES The Essar Group offers a wide portfolio of services that cater to diverse sectors that include shipping, business process outsourcing, telecom and realty. Essar Shipping is an integrated logistics solution provider with a presence in sea transportation, logistics and oilfield services. The company currently has a fleet of 27 vessels, with an additional 12 new ships on order. It provides contract drilling services to global oil majors, with a fleet of 12 onshore rigs and one semi-submersible offshore rig; and two new jack-up rigs on order. Aegis is Essar's BPO arm. A global leader in business process outsourcing (BPO), it employs over 55,000 employees with expertise in the telecom, BFSI, travel and hospitality, consumer goods, retail and healthcare domains as well as engineering services. Aegis serves several Fortune 500 companies from 50 delivery centres across 12 countries. Essar Communications is a global player in the communications sector with a presence in telecom services, consumer durables and IT retail. Yu, its GSM-based mobile services network in Kenya, has more than a million subscribers; in the telecom retail space, the MobileStore is the largest telecom retailer within the organized sector (over 900 outlets across India).
Equinox Realty has a current portfolio of approximately 16 million sq. ft. under various stages of development and is currently present in the Indian states of Maharashtra, Karnataka, Gujarat and Madhya Pradesh.
Essar Energy
Essar Energy is a part of the Essar Group, a multinational business conglomerate operating in various sectors including construction, steel, energy, power, shipping ports and logistics. Essar Energy was created by combining the existing energy portfolio of Essar Global, a diversified Indian business group established over 40 years ago. The company was established in 1998 as a wholly owned subsidiary of the Essar Group. It is head quartered at Port Louis, Mauritius. Essar Energy has interests in both the power generation and petroleum industries. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index. Essar energy’s business comprises two divisions 1. Power: Generation and Transmission Essar Energy is a first mover among the private-sector players in the Indian power industry and currently has a total installed generation capacity of 2,800 MW. Essar Energy is one of India's leading private power producers with a 14-year operating track record. The company's power business currently has five operational power plants in India and one operational power plant in Algoma, Canada, with a total installed generation capacity of 2,800 MW. This capacity is increasing to 4,510 MW by the end of March 2013 and to 6,700 MW by the end of March 2014. Essar Energy also has access to approximately 500 mt of coal resources across seven coal blocks in India and overseas.
2. Oil and Gas a) Exploration and Production Exploration and production of oil and gas is critical for India's energy security and economic growth. Essar Energy's oil and gas exploration and production business is therefore inexorably linked with the national imperative. Exploration and production, the initial link in the energy and materials value chain, remains a major growth area and Essar Energy envisions evolving as a global energy major. Essar Energy has a diverse portfolio of 15 blocks and fields in the various fields of exploration and production of oil and gas in India, Indonesia, Madagascar, Nigeria and Vietnam. Total reserves and resources across these blocks is 2,109 mmboe. Essar Energy has net 2P (proven and probable reserves) and 2C (contingent resources) of 209 mmboe, best estimate prospective resources of 929 mmboe and an un-risked in-place resource base of 971 mmboe. The company's development and production assets include the
Raniganj Block in West Bengal, Ratna / R-Series Fields in offshore Mumbai and the Mehsana Block in Gujarat. The Raniganj Block has certified recoverable resource of 558 billion cubic feet (bcf) and is the first Coal Bed Methane (CBM) block under development. b) Refining and Marketing Essar Energy's refining business primarily consists of the Vadinar refinery, the second-largest private sector refinery in India, the Stanlow refinery, the second largest refinery in the United Kingdom, and a 50% interest in the Kenya Petroleum Refinery Limited. Essar Energy serves retail customers in India through a modern, countrywide network of 1,600 operational and under construction retail fuel outlets. The Vadinar Refinery in Gujarat is the second largest private sector refinery in India. It has been built with state-of-the-art technology and has the capability to produce petrol and diesel suitable for use in India as well as advanced international markets. The refinery has been designed to handle a diverse range of crude - from sweet to sour and light to heavy. It produces LPG, Naphtha, light diesel oil, Aviation Turbine Fuel (ATF) and kerosene. Essar Energy completed the US$350 million acquisition of Stanlow refinery, UK, on July 31, 2011. Stanlow has a nameplate capacity of 296,000 barrels per stream day but is currently operating at about 70% of this level. The Stanlow Refinery lies near to Liverpool, North West England, on the south bank of Manchester ship canal and is UK's second biggest oil refinery. It produces approximately 15% of the country's gasoline requirements together with large volumes of diesel and jet fuel. Essar Energy also holds a 50% interest in Kenya Petroleum Refineries Ltd, Mombassa, and a tolling refinery with a current throughput of 1.6 mmtpa.
Board of Directors Mr Prashant Ruia: Chairman, Non-Executive director Mr Simon Murray: Vice Chairman, Non-Executive Director Mr Ravi Ruia: Non-Executive Director Mr Naresh Nayyar: Chief Executive Officer Mr Sattar Abdoula: Independent Non-Executive Director Mr Subhas Lallah: Independent Non-Executive Director Mr Steve Lucas: Independent Non-Executive Director
Mr Philip Aiken: Senior Independent Non-Executive Director
Shareholder Structure
Essar Group has nearly 76% stake in Essar Energy
Company Financials: Income Statement
From the above financial statement, we observe that the net profit after tax has decreased from $ 248.3 million to $ 98.2 million.
Following table shows the segmental revenue:
Revenues - Group Essar Energy increased revenue (before reversal of sales tax benefit) by US$11.9 billion in the fifteen month period 2011-12, compared to the 12 month period to December 2010. Of this amount, US$6.4 billion reflected the acquisition of the Stanlow refinery and US$5.5 billion was the increase in revenue attributable to the Indian refinery (before the reversal of the sales tax benefit).
Revenues - Power Power revenues increased in 2011-12 by US$34.7 million to US$356.5 million from US$321.8 million in 2010 (after eliminating inter-segmental revenues for the current period of US$60.4 million (2010: US$27.8 million)). On a 12 month pro-rata basis revenue has decreased, due to lower unscheduled interchange (UI) in Bhander Power (US$23.5 million) compared to 2010 and adverse foreign exchange differences (US$12.9 million). Revenues – Exploration and Production Revenues were primarily impacted by lower production from the CB-ON/3 field in Gujarat which led to decreased sales of 8,696 barrels in the 15 months of 2011-12 from 9,616 barrels in 2010, due to delays in receiving replacement sub-surface pumps. Revenues – Refining and Marketing - India R&M India revenues (including sales tax benefit but before its subsequent reversal) increased by US$5,564 million from US$9,681 million in 2010 to US$15,245 million in the 15 months to March 2012. This was primarily as a result of an increase in the quantity of the products sold and higher product prices partly offset by decreased sales of traded products.
SWOT Analysis: Essar Energy Strengths 1. 2. Strong parent group company in Essar Group Countrywide network of 1,600 operational and under construction retail fuel outlets. 3. State of the art technologies at refineries 4. First Indian private sector company to enter petro retailing 5. Very active in CSR activities 6. Vadinar refinery is second largest private sector refinery in India 7. Access to coal reserves 8. Diverse portfolio of 15 blocks and fields 9. India has 4th largest reserves of coal in the world and is the 3rd largest producer in the world 10. India’s crude oil reserves are 20th largest in the world 11. Low rate of accidents in plants
Weakness 1. Huge transmission and distribution losses 2. Continuity and robustness of supply chain 3. Company operations are bound by government regulations and fluctuations 4. Net sales are affected due to increasing cost
Opportunities 1. There is huge gap between demand and supply. In 2011, India’s power requirement felt short by 13% 2. Large pool of highly skilled technical personnel available 3. Increasing lifestyle trends of people 4. Technological development and innovation 5. Scope for expansion into new markets and verticals like solar and wind energy generation 6. Improved storage techniques and technologies 7. Heavy industrialization is causing increase in the demand for energy 8. Scope for merger and acquisitions with foreign partners
Threats 1. 2. 3. 4.
Bureaucracy Legislation changes Environmental factors Operational risks
5. 6. 7. 8.
Industry is driven in large part by policy, making it subject to political changes Economic instability Unforeseen shortages of raw materials like coal Subsidies provided to government owned PSUs
Business Strategy Optimise performance of all existing assets Essar Energy intends to capitalise on the existing assets by drawing on the Group's significant experience and expertise to carry out a number of optimisation projects. These will consolidate Essar Energy's position as one of India's largest energy groups. This can be achieved through a combination of debottlenecking operating plants, further improving efficiency, expanding output and increasing economies of scale. Deliver growth through a variety of power and oil and gas projects Essar Energy plans to pursue further growth through both green-field and brown-field energy projects in the areas of exploration and production, refining, marketing, power generation, raw material acquisition, transmission, and distribution. Leverage skills and Indian asset base to identify growth opportunities Essar Energy intends to leverage its established skills and Indian asset base in oil and gas, and power, to seek organic and inorganic growth opportunities in India and potentially overseas, with the objective of improving market leadership, economies of scale, synergies, and maximising shareholder value. Be a good corporate citizen Essar Energy intends to act as a good corporate citizen with respect to the health and safety of its employees and the communities in which it operates. The maintenance of high environmental performance standards are significant responsibilities within the conduct of Essar Energy's operations, and the aim of the company is to be recognised as a leader in health, safety and environmental management.
Competitor Analysis Reliance Industries Reliance Industries (RIL) is one of the main companies operating in the same segment as Essar Energy. RIL is India’s largest private sector enterprise, with businesses in the energy and materials value chain. Group's annual revenues are in excess of US$ 66 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company. The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail, infotel and special economic zones.
A) Exploration and Production RIL has recently tied up with British Petroleum, a British multinational oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world. The partnership across the full value chain comprises BP taking a 30% stake in 23 oil and gas production sharing contracts that Reliance operates in India, including the producing KG-D6 block. The partnership will aim to combine BP's deep-water exploration & development capabilities with Reliance's project management & operations expertise. The two companies will also form a joint venture (50:50) for the sourcing and marketing of gas in India and bid together for incremental opportunities in the deep-water blocks in the east coast of India. KG-D6 was the single largest source of domestic gas in the country for FY-11 and accounted for almost 35% of the total gas consumption in India. An integrated development plan for all gas discoveries in KG-D6 is being conceptualized. This will encompass existing wells and other discoveries within the block to maximize capital efficiency and to accelerate monetization. The Panna-Mukta fields produced 9.3 MMBL of crude oil and 52.1 BCF of natural gas in FY-11. Tapti fields produced 1.2 MMBL of condensate and 95.2 BCF of natural gas in FY-11. RIL also holds 3 CBM blocks in Sohagpur (East), Sohagpur (West) and Sonhat. RIL has 13 blocks in its international conventional portfolio, including 2 in Peru, 3 in Yemen (1 producing and 2 exploratory), 2 each in Oman, Kurdistan and Colombia, 1 each in East Timor and Australia; amounting to a total acreage of over 99,145 sq. km. RIL, through its subsidiary, Reliance Marcellus LLC, also entered into a joint venture with Atlas Energy, Inc. (now owned by Chevron Corporation) under which Reliance acquired a 40% interest in Atlas' core Marcellus shale acreage position. With this venture, Reliance became a partner in approximately 300,000 net acres of undeveloped leasehold in the core area of the Marcellus shale in south western Pennsylvania. In another joint venture, RIL, through its subsidiary, Reliance Eagleford Upstream LP, entered into a joint venture with Pioneer Natural Resources Company
under which Reliance acquired a 45% interest in Pioneer's core Eagle Ford shale acreage position in two separate transactions. The joint venture plans to increase the current drilling programme to approximately 140 wells per year within three years. RIL, through its subsidiary, Reliance Marcellus II, LLC, also entered into a joint venture with Carrizo Oil & Gas, Inc. Under the transaction, Reliance acquired a 60% interest in Marcellus shale acreage in Central and Northeast Pennsylvania. This acreage is expected to support the drilling of approximately 1,000 wells over the next 10 years, with a net resource potential of about 3.4 TCFe (2.0 TCFe net to Reliance).
B) Refining and Marketing Petroleum Refining and retailing is the second link in RIL's drive for growth and global leadership in the core energy and materials value chain. RIL has 1.24 million barrels per day (MBPD) of crude processing capacity, the largest at any single location in the world. The RIL refineries are state-of-the-art and among the most complex refineries in the world. Strategically located on the west coast of India, it benefits from low transportation costs for its feedstock and also from its proximity to the high-growth markets of Asia. Reliance has consolidated operations of its GAPCO subsidiaries in East Africa. GAPCO group owns and operates large storage facilities and also has a wellspread retail distribution network. It owns and operates large coastal storage terminals in Dar-e-Salaam (Tanzania), Mombasa (Kenya) and an inland terminal at Kampala (Uganda) and has well-spread depots in East Africa. Reliance's refinery at Jamnagar in the state of Gujarat, India, is designed to process a wide variety of crude oils ranging from light to heavy and sweet to sour. The refinery is equipped with world-class port facilities, which can receive crude oils in various types of vessels including Ultra Large & Very Large Crude Carriers, Suezmax and Aframax vessels.
References
http://www.essar.com/default.aspxhttp://www.essarenergy.com/http://infralineenergy.blogspot.in/http://www.eai.inhttp://www.indiaenergyportal.org/overview_detail.phphttp://www.rediff.comhttp://www.ril.com/
doc_699850418.docx
It expplains about Industry Trends of energy sector, PEST Analysis of energy Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about the company, it's Finance performance, SWOT analysis of essar energy, competitor analysis and Various Strategies employed by essar energy.
Company Analysis Essar Energy (Essar Group)
Energy Sector: An Overview The Energy sector has always been recognised one of the most important driving force behind economic growth and development of a nation. The energy sector assumes even more significance for developing countries, in view of their ever increasing energy needs and the huge investment required. There is a direct relationship between economic growth and consumption of energy. Economic growth is contingent upon availability of cost effective and environment friendly energy sources. The energy demand is a good indicator for economic development. The energy sector has been receiving high priority over the years in the planning process. The energy sector accounted for 23.43% of the total allocation in the 11th Five Year Plan from 2007 to 2012. The Indian power sector has almost doubled its generation capacity over the past decade, up from about 96 GW in 2000 to 170 GW in 2011. In spite of this, the electricity demand continues to surpass the supply. There was still a shortfall of 10.3 % and peak shortage of 13% in the country during 2011-12. India has seen explosive economic growth over the past few years with a 9 % growth rate. To maintain that rate, the nation will need to add another 169 GW of power capacity in five years according to the Indian Planning Commission. On the eve of the 59th Independence Day (on 14 August 2005), the President of India emphasized that energy independence has to be the nation’s first and highest priority, and India must be determined to achieve this within the next 25 years. India has always been dependent on coal for its energy generation. Nearly 70 % of India’s energy requirement is met from conventional sources like coal, oil and gas. Renewable energy sources offer viable option to address the energy security concerns of a country. Today, India has one of the highest potentials for the effective use of renewable energy. There is a significant potential in India for generation of power from renewable energy sources—wind, small hydro, biomass, and solar energy. The Indian government plans to establish 20 GW solar power generation capacity by 2022. Renewable energy is being seen as a big potential source of generating power as India owing to its geographic advantages has access to critical natural resources such as water, wind and sun. The country is gearing up to meet the challenge of mobilizing huge investments required to tap the renewable energy sources. Energy markets have improved significantly over the past few years as a result of improved economic growth, higher demand for refined products and limited supplies of crude oil. In 2010, global oil demand grew by 3.4%, which is the highest growth in the last 30 years. Emerging Asia which comprises India and China, accounted for 40% of the oil demand increase. It is expected that global energy consumption growth will average at around 1.7% per annum over the next two decades. Of this, non-OECD energy consumption is expected to be 68% higher by 2030, averaging 2.6% p.a. growth, and accounting for 93% of global energy growth. OECD energy consumption in 2030 is expected to be around 6% higher than today, with growth averaging at a measly 0.3% p.a. over the next two decades. The fuel mix is changing relatively slowly, due to long asset lifetime, but gas and non-fossil fuels are gaining share at the expense of coal and crude oil. Oil continues to suffer a long run decline in market share, while gas is steadily gaining. Natural gas is projected to be the fastest
growing fossil fuel globally. Production is expected to grow in every region except Europe, with Asia accounting for the world's largest production and consumption increments. More and more nations are moving from conventional sources like coal towards other renewable sources. Germany is the leading country for producing solar power. It produces 4 % of its energy requirement from these sources and produces solar energy equivalent to the total solar power produced by rest of the world. Recently, Germany produced a new record for solar power generation. German solar power plants produced a world record 22 GW of electricity per hour - equal to 20 nuclear power stations at full capacity. The US is also investing heavily in solar energy. Developing nations are increasingly moving towards nuclear energy, since the investment required for producing energy from renewable sources like solar energy is very high. There is an urgent need to conserve energy and reduce energy requirements by demand-side management and by adopting more efficient technologies in all sectors.
PEST Analysis: Energy Industry Political Factors 1. 2. 3. 4. 5. 6. Policy changes by countries/states where such resources are available Government elected in the state/country Events like wars between countries have huge impact on the prices and supply Foreign policy of Oil producing countries Sanctions on trade on countries producing these resources Environmental regulations
Economic Factors 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Volatility and fluctuation of crude oil prices Stoking large quantities leads to speculation in the market about the prices Huge exploration and production cost Setting up of extensive distribution network Huge subsidy bills put a burden on the government Insufficient raw material and import/export restriction Imports bills of raw materials like coal Huge investment for extracting energy from renewable sources like sun and wind Economic development growth rate Huge investment required for technological advancements
Social Factors 1. 2. 3. 4. 5. 6. Per capita energy consumption Population Availability of labour Demand by industries Rising lifestyle aspirations Bridging the gap between demand and supply
Technological Factors 1. 2. 3. 4. Drilling and exploration technologies Environment protection and management of waste Hydrocarbon recovery optimization Proper distribution network
SWOT Analysis: Energy Industry Strengths 1. Historically, the energy sector growth has traced the economic growth of a country. With GDP growth rate expected to be around 7-8 % in the long term, the energy sector would follow suit. 2. India is the 5th highest energy consumer 3. India has 4th largest reserves of coal in the world and is the 3rd largest producer in the world 4. India has total coal reserves of 293 billion tonnes 5. India has 25th largest natural gas reserves in the world 6. India’s crude oil reserves are 20th largest in the world 7. Energy sector has been growing at around 5 %, compared to world energy sector which has been growing at 2 %. 8. Oil and Gas Industry is estimated to be approximately 15 % of GDP 9. India is 5th largest producer of wind energy 10. Low rate of accidents in plants 11. Energy efficient turbine technology 12. Wind energy generation has grown at a rate of 33% over the past decade 13. Liberalization of electricity market has allowed private investors to enter the power sector 14. Incentives like tax deductions and relief are provided for generation of renewable energy 15. In case of wind energy, no fuel is required and hence no fuel costs 16. Renewable sources are clean sources of energy and hence there are no carbon emissions 17. Wind energy stations can be set up at land or at sea
Weakness 1. 2. 3. 4. 5. 6. Inadequate power generation capacity Lack of optimum utilization of existing resources. Huge transmission and distribution losses Lack of grid discipline Slow pace of rural electrification Cost of generating energy from renewable sources is still much higher compared to energy generation from conventional sources like coal and gas. 7. There are no rate based incentives provided as in Germany 8. Timescales, deadlines and pressures 9. Continuity and robustness of supply chain 10. Power generation from wind energy is intermittent 11. Company operations are bound by government regulations and fluctuations
12. Net sales are affected due to increasing cost
Opportunities 1. The Indian government plans to establish 20 GW solar power generation capacity by 2022. 2. There is huge gap between demand and supply. In 2011, India’s power requirement felt short by 13% 3. Huge scope for solar energy generation in India. India receives good amount of sunlight for nearly 9 months with annual temperature around 25-27 degree Celsius 4. The government is offering relief to SPV manufacturers and SPV based products used for solar energy generation 5. India receives high annual rainfall which can be tapped to produce hydro electricity 6. Wind energy production can be increased. Companies like Suzlon have already taken lead. 7. Large pool of highly skilled technical personnel available 8. Increase incentives on energy efficient automobiles 9. Big opportunity for renewable energy lies in creating favourable legislation like that in Europe 10. Increasing lifestyle trends of people 11. Technological development and innovation 12. New markets both vertical and horizontal 13. Larger and more efficient use of turbines (wind, water) to generate larger amount of energy at lower costs 14. Improved storage techniques and technologies 15. Heavy industrialization is causing increase in the demand for energy 16. Per capita power consumption is far below that of BRIC countries Threats 1. Bureaucracy 2. Hurdles in acquiring land for setting up of business units 3. Lack of awareness among locals regarding benefits of projects leading to opposition and protests 4. Legislation changes 5. Environmental factors 6. Operational risks 7. Industry is driven in large part by policy, making it subject to political changes 8. Economic instability
Essar Group
The Essar group is headquartered in Mumbai, India. The Essar group was established in 1969 by the Ruia brothers, Shashi Ruia and Ravi Ruia. Essar Group began its first operation with the construction of an outer breakwater in Chennai port. It quickly moved to capitalize on every emerging business opportunity, becoming India’s first private company to buy a tanker in 1976.The Company was incorporated in June 1976 under the name of Essar Construction Limited and was engaged primarily in core sector activities, including marine construction, pipeline laying, dredging and other port related activities. The Group also invested in a diverse shipping fleet and oilrigs, when the Government of India opened up the shipping and drilling businesses to private players in the 1980s. In 1984, the Company ventured into other core sectors mainly the field of exploration and development, drilling onshore and offshore oil and gas wells for Indian Public Sector oil exploration companies. In view of this the Company's name was then changed to Essar Offshore and Exploration Limited in May 1987. In August 1987, the Company's name was changed to Essar Gujarat Limited, to reflect its highly diversified business interest. In 1988, the Company made an initial public offer for its shares, which are now listed in Bombay Stock Exchange, National Stock Exchange of India and two other Indian stock exchanges. Then, in the 1990s, Essar began its steelmaking business by setting up India’s first sponge iron plant in Hazira, a coastal town in the western Indian state of Gujarat. The Group went on to build a pellet plant in Visakhapatnam, and eventually a fully integrated steel plant in Hazira. Through the 1990s, with the gradual liberalization of the Indian economy, Essar seized every opportunity that came its way. It diversified its shipping fleet, started oil & gas exploration and production, laid the foundation of its oil refinery at Vadinar, Gujarat, and set up a power plant near the steel complex in Hazira. The construction business helped the Group build most of its business assets. Essar also entered the GSM telephony business, establishing India’s first mobile phone service in Delhi (branded Essar Cell phone) with Swiss PTT as the joint venture partner. Over the last decade, it has grown through strategic global acquisitions and partnerships, or through greenfield and brownfield development projects, capturing new markets and discovering new raw material sources. Today, the Group continues to expand its global footprint, focusing on markets in Asia, Africa, Europe, the Americas and Australia. Essar invests significantly in the latest technology to drive forward and backward integration in its businesses, and on leveraging synergies between these businesses. It also focuses on in-house research and innovation to be a low-cost manufacturer with high-quality products and innovative customer offerings. Alongside its ambitious business pursuits, Essar has been committed to its social responsibility. The Group runs community outreach initiatives at all its plant locations, with a focus on education, healthcare, environmental and agricultural development, and selfemployment. Essar is committed to sustainable business practices. Its Health, Safety and Environment (HSE) management system is on par with global standards. The Group is also actively undertaking climate change initiatives to reduce its carbon footprint. This includes
several Clean Development Mechanism (CDM) projects that earn the company 'Certified Emission Reduction' credits. A look at the Essar Group's areas of business: STEEL Essar Steel is a global steel producer with a footprint in India, Canada, USA, the Middle East and Asia. It has an annual capacity of 14 million tonnes, and aims to achieve a global capacity of 20-25 million tonnes. It has a significant presence in the key markets of Asia, Europe, Africa and North America. The company has specialized plants for value-added steel products such as pipes and plates and has a leadership position in the cold rolling, galvanizing and pre-coated segments. Essar Minerals owns a growing portfolio of iron ore and coal mines in India, Indonesia, Mozambique and the USA. It also has an iron ore prospecting license in Brazil and various states in India. The company has access to over 1.6 billion tonnes of iron ore reserves and 450 million tonnes of coal reserves.
ENERGY Essar Energy is a world-class, low-cost, integrated energy company focused on India and positioned to capitalize on India’s rapidly growing energy demand. It has an established track-record and assets worth US$12 billion across the power and oil and gas industries. The combined assets of Essar Power and Essar Oil constitute Essar Energy, which was listed on the London Stock Exchange in 2010 following a highly successful Initial Public Offer (IPO), the second-largest overseas IPO ever floated by a company of Indian origin. Essar Energy is part of the FTSE 100, UK's top 100 companies by market capitalization. Essar Oil is a fully integrated oil and gas company of international scale with a strong presence across the hydrocarbon value chain – from exploration and production to oil retail. The company has access to a global portfolio of onshore and offshore oil and gas blocks, with about 45,000 sq km available for exploration. The company is also the largest coal bed methane (CBM) player in India. Currently, the company has over 375,000 barrels per stream day (bpsd) of crude refining capacity at Vadinar in Gujarat, India, that is being expanded to 405,000 bpsd; over 296,000 bpsd of crude refining capacity at Stanlow in Cheshire, United Kingdom; 50-per cent controlling stake in Kenya Petroleum Refineries, which operates a refinery in Mombasa, Kenya, with a capacity of 80,000 bpsd; and over 1,600 Essar-branded oil retail outlets in various parts of India. Essar Power is among India's top private sector power producers with a current generation capacity of 1,600 MW spread across five power plants in India and Canada. This capacity is being expanded to 6,100 MW by end-2012 and to 11,470 MW by 2014, through the addition of seven new power plants in various parts of India. It is one of the lowest-cost power
producers and owns about 800 million tonnes of coal reserves and resources in blocks spread across four continents.
INFRASTRUCTURE The Essar Group has a strong foundation in infrastructure projects, with proven capability in managing ports and handling large, complex engineering, procurement and construction projects. Essar Ports is one of the largest owners and operators of ports in India. The company has an existing aggregate capacity of 88 MMTPA across two facilities located at Vadinar (58 MMTPA) and Hazira (30 MMTPA) in the state of Gujarat, on the west coast of India. It is currently in the process of increasing its aggregate ports capacity to 158 MMTPA at a number of locations across India. Essar Projects is the second largest engineering, procurement and construction (EPC) companies in India. Its EPC capabilities have helped build all of Essar's industrial assets in India in the sectors of steel, oil and gas, power, and ports and terminals. The company is increasingly using its expertise to execute large external projects across the world.
SERVICES The Essar Group offers a wide portfolio of services that cater to diverse sectors that include shipping, business process outsourcing, telecom and realty. Essar Shipping is an integrated logistics solution provider with a presence in sea transportation, logistics and oilfield services. The company currently has a fleet of 27 vessels, with an additional 12 new ships on order. It provides contract drilling services to global oil majors, with a fleet of 12 onshore rigs and one semi-submersible offshore rig; and two new jack-up rigs on order. Aegis is Essar's BPO arm. A global leader in business process outsourcing (BPO), it employs over 55,000 employees with expertise in the telecom, BFSI, travel and hospitality, consumer goods, retail and healthcare domains as well as engineering services. Aegis serves several Fortune 500 companies from 50 delivery centres across 12 countries. Essar Communications is a global player in the communications sector with a presence in telecom services, consumer durables and IT retail. Yu, its GSM-based mobile services network in Kenya, has more than a million subscribers; in the telecom retail space, the MobileStore is the largest telecom retailer within the organized sector (over 900 outlets across India).
Equinox Realty has a current portfolio of approximately 16 million sq. ft. under various stages of development and is currently present in the Indian states of Maharashtra, Karnataka, Gujarat and Madhya Pradesh.
Essar Energy
Essar Energy is a part of the Essar Group, a multinational business conglomerate operating in various sectors including construction, steel, energy, power, shipping ports and logistics. Essar Energy was created by combining the existing energy portfolio of Essar Global, a diversified Indian business group established over 40 years ago. The company was established in 1998 as a wholly owned subsidiary of the Essar Group. It is head quartered at Port Louis, Mauritius. Essar Energy has interests in both the power generation and petroleum industries. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index. Essar energy’s business comprises two divisions 1. Power: Generation and Transmission Essar Energy is a first mover among the private-sector players in the Indian power industry and currently has a total installed generation capacity of 2,800 MW. Essar Energy is one of India's leading private power producers with a 14-year operating track record. The company's power business currently has five operational power plants in India and one operational power plant in Algoma, Canada, with a total installed generation capacity of 2,800 MW. This capacity is increasing to 4,510 MW by the end of March 2013 and to 6,700 MW by the end of March 2014. Essar Energy also has access to approximately 500 mt of coal resources across seven coal blocks in India and overseas.
2. Oil and Gas a) Exploration and Production Exploration and production of oil and gas is critical for India's energy security and economic growth. Essar Energy's oil and gas exploration and production business is therefore inexorably linked with the national imperative. Exploration and production, the initial link in the energy and materials value chain, remains a major growth area and Essar Energy envisions evolving as a global energy major. Essar Energy has a diverse portfolio of 15 blocks and fields in the various fields of exploration and production of oil and gas in India, Indonesia, Madagascar, Nigeria and Vietnam. Total reserves and resources across these blocks is 2,109 mmboe. Essar Energy has net 2P (proven and probable reserves) and 2C (contingent resources) of 209 mmboe, best estimate prospective resources of 929 mmboe and an un-risked in-place resource base of 971 mmboe. The company's development and production assets include the
Raniganj Block in West Bengal, Ratna / R-Series Fields in offshore Mumbai and the Mehsana Block in Gujarat. The Raniganj Block has certified recoverable resource of 558 billion cubic feet (bcf) and is the first Coal Bed Methane (CBM) block under development. b) Refining and Marketing Essar Energy's refining business primarily consists of the Vadinar refinery, the second-largest private sector refinery in India, the Stanlow refinery, the second largest refinery in the United Kingdom, and a 50% interest in the Kenya Petroleum Refinery Limited. Essar Energy serves retail customers in India through a modern, countrywide network of 1,600 operational and under construction retail fuel outlets. The Vadinar Refinery in Gujarat is the second largest private sector refinery in India. It has been built with state-of-the-art technology and has the capability to produce petrol and diesel suitable for use in India as well as advanced international markets. The refinery has been designed to handle a diverse range of crude - from sweet to sour and light to heavy. It produces LPG, Naphtha, light diesel oil, Aviation Turbine Fuel (ATF) and kerosene. Essar Energy completed the US$350 million acquisition of Stanlow refinery, UK, on July 31, 2011. Stanlow has a nameplate capacity of 296,000 barrels per stream day but is currently operating at about 70% of this level. The Stanlow Refinery lies near to Liverpool, North West England, on the south bank of Manchester ship canal and is UK's second biggest oil refinery. It produces approximately 15% of the country's gasoline requirements together with large volumes of diesel and jet fuel. Essar Energy also holds a 50% interest in Kenya Petroleum Refineries Ltd, Mombassa, and a tolling refinery with a current throughput of 1.6 mmtpa.
Board of Directors Mr Prashant Ruia: Chairman, Non-Executive director Mr Simon Murray: Vice Chairman, Non-Executive Director Mr Ravi Ruia: Non-Executive Director Mr Naresh Nayyar: Chief Executive Officer Mr Sattar Abdoula: Independent Non-Executive Director Mr Subhas Lallah: Independent Non-Executive Director Mr Steve Lucas: Independent Non-Executive Director
Mr Philip Aiken: Senior Independent Non-Executive Director
Shareholder Structure
Essar Group has nearly 76% stake in Essar Energy
Company Financials: Income Statement
From the above financial statement, we observe that the net profit after tax has decreased from $ 248.3 million to $ 98.2 million.
Following table shows the segmental revenue:
Revenues - Group Essar Energy increased revenue (before reversal of sales tax benefit) by US$11.9 billion in the fifteen month period 2011-12, compared to the 12 month period to December 2010. Of this amount, US$6.4 billion reflected the acquisition of the Stanlow refinery and US$5.5 billion was the increase in revenue attributable to the Indian refinery (before the reversal of the sales tax benefit).
Revenues - Power Power revenues increased in 2011-12 by US$34.7 million to US$356.5 million from US$321.8 million in 2010 (after eliminating inter-segmental revenues for the current period of US$60.4 million (2010: US$27.8 million)). On a 12 month pro-rata basis revenue has decreased, due to lower unscheduled interchange (UI) in Bhander Power (US$23.5 million) compared to 2010 and adverse foreign exchange differences (US$12.9 million). Revenues – Exploration and Production Revenues were primarily impacted by lower production from the CB-ON/3 field in Gujarat which led to decreased sales of 8,696 barrels in the 15 months of 2011-12 from 9,616 barrels in 2010, due to delays in receiving replacement sub-surface pumps. Revenues – Refining and Marketing - India R&M India revenues (including sales tax benefit but before its subsequent reversal) increased by US$5,564 million from US$9,681 million in 2010 to US$15,245 million in the 15 months to March 2012. This was primarily as a result of an increase in the quantity of the products sold and higher product prices partly offset by decreased sales of traded products.
SWOT Analysis: Essar Energy Strengths 1. 2. Strong parent group company in Essar Group Countrywide network of 1,600 operational and under construction retail fuel outlets. 3. State of the art technologies at refineries 4. First Indian private sector company to enter petro retailing 5. Very active in CSR activities 6. Vadinar refinery is second largest private sector refinery in India 7. Access to coal reserves 8. Diverse portfolio of 15 blocks and fields 9. India has 4th largest reserves of coal in the world and is the 3rd largest producer in the world 10. India’s crude oil reserves are 20th largest in the world 11. Low rate of accidents in plants
Weakness 1. Huge transmission and distribution losses 2. Continuity and robustness of supply chain 3. Company operations are bound by government regulations and fluctuations 4. Net sales are affected due to increasing cost
Opportunities 1. There is huge gap between demand and supply. In 2011, India’s power requirement felt short by 13% 2. Large pool of highly skilled technical personnel available 3. Increasing lifestyle trends of people 4. Technological development and innovation 5. Scope for expansion into new markets and verticals like solar and wind energy generation 6. Improved storage techniques and technologies 7. Heavy industrialization is causing increase in the demand for energy 8. Scope for merger and acquisitions with foreign partners
Threats 1. 2. 3. 4.
Bureaucracy Legislation changes Environmental factors Operational risks
5. 6. 7. 8.
Industry is driven in large part by policy, making it subject to political changes Economic instability Unforeseen shortages of raw materials like coal Subsidies provided to government owned PSUs
Business Strategy Optimise performance of all existing assets Essar Energy intends to capitalise on the existing assets by drawing on the Group's significant experience and expertise to carry out a number of optimisation projects. These will consolidate Essar Energy's position as one of India's largest energy groups. This can be achieved through a combination of debottlenecking operating plants, further improving efficiency, expanding output and increasing economies of scale. Deliver growth through a variety of power and oil and gas projects Essar Energy plans to pursue further growth through both green-field and brown-field energy projects in the areas of exploration and production, refining, marketing, power generation, raw material acquisition, transmission, and distribution. Leverage skills and Indian asset base to identify growth opportunities Essar Energy intends to leverage its established skills and Indian asset base in oil and gas, and power, to seek organic and inorganic growth opportunities in India and potentially overseas, with the objective of improving market leadership, economies of scale, synergies, and maximising shareholder value. Be a good corporate citizen Essar Energy intends to act as a good corporate citizen with respect to the health and safety of its employees and the communities in which it operates. The maintenance of high environmental performance standards are significant responsibilities within the conduct of Essar Energy's operations, and the aim of the company is to be recognised as a leader in health, safety and environmental management.
Competitor Analysis Reliance Industries Reliance Industries (RIL) is one of the main companies operating in the same segment as Essar Energy. RIL is India’s largest private sector enterprise, with businesses in the energy and materials value chain. Group's annual revenues are in excess of US$ 66 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company. The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail, infotel and special economic zones.
A) Exploration and Production RIL has recently tied up with British Petroleum, a British multinational oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world. The partnership across the full value chain comprises BP taking a 30% stake in 23 oil and gas production sharing contracts that Reliance operates in India, including the producing KG-D6 block. The partnership will aim to combine BP's deep-water exploration & development capabilities with Reliance's project management & operations expertise. The two companies will also form a joint venture (50:50) for the sourcing and marketing of gas in India and bid together for incremental opportunities in the deep-water blocks in the east coast of India. KG-D6 was the single largest source of domestic gas in the country for FY-11 and accounted for almost 35% of the total gas consumption in India. An integrated development plan for all gas discoveries in KG-D6 is being conceptualized. This will encompass existing wells and other discoveries within the block to maximize capital efficiency and to accelerate monetization. The Panna-Mukta fields produced 9.3 MMBL of crude oil and 52.1 BCF of natural gas in FY-11. Tapti fields produced 1.2 MMBL of condensate and 95.2 BCF of natural gas in FY-11. RIL also holds 3 CBM blocks in Sohagpur (East), Sohagpur (West) and Sonhat. RIL has 13 blocks in its international conventional portfolio, including 2 in Peru, 3 in Yemen (1 producing and 2 exploratory), 2 each in Oman, Kurdistan and Colombia, 1 each in East Timor and Australia; amounting to a total acreage of over 99,145 sq. km. RIL, through its subsidiary, Reliance Marcellus LLC, also entered into a joint venture with Atlas Energy, Inc. (now owned by Chevron Corporation) under which Reliance acquired a 40% interest in Atlas' core Marcellus shale acreage position. With this venture, Reliance became a partner in approximately 300,000 net acres of undeveloped leasehold in the core area of the Marcellus shale in south western Pennsylvania. In another joint venture, RIL, through its subsidiary, Reliance Eagleford Upstream LP, entered into a joint venture with Pioneer Natural Resources Company
under which Reliance acquired a 45% interest in Pioneer's core Eagle Ford shale acreage position in two separate transactions. The joint venture plans to increase the current drilling programme to approximately 140 wells per year within three years. RIL, through its subsidiary, Reliance Marcellus II, LLC, also entered into a joint venture with Carrizo Oil & Gas, Inc. Under the transaction, Reliance acquired a 60% interest in Marcellus shale acreage in Central and Northeast Pennsylvania. This acreage is expected to support the drilling of approximately 1,000 wells over the next 10 years, with a net resource potential of about 3.4 TCFe (2.0 TCFe net to Reliance).
B) Refining and Marketing Petroleum Refining and retailing is the second link in RIL's drive for growth and global leadership in the core energy and materials value chain. RIL has 1.24 million barrels per day (MBPD) of crude processing capacity, the largest at any single location in the world. The RIL refineries are state-of-the-art and among the most complex refineries in the world. Strategically located on the west coast of India, it benefits from low transportation costs for its feedstock and also from its proximity to the high-growth markets of Asia. Reliance has consolidated operations of its GAPCO subsidiaries in East Africa. GAPCO group owns and operates large storage facilities and also has a wellspread retail distribution network. It owns and operates large coastal storage terminals in Dar-e-Salaam (Tanzania), Mombasa (Kenya) and an inland terminal at Kampala (Uganda) and has well-spread depots in East Africa. Reliance's refinery at Jamnagar in the state of Gujarat, India, is designed to process a wide variety of crude oils ranging from light to heavy and sweet to sour. The refinery is equipped with world-class port facilities, which can receive crude oils in various types of vessels including Ultra Large & Very Large Crude Carriers, Suezmax and Aframax vessels.
References
http://www.essar.com/default.aspxhttp://www.essarenergy.com/http://infralineenergy.blogspot.in/http://www.eai.inhttp://www.indiaenergyportal.org/overview_detail.phphttp://www.rediff.comhttp://www.ril.com/
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