Description
It describes about Industry Trends of oil and gas industry, PEST Analysis of oil and gas Industry, Competitor Analysis of Hindustan petroleum, SWOT analysis, Company Description, General Information about the company, it's Finance performance, SWOT analysis of hindustan petroleum and Various Strategies employed by hindustan petroleum.
Hindustan Petroleum
Contents Sr. No. 1 1.1 1.2 1.3 1.4 2 2.1 2.2 2.3 2.4 2.5 Topic Industry Analysis Industry Trends PEST Analysis of Industry Competitor Analysis SWOT analysis Company Analysis Company Description General Information Finance performance SWOT analysis Various Strategies employed References
1. Industry Analysis [1] Introduction There are many ways to look at Oil and Gas industry i.e. Petroleum industry and the needs of human life in different sectors of economy which they satisfy and cannot be done without. From a human or personal perspective, oil and gas provides the world's 7 billion people with 60 percent of their daily energy needs. The other 40 percent comes from coal, nuclear, hydroelectric power, renewable resources like wind, solar energy, tidal power and biomass products such as firewood. From a business perspective, oil and gas represent global commerce on a large scale. Global energy markets are expanding continuously and companies are spending billions of dollars annually to maintain and increase their oil and gas production. Over 200 countries have invited companies to negotiate for the right to explore their lands or territorial waters, hoping that they will find and produce oil and gas, create local jobs and provide billions of dollars in national revenues. From a geopolitical perspective, large quantities of oil and gas flow daily from exporting regions such as the Middle East, Africa and Latin America to importing regions such as North America, Europe and the Far East. This creates political, trade, economic and even national security concerns on both sides. Oil and gas exporters want to maximize their revenues and improve their trade balances while maintaining control and sovereignty over their natural resources. At the same time, importing nations want to minimize trade deficits and ensure a steady, reliable oil supply. From an internal policy perspective, producing countries continually wrestle with questions of how best to develop their resources and attain long-term sustainable benefits for their people. At the same time, consuming countries are always considering how to reduce their dependence on imported oil, either by imposing higher energy taxes to help in conservation, tapping into domestic resources such as coal or developing alternative energy sources such as nuclear power. These issues have major long-term impacts, both within individual countries and on the world at large, even affecting such fundamental issues as war and peace. From a health, safety and environmental perspective, there is a continuous concern for safety in oil and gas operations, the impact that new projects have on surface environments, the possibility of oil spills and the effect of pollutants such as CO2 on global climate change and air quality. The oil and gas business is clearly a multifaceted, global industry that impacts all aspects of our lives. And yet it is one that we tend to take for granted until a crisis emerges-a tanker runs aground, a hurricane damages a refinery, a country changes political leaders or revises its energy policies.
1.1 Industry Trends Various trends are going in the Indian as well as global petroleum industry right now according to world economic and political scenario. All the developing countries are in dire need of oil and other natural resources for their development and hence are continuously accessing new options in terms of under-developed countries or trying to maintain good relations from the oil exporting countries. 1.1. a. Global Perspective[2] Petroleum industry is the main driving force of the 20th century and continues to remain the same by meeting almost 60% of world’s energy demands. Each and every country is trying to get maximum oil possible so as to accelerate its development along with finding new oil supplies in its territories and water bodies alike. Over the past decades, there have been radical changes in the oil industry resulting in far reaching developments such as; mergers and take-overs, globalisation, government influence and technological advances and innovations. In the first part of the talk, an insight into the oil industry was given and some recent trends were discussed. Petroleum industry has grown in an upward slope from 1990 to 2005 and still growing with reserves increasing from 20.9 million barrels to 24.3 million barrels in the whole world. The exporting countries are trying their best to export the oil without letting their supremacy from the natural resources slip out . The importing countries are trying their best to settle their balance of trade and payment so that oil imports are settled at their best possible way. Their other try is to find a cheaper alternative to oil so as to reduce their import bills. 1.1. b. Indian Perspective
India imports three fourths of the oil it refines. The government operates an elaborate set of crosssubsidies to insulate the domestic pricing from international pricing. Such cross-subsidies have serious effects on the finance of petroleum companies and encourage fierce competition among them. The oil companies, both private and public, have become such a part of economy that the cross-subsidy could not be maintained for more time and this led to domestic prices coming near to that of international prices with finally government also decontrolling the prices of petrol. Indian oil companies do face serious pressure with international prices fluctuating continually and also varying amount of supply due to international tensions or other problems like calamities etc. but have still managed to sustain with good growth. Major contributory factors for high demand growth rates in India The steady growth in GDP and purchasing power on part of the Indian population has resulted into a corresponding growth in consumption of petroleum products in India. A few factors, which have particularly been significant in this regard, are: 1. Significant growth in passenger car population (From 2.3 million private motor vehicles in 1991 to 3.9 million in 1998 - Annual growth of more than 7% From 14.1 million two-wheeled motor vehicle in 1991 to 27.9 million in 1998)
2. Significant growth in transportation vehicles like trucks. 3. Replacement of conventional cooking fuels including kerosene in urban regions by LPG. 1.1. c. Recent happenings. Recent happenings are stirred by entrepreneurial and political events in the global scenario. Prices of oil are varying day by day with companies and countries fighting hard for petroleum enriched lands and basins. With regards to Indian market, Reliance petroleum industries and the government are continually trying to revive the KG basin project along with trying to maintain the trade relations with Iran so as to maintain the continuous supply of oil. This is a situation wherein there are growing international tensions regarding rumoured production of nuclear weapons by Iran. Also, the ministry of Petroleum and Natural Gas have announced 27 per cent reservation to Other Backward Classes (OBCs) in the allotment of retail outlets, which is petrol pump dealership. Indian Government has decided to put a cap on the subsidies provided to the economically higher sections of the society and this means increase in the price of daily need commodities of middle and upper class of India. Petroleum Industries are finding it difficult to hold such large amount in business where Indian government is in fiscal deficit and hence cannot afford to pay subsidies to the said companies. There are eight Indian firms in the Fortune 500 list with Indian Oil Corporation leading the Indian chart. Bharat Petroleum will be offering a BP biodiesel blend to Christchurch retail customers at BP Connect Hoon Hay. BP has partnered with local Christchurch Company, Biodiesel, New Zealand, to produce the BP biodiesel blend. The product is a blend of normal mineral diesel and up to 5 percent biodiesel, the maximum amount of biodiesel allowed in a blend under current New Zealand legislation. This is done in order to take steps forward towards a stable price of oil. World’s oil supply is up recently but the spare oil supply is tight according to research findings of EIA. Iran has discovered two new oil reserves which contain upto 6 billion barrels. Hence it would be able to supply more 70000 barrels per day. This explains all the recent happenings in petroleum industry with respect to national and International front.
1.2 PEST Analysis of Petroleum Industry[7] PEST refers to Political, Economical, Social and Technological aspects of an industry.Below explained are the different aspects of the petroleum industry: PEST analysis Political Currently, only Gulf countries in the world are having excess reserves of oil and natural gas and they are supplying it to each and every country in the world. Also, crude oil is one of the most worldwide required resource. Any slightest fluctuation in crude oil prices can have both direct and indirect influence on the economy of the countries. The price of the crude oil in the International market decides the rate of inflation in the country and hence it is one of the most sensitively important ingredients in the economy. Also, recent tensions between Iraq, Israel, the U.K. and the U.S. had led to severe tensions between India and Iraq too which affected our oil exports. Economical Oil is one of the most important factors in deciding the inflation , import bill, economic prosperity of the country. Most of the countries import oil from Gulf countries and in turn pay in dollars per barrel. The consumption level of oil is projected to be rise by 1.2 million bbl/d in the year 2008. The consumption of China is presumed to be rise by 0.4 million bbl/d in current year, as it has already registered an increase of 0.8 million bbl/d in march. Due to varying prices of oil, the Indian government which has a fiscal deficit of 5.9% of GDP is finding it difficult to subsidise it and this has led to high price rise in foodgrains, fruits and vegetables. Social The effect of overuse of oil in prosperity of economies has started to show up. The natural resources of oil are fast depleting due to which researches are desperately trying to find nonconventional sources of energy which can lead them to prevent more depletion of oil. Also as the nations are prospering the need or the demand for oil is increasing and this has led to increase in oil prices as the supply of oil is depleting. Also as oil is the deciding factor for inflation hence inflation is spiraling out of control and governments are finding it difficult to control them. Technological Oil and gas industry is the most important need for driving all sectors technologically. Oil industry has become more and more technologically advanced with ONGC mining for oil under the sea deep in the Indian ocean extracting oil with all the modern machineries. Also oil has led to quest for research in the industry with TATA launching the cheapest car in the world i.e. Nano which runs on petrol. Also looking on the other side, oil depletion is also driving the researchers to invent new sources of energy as an alternative to oil.
1.3 Competitor Analysis[9] Nearest competitor of Hindustan Petroleum is Gas Authority of India Ltd. (GAIL). Gail Success Story Formation of GAIL GAIL (India) Ltd was incorporated in August 1984 as a Central Public Sector Undertaking (PSU) under the Ministry of Petroleum & Natural Gas (MoP&NG). The company was initially given the responsibility of construction, operation & maintenance of the Hazira – Vijaypur – Jagdishpur (HVJ) pipeline Project. It was one of the largest cross-country natural gas pipeline projects in the world. Originally this 1800 Km long pipeline was built at a cost of Rs 1700 Crores and it laid the foundation for development of market for natural Gas in India.
Pricing of GAIL Shares Price of GAIL shares as per 21st July, 2012 is Rs.356 for BSE and Rs. 357 for NSE. The pricing appears to be stable with little variations in the pricing. Quality and Distribution of GAIL[11] GAIL manufactures and delivers quality products since 1984 and has won many awards for quality assurance as well as company performance. GAIL is the pioneer of city gas distribution in India. GAIL took many initiatives to introduce PNG for households and CNG for the transport sector to address the rising pollution levels. Pilot projects were launched in early 1990s in two metros Delhi and Mumbai through joint venture companies Indraprastha Gas Limited (IGL) and Mahanagar Gas Limited (MGL) leading to the start of commercial operation of city gas projects. The results of these ventures are quite visible through the improvement in air quality in these cities. Based on the success of IGL and MGL, GAIL has further set up six more JVCs viz Bhagyanagar Gas Limited, Andhra Pradesh; Avantika Gas Limited in Madhya Pradesh; Central U P Gas Limited & Green Gas Limited in Uttar Pradesh; Maharashtra Natural Gas Limited in Pune Maharashtra and Tripura Natural Gas Company Limited in Tripura for CGD projects in various cities. GAIL Gas Limited has been authorized by PNGRB and MoPNG for implementing City Gas Distribution Projects in Dewas (Madhya Pradesh), Kota (Rajasthan), Sonepat (Haryana), Meerut (Uttar Pradesh), Firozabad (Uttar Pradesh) and Vadodara (Gujarat). As per the business plan, GAIL Gas would be expanding the CGD business in dedicated and aggressive manner and will facilitate re-investing returns from operational CGD projects into new projects thus reducing the need for fresh equity infusions by GAIL. As per the estimate more than 200 cities have been identified for the development of CGD projects in a phased manner in synchronization with the commissioning of the pipeline. The details of these cities have already been forwarded to MoPNG by GAIL with a request for authorization for setting up of CGD network in these cities. Gas supplied by GAIL to retail gas distributors serves more than 6,00,000 automobiles as Compressed Natural Gas (CNG) and over 6,50,000 households as Piped Natural Gas (PNG). Various cities are covered in the network.
Joint Ventures and Subsidiaries by GAIL GAIl has been one of the pioneers in introducing the city distribution system projects and has entered into a number of joint ventures with companies as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Aavantika Gas Limited. Bhagyanagar Gas Limited Central U.P. Gas Limited. Green Gas Limited Indraprastha Gas Limited Mahanagar Gas Limited Maharashtra Natural Gas Limited ONGC Petro-Additions Limited. Petronet LNG Limited. Ratnagiri Gas And Power Private Limited. Tripura Natural gas Company Limited GAIL China Gas Global Energy Holdings Limited
And its subsidiaries are as follows: 1. 2. 3. Brahmaputra Cracker and Polymer Limited GAIL Gas Limited GAIL Global PTE Limited
1.4 SWOT Analysis Strengths 1. Strength of the petroleum industry is that it has strong government backing. 2. Prices depends on the rate in International market and hence no competition in terms of pricing. 3. Profit percentage is low but steady and the profit margin is always maintained. Weaknesses 1.Requires large capital and high level of planning before setting up. 2.Always need to monitor prices and deal with heavy losses sometimes due to international pressures. 3.High level of infrastructure and technology required to extract oil. 4. Face acute shortages in case of political tensions brewing between nations. Opportunities 1.Linking the company to public sector makes it quite easy to attract capital required for high investment capital projects. 2.To come out with a green solution as an alternative to petroleum in order to stabilize the prices. 3.Develop inter-city projects to facilitate better connectivity. Threats 1.Biggest threat to oil companies is the international tensions which can lead to drying up of oil supplies bringing the economy to a stand-still. 2.Research related works on oil reserves which lead to huge losses if unsuccessful.
2. Company Analysis 2.1 Company Description[12] HPCL is a Government of India Enterprise with a Navratna Status, and a Fortune 500 and Forbes 2000 company, with an annual turnover of Rs. 1,32,670 Crores and sales/income from operations of Rs 1,43,396 Crores (US$ 31,546 Millions) during FY 2010-11, having about 20% Marketing share in India among PSUs and a strong market infrastructure. HPCL's Crude Thruput and Market Sales (including exports) are 14.75 Million Metric Tonnes (MMT) and 27.03 MMT respectively in the same period. HPCL is one of the largest integrated Public Sector Undertaking, engaged in the business of refining Crude Oil and marketing of various petroleum products like Petrol, Diesel, LPG, Kersoene, Lube Oils, Asphalt, branded products like Power, Turbojet, naphtha, ATF (Aviation Turbine Fuel) throughout India and at select foreign countries. Some of these products are exported to other countries. HPCL operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum (MMTPA) capacity and the other in Vishakapatnam, (East Coast) with a capacity of 8.3 MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is constructing a 9 MMTPA refinery at Bathinda, in the state of Punjab, as a joint venture with Mittal Energy Investments Pte. Ltd. HPCL also owns and operates the largest Lube Refinery in the India producing Lube Base Oils of international standards, with a capacity of 335 TMT. This Lube Refinery accounts for over 40% of the India's total Lube Base Oil production. HPCL has 7 Retail and 6 LPG Zonal offices at major Cities, in addition to 90 Regional Offices, 37 major Terminals / Installations / Tap Off Points, 7 Lube Blending Plants, 100 Depots, 43 LPG Bottling Plants, 2 LPG Import Facilities, 8539 Petrol Pumps, 77 CNG Pumps, 72 Auto LPG Pumps 2250 HP Gas LPG Distributors serving 2.698 Crores LPG Customers, 1638 SKO / LDO Distributors, 59 Lube CFA spread over in the various states of India, ensure that the customers can approach their nearest location for getting their requirements. In addition HPCL has 23 Aviation Service Stations spread over India, to cater to the Airline industry. HPCL's vast marketing network consists of 13 Zonal offices in major cities and 101 Regional Offices facilitated by a Supply & Distribution infrastructure comprising Terminals, Pipeline networks, Aviation Service Stations, LPG Bottling Plants, Inland Relay Depots & Retail Outlets, Lube and LPG Distributorships. HPCL, over the years, has moved from strength to strength on all fronts. The refining capacity steadily increased from 5.5 MMTPA in 1984/85 to 14.8 MMTPA presently. On the financial front, the turnover has grown from Rs. 2687 Crores in 198485 to an impressive Rs 1,32,670 Crores in FY 2010-11.
2.2 General Information[13] Location of Headquarters The Hindustan Petroleum Corporation Limited has its Headquarters located at Petroleum House, 17 Jamshedji Tata Road, Churchgate, Mumbai-400020 and two main oil refineries in Mumbai as well as Vishakhapatnam.
Year of founding It is a government registered company which was founded in the year 1976 after the amalgamation of foreign oil companies ESSO and Caltex, which were taken over by the Government of India in 1974 and 1976 respectively. Shareholder pattern[14] HPCL is a Central Public Sector Undertaking, with a subscribed capital of Rs. 339.33 Crores. The President of India is presently holding 51.01 % of the paid share capital, the remaining shares being held by various Financial Institutions, FIIs, Banks, Mutual Funds, NRIs and general public including employees of the Corporation. The shares are listed on BSE / NSE and are actively traded. Table containing shareholding pattern: As on 30/06/2012, these are the following shareholder pattern statistics: Category The President Of India Financial Institutions FIIs/OCBs Banks Mutual Funds NRIs Employees of the Company Public Total Number of employees HPCL has 11428 employees in total working for it as on 31/03/2011. They are classified as under: Group A B C D Total No. Of Employees 4939 Nil 6211 98 11428 No.of shares 173076750 45794023 24929920 813780 46438684 926230 272945 46374918 338627250 Percentage 51.11 13.52 7.36 0.24 13.72 0.27 0.08 13.7 100
Top management [15] HPCL is managed by a Board of Directors. Presently there are 11 Directors, with the Chairman and Managing Director as the head of the Corporation. The Board comprises of 4 full time Directors also called Functional Directors – Director Marketing, Director Refineries, Director Human Resources and Director Finance. In addition, 2 part time Directors representing Government of India, through Ministry of Petroleum & Natural Gas, 4 part time Independent Directors, also called Navratna Directors are on the Board. All these 6 Directors are nominated by the Government of India.
2.3 Financial Performance of the company[16] Total sales turnover of the company for the financial year 2011-12 is Rs. 185087.26 crores which is almost 50,000 crores than last financial year. This is a giant leap by HPCL in the forward direction. Net profit comes to 175.96 crores which is very less compared to last year’s profit and hence comparatively the company has not earned much this year Segment wise performance of the company is still not published by the company. 2.4 SWOT analysis of the company. SWOT stands for strengths, weaknesses, opportunities and threats for the company and they are as mentioned below:
Strengths 1. Strength of the HPCL is that it has strong government backing. 2. Prices depends on the rate in International market and hence no competition in terms of pricing. 3. Profit percentage is low but steady and the profit margin is always maintained. 4. Country’s largest lube refinery gives it the edge in competition. 5. Holds petrol pumps throught India giving it better connectivity with citizens and edge over competitors. Weaknesses 1. Requires large capital and high level of planning before setting up. 2. Always need to monitor prices and deal with heavy losses sometimes due to international pressures. 3. High level of infrastructure and technology required to extract and refine oil. 4. As it is state governed, it cannot take certain hard decisions without the supervision of government. Opportunities 1. Linking the company to public sector makes it quite easy to attract capital required for high investment capital projects. 2. To come out with a green solution as an alternative to petroleum in order to stabilize the prices.
3.
Develop inter-city projects to facilitate better connectivity.
Threats 1. Biggest threat to oil companies is the international tensions which can lead to drying up of oil supplies bringing the economy to a stand-still. 2. Research related works on oil reserves which lead to huge losses if unsuccessful.
2.5 2.5.
Various strategies employed by the company in past 2 years. a. Hierarchical changes[15]
1. Ms. Nishi Vasudeva took charge as Director – Marketing effective July 04, 2011. Prior to this she was the Executive Director (Marketing Co-ordination) of HPCL. She took over the post which was left vacant by Mr. S. Roy Chaudhary as he became the Chairman and Managing Director of the company in August 2010. 2. Mr. S. K. Roongta joined the HPCL board as an Independent Director effective January 10, 2011. He also holds Directorships in Axis Bank, Neyveli Lignite Corporation Ltd., Shipping Corporation Ltd., Jubilant Industries Ltd., Jindal Power Ltd. and ACC Ltd. 3. Mr. Anil Razdan joined the HPCL board as an Independent Director effective January 10, 2011. Shri Anil Razdan was Secretary to the Government of India, Ministry of Power during 2007-08. He has held various significant assignments in the Government of Haryana, and the energy sector in the Government of India, including that of Additional & Special Secretary with the Ministry of Petroleum & Natural Gas. 2.5. b. Business divisions 1. HPCL is nearing a close in with regars to setting up an oil refinery in Barmer at Rajasthan. Currently it holds two refineries in Mumbai and Vishakhapatnam. This move by HPCL is seen as an expansionist strategy by other competitors. 2. Pollution board asked HPCL to cut 30% production with respect to oil refinery in VIshakhapatnam on account of excessive pollution. 3. HPCL wins Marketing Company of the Year award. 2.5. c. Regional strategies 1. HPCL is nearing a close in with regars to setting up an oil refinery in Barmer at Rajasthan. Currently it holds two refineries in Mumbai and Vishakhapatnam. This move by HPCL is seen as an expansionist strategy by other competitors. 2. HPCL's vast marketing network consists of 13 Zonal offices in major cities and 101 Regional Offices.
This in all gives the company analysis of Hindustan Petroleum Corporation Limited.
3. References 1. http://www.petroleumonline.com/content/overview.asp?mod=1 2. http://www.socialstudies.org.uk/events/183-a-global-perspectiveoil-industry-oldreservoirs-and-new-tricksby-vural-sander-suicmez?catid=1%3Aevents 3. http://www.slideshare.net/indicusanalytics/competition-in-the-indian-petroleum-industry 4. http://www.ril.com/downloads/pdf/business_petroleum_refiningmktg_lc_ipi.pdf 5. http://www.petroleumbazaar.com/Internationalnews.aspx 6. http://www.commodityonline.com/news/irans-new-oil-fields-to-add-output-by-70000barels-per-day-49027-3-49028.html 7. http://www.scribd.com/doc/31803171/Pestle-analysis-of-oil-and-petroleum-industry 8. http://exportimportindia.in/2011/11/top-10-oil-petroleum-gas-companies-in-india-by-2011/ 9. http://www.gail.nic.in/final_site/index.html 10. http://www.business-standard.com/stockpage/stock_details.php?bs_code=6898 11. http://www.gailonline.com/gailnewsite/businesses/citygasdistribution.html 12. http://www.hindustanpetroleum.com/En/UI/AboutUs.aspx 13. http://www.hindustanpetroleum.com/en/UI/RTIInfo_Manual.aspx 14. http://www.hindustanpetroleum.com/En/UI/IRShareholderProfile.aspx 15. http://www.hindustanpetroleum.com/En/UI/BoardOfDirectors.aspx 16. http://www.moneycontrol.com/stocks/company_info/print_main.php 17. http://www.moneycontrol.com/financials/hpcl/consolidated-ratios/HPC 18.
doc_910580178.doc
It describes about Industry Trends of oil and gas industry, PEST Analysis of oil and gas Industry, Competitor Analysis of Hindustan petroleum, SWOT analysis, Company Description, General Information about the company, it's Finance performance, SWOT analysis of hindustan petroleum and Various Strategies employed by hindustan petroleum.
Hindustan Petroleum
Contents Sr. No. 1 1.1 1.2 1.3 1.4 2 2.1 2.2 2.3 2.4 2.5 Topic Industry Analysis Industry Trends PEST Analysis of Industry Competitor Analysis SWOT analysis Company Analysis Company Description General Information Finance performance SWOT analysis Various Strategies employed References
1. Industry Analysis [1] Introduction There are many ways to look at Oil and Gas industry i.e. Petroleum industry and the needs of human life in different sectors of economy which they satisfy and cannot be done without. From a human or personal perspective, oil and gas provides the world's 7 billion people with 60 percent of their daily energy needs. The other 40 percent comes from coal, nuclear, hydroelectric power, renewable resources like wind, solar energy, tidal power and biomass products such as firewood. From a business perspective, oil and gas represent global commerce on a large scale. Global energy markets are expanding continuously and companies are spending billions of dollars annually to maintain and increase their oil and gas production. Over 200 countries have invited companies to negotiate for the right to explore their lands or territorial waters, hoping that they will find and produce oil and gas, create local jobs and provide billions of dollars in national revenues. From a geopolitical perspective, large quantities of oil and gas flow daily from exporting regions such as the Middle East, Africa and Latin America to importing regions such as North America, Europe and the Far East. This creates political, trade, economic and even national security concerns on both sides. Oil and gas exporters want to maximize their revenues and improve their trade balances while maintaining control and sovereignty over their natural resources. At the same time, importing nations want to minimize trade deficits and ensure a steady, reliable oil supply. From an internal policy perspective, producing countries continually wrestle with questions of how best to develop their resources and attain long-term sustainable benefits for their people. At the same time, consuming countries are always considering how to reduce their dependence on imported oil, either by imposing higher energy taxes to help in conservation, tapping into domestic resources such as coal or developing alternative energy sources such as nuclear power. These issues have major long-term impacts, both within individual countries and on the world at large, even affecting such fundamental issues as war and peace. From a health, safety and environmental perspective, there is a continuous concern for safety in oil and gas operations, the impact that new projects have on surface environments, the possibility of oil spills and the effect of pollutants such as CO2 on global climate change and air quality. The oil and gas business is clearly a multifaceted, global industry that impacts all aspects of our lives. And yet it is one that we tend to take for granted until a crisis emerges-a tanker runs aground, a hurricane damages a refinery, a country changes political leaders or revises its energy policies.
1.1 Industry Trends Various trends are going in the Indian as well as global petroleum industry right now according to world economic and political scenario. All the developing countries are in dire need of oil and other natural resources for their development and hence are continuously accessing new options in terms of under-developed countries or trying to maintain good relations from the oil exporting countries. 1.1. a. Global Perspective[2] Petroleum industry is the main driving force of the 20th century and continues to remain the same by meeting almost 60% of world’s energy demands. Each and every country is trying to get maximum oil possible so as to accelerate its development along with finding new oil supplies in its territories and water bodies alike. Over the past decades, there have been radical changes in the oil industry resulting in far reaching developments such as; mergers and take-overs, globalisation, government influence and technological advances and innovations. In the first part of the talk, an insight into the oil industry was given and some recent trends were discussed. Petroleum industry has grown in an upward slope from 1990 to 2005 and still growing with reserves increasing from 20.9 million barrels to 24.3 million barrels in the whole world. The exporting countries are trying their best to export the oil without letting their supremacy from the natural resources slip out . The importing countries are trying their best to settle their balance of trade and payment so that oil imports are settled at their best possible way. Their other try is to find a cheaper alternative to oil so as to reduce their import bills. 1.1. b. Indian Perspective
India imports three fourths of the oil it refines. The government operates an elaborate set of crosssubsidies to insulate the domestic pricing from international pricing. Such cross-subsidies have serious effects on the finance of petroleum companies and encourage fierce competition among them. The oil companies, both private and public, have become such a part of economy that the cross-subsidy could not be maintained for more time and this led to domestic prices coming near to that of international prices with finally government also decontrolling the prices of petrol. Indian oil companies do face serious pressure with international prices fluctuating continually and also varying amount of supply due to international tensions or other problems like calamities etc. but have still managed to sustain with good growth. Major contributory factors for high demand growth rates in India The steady growth in GDP and purchasing power on part of the Indian population has resulted into a corresponding growth in consumption of petroleum products in India. A few factors, which have particularly been significant in this regard, are: 1. Significant growth in passenger car population (From 2.3 million private motor vehicles in 1991 to 3.9 million in 1998 - Annual growth of more than 7% From 14.1 million two-wheeled motor vehicle in 1991 to 27.9 million in 1998)
2. Significant growth in transportation vehicles like trucks. 3. Replacement of conventional cooking fuels including kerosene in urban regions by LPG. 1.1. c. Recent happenings. Recent happenings are stirred by entrepreneurial and political events in the global scenario. Prices of oil are varying day by day with companies and countries fighting hard for petroleum enriched lands and basins. With regards to Indian market, Reliance petroleum industries and the government are continually trying to revive the KG basin project along with trying to maintain the trade relations with Iran so as to maintain the continuous supply of oil. This is a situation wherein there are growing international tensions regarding rumoured production of nuclear weapons by Iran. Also, the ministry of Petroleum and Natural Gas have announced 27 per cent reservation to Other Backward Classes (OBCs) in the allotment of retail outlets, which is petrol pump dealership. Indian Government has decided to put a cap on the subsidies provided to the economically higher sections of the society and this means increase in the price of daily need commodities of middle and upper class of India. Petroleum Industries are finding it difficult to hold such large amount in business where Indian government is in fiscal deficit and hence cannot afford to pay subsidies to the said companies. There are eight Indian firms in the Fortune 500 list with Indian Oil Corporation leading the Indian chart. Bharat Petroleum will be offering a BP biodiesel blend to Christchurch retail customers at BP Connect Hoon Hay. BP has partnered with local Christchurch Company, Biodiesel, New Zealand, to produce the BP biodiesel blend. The product is a blend of normal mineral diesel and up to 5 percent biodiesel, the maximum amount of biodiesel allowed in a blend under current New Zealand legislation. This is done in order to take steps forward towards a stable price of oil. World’s oil supply is up recently but the spare oil supply is tight according to research findings of EIA. Iran has discovered two new oil reserves which contain upto 6 billion barrels. Hence it would be able to supply more 70000 barrels per day. This explains all the recent happenings in petroleum industry with respect to national and International front.
1.2 PEST Analysis of Petroleum Industry[7] PEST refers to Political, Economical, Social and Technological aspects of an industry.Below explained are the different aspects of the petroleum industry: PEST analysis Political Currently, only Gulf countries in the world are having excess reserves of oil and natural gas and they are supplying it to each and every country in the world. Also, crude oil is one of the most worldwide required resource. Any slightest fluctuation in crude oil prices can have both direct and indirect influence on the economy of the countries. The price of the crude oil in the International market decides the rate of inflation in the country and hence it is one of the most sensitively important ingredients in the economy. Also, recent tensions between Iraq, Israel, the U.K. and the U.S. had led to severe tensions between India and Iraq too which affected our oil exports. Economical Oil is one of the most important factors in deciding the inflation , import bill, economic prosperity of the country. Most of the countries import oil from Gulf countries and in turn pay in dollars per barrel. The consumption level of oil is projected to be rise by 1.2 million bbl/d in the year 2008. The consumption of China is presumed to be rise by 0.4 million bbl/d in current year, as it has already registered an increase of 0.8 million bbl/d in march. Due to varying prices of oil, the Indian government which has a fiscal deficit of 5.9% of GDP is finding it difficult to subsidise it and this has led to high price rise in foodgrains, fruits and vegetables. Social The effect of overuse of oil in prosperity of economies has started to show up. The natural resources of oil are fast depleting due to which researches are desperately trying to find nonconventional sources of energy which can lead them to prevent more depletion of oil. Also as the nations are prospering the need or the demand for oil is increasing and this has led to increase in oil prices as the supply of oil is depleting. Also as oil is the deciding factor for inflation hence inflation is spiraling out of control and governments are finding it difficult to control them. Technological Oil and gas industry is the most important need for driving all sectors technologically. Oil industry has become more and more technologically advanced with ONGC mining for oil under the sea deep in the Indian ocean extracting oil with all the modern machineries. Also oil has led to quest for research in the industry with TATA launching the cheapest car in the world i.e. Nano which runs on petrol. Also looking on the other side, oil depletion is also driving the researchers to invent new sources of energy as an alternative to oil.
1.3 Competitor Analysis[9] Nearest competitor of Hindustan Petroleum is Gas Authority of India Ltd. (GAIL). Gail Success Story Formation of GAIL GAIL (India) Ltd was incorporated in August 1984 as a Central Public Sector Undertaking (PSU) under the Ministry of Petroleum & Natural Gas (MoP&NG). The company was initially given the responsibility of construction, operation & maintenance of the Hazira – Vijaypur – Jagdishpur (HVJ) pipeline Project. It was one of the largest cross-country natural gas pipeline projects in the world. Originally this 1800 Km long pipeline was built at a cost of Rs 1700 Crores and it laid the foundation for development of market for natural Gas in India.
Pricing of GAIL Shares Price of GAIL shares as per 21st July, 2012 is Rs.356 for BSE and Rs. 357 for NSE. The pricing appears to be stable with little variations in the pricing. Quality and Distribution of GAIL[11] GAIL manufactures and delivers quality products since 1984 and has won many awards for quality assurance as well as company performance. GAIL is the pioneer of city gas distribution in India. GAIL took many initiatives to introduce PNG for households and CNG for the transport sector to address the rising pollution levels. Pilot projects were launched in early 1990s in two metros Delhi and Mumbai through joint venture companies Indraprastha Gas Limited (IGL) and Mahanagar Gas Limited (MGL) leading to the start of commercial operation of city gas projects. The results of these ventures are quite visible through the improvement in air quality in these cities. Based on the success of IGL and MGL, GAIL has further set up six more JVCs viz Bhagyanagar Gas Limited, Andhra Pradesh; Avantika Gas Limited in Madhya Pradesh; Central U P Gas Limited & Green Gas Limited in Uttar Pradesh; Maharashtra Natural Gas Limited in Pune Maharashtra and Tripura Natural Gas Company Limited in Tripura for CGD projects in various cities. GAIL Gas Limited has been authorized by PNGRB and MoPNG for implementing City Gas Distribution Projects in Dewas (Madhya Pradesh), Kota (Rajasthan), Sonepat (Haryana), Meerut (Uttar Pradesh), Firozabad (Uttar Pradesh) and Vadodara (Gujarat). As per the business plan, GAIL Gas would be expanding the CGD business in dedicated and aggressive manner and will facilitate re-investing returns from operational CGD projects into new projects thus reducing the need for fresh equity infusions by GAIL. As per the estimate more than 200 cities have been identified for the development of CGD projects in a phased manner in synchronization with the commissioning of the pipeline. The details of these cities have already been forwarded to MoPNG by GAIL with a request for authorization for setting up of CGD network in these cities. Gas supplied by GAIL to retail gas distributors serves more than 6,00,000 automobiles as Compressed Natural Gas (CNG) and over 6,50,000 households as Piped Natural Gas (PNG). Various cities are covered in the network.
Joint Ventures and Subsidiaries by GAIL GAIl has been one of the pioneers in introducing the city distribution system projects and has entered into a number of joint ventures with companies as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Aavantika Gas Limited. Bhagyanagar Gas Limited Central U.P. Gas Limited. Green Gas Limited Indraprastha Gas Limited Mahanagar Gas Limited Maharashtra Natural Gas Limited ONGC Petro-Additions Limited. Petronet LNG Limited. Ratnagiri Gas And Power Private Limited. Tripura Natural gas Company Limited GAIL China Gas Global Energy Holdings Limited
And its subsidiaries are as follows: 1. 2. 3. Brahmaputra Cracker and Polymer Limited GAIL Gas Limited GAIL Global PTE Limited
1.4 SWOT Analysis Strengths 1. Strength of the petroleum industry is that it has strong government backing. 2. Prices depends on the rate in International market and hence no competition in terms of pricing. 3. Profit percentage is low but steady and the profit margin is always maintained. Weaknesses 1.Requires large capital and high level of planning before setting up. 2.Always need to monitor prices and deal with heavy losses sometimes due to international pressures. 3.High level of infrastructure and technology required to extract oil. 4. Face acute shortages in case of political tensions brewing between nations. Opportunities 1.Linking the company to public sector makes it quite easy to attract capital required for high investment capital projects. 2.To come out with a green solution as an alternative to petroleum in order to stabilize the prices. 3.Develop inter-city projects to facilitate better connectivity. Threats 1.Biggest threat to oil companies is the international tensions which can lead to drying up of oil supplies bringing the economy to a stand-still. 2.Research related works on oil reserves which lead to huge losses if unsuccessful.
2. Company Analysis 2.1 Company Description[12] HPCL is a Government of India Enterprise with a Navratna Status, and a Fortune 500 and Forbes 2000 company, with an annual turnover of Rs. 1,32,670 Crores and sales/income from operations of Rs 1,43,396 Crores (US$ 31,546 Millions) during FY 2010-11, having about 20% Marketing share in India among PSUs and a strong market infrastructure. HPCL's Crude Thruput and Market Sales (including exports) are 14.75 Million Metric Tonnes (MMT) and 27.03 MMT respectively in the same period. HPCL is one of the largest integrated Public Sector Undertaking, engaged in the business of refining Crude Oil and marketing of various petroleum products like Petrol, Diesel, LPG, Kersoene, Lube Oils, Asphalt, branded products like Power, Turbojet, naphtha, ATF (Aviation Turbine Fuel) throughout India and at select foreign countries. Some of these products are exported to other countries. HPCL operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum (MMTPA) capacity and the other in Vishakapatnam, (East Coast) with a capacity of 8.3 MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is constructing a 9 MMTPA refinery at Bathinda, in the state of Punjab, as a joint venture with Mittal Energy Investments Pte. Ltd. HPCL also owns and operates the largest Lube Refinery in the India producing Lube Base Oils of international standards, with a capacity of 335 TMT. This Lube Refinery accounts for over 40% of the India's total Lube Base Oil production. HPCL has 7 Retail and 6 LPG Zonal offices at major Cities, in addition to 90 Regional Offices, 37 major Terminals / Installations / Tap Off Points, 7 Lube Blending Plants, 100 Depots, 43 LPG Bottling Plants, 2 LPG Import Facilities, 8539 Petrol Pumps, 77 CNG Pumps, 72 Auto LPG Pumps 2250 HP Gas LPG Distributors serving 2.698 Crores LPG Customers, 1638 SKO / LDO Distributors, 59 Lube CFA spread over in the various states of India, ensure that the customers can approach their nearest location for getting their requirements. In addition HPCL has 23 Aviation Service Stations spread over India, to cater to the Airline industry. HPCL's vast marketing network consists of 13 Zonal offices in major cities and 101 Regional Offices facilitated by a Supply & Distribution infrastructure comprising Terminals, Pipeline networks, Aviation Service Stations, LPG Bottling Plants, Inland Relay Depots & Retail Outlets, Lube and LPG Distributorships. HPCL, over the years, has moved from strength to strength on all fronts. The refining capacity steadily increased from 5.5 MMTPA in 1984/85 to 14.8 MMTPA presently. On the financial front, the turnover has grown from Rs. 2687 Crores in 198485 to an impressive Rs 1,32,670 Crores in FY 2010-11.
2.2 General Information[13] Location of Headquarters The Hindustan Petroleum Corporation Limited has its Headquarters located at Petroleum House, 17 Jamshedji Tata Road, Churchgate, Mumbai-400020 and two main oil refineries in Mumbai as well as Vishakhapatnam.
Year of founding It is a government registered company which was founded in the year 1976 after the amalgamation of foreign oil companies ESSO and Caltex, which were taken over by the Government of India in 1974 and 1976 respectively. Shareholder pattern[14] HPCL is a Central Public Sector Undertaking, with a subscribed capital of Rs. 339.33 Crores. The President of India is presently holding 51.01 % of the paid share capital, the remaining shares being held by various Financial Institutions, FIIs, Banks, Mutual Funds, NRIs and general public including employees of the Corporation. The shares are listed on BSE / NSE and are actively traded. Table containing shareholding pattern: As on 30/06/2012, these are the following shareholder pattern statistics: Category The President Of India Financial Institutions FIIs/OCBs Banks Mutual Funds NRIs Employees of the Company Public Total Number of employees HPCL has 11428 employees in total working for it as on 31/03/2011. They are classified as under: Group A B C D Total No. Of Employees 4939 Nil 6211 98 11428 No.of shares 173076750 45794023 24929920 813780 46438684 926230 272945 46374918 338627250 Percentage 51.11 13.52 7.36 0.24 13.72 0.27 0.08 13.7 100
Top management [15] HPCL is managed by a Board of Directors. Presently there are 11 Directors, with the Chairman and Managing Director as the head of the Corporation. The Board comprises of 4 full time Directors also called Functional Directors – Director Marketing, Director Refineries, Director Human Resources and Director Finance. In addition, 2 part time Directors representing Government of India, through Ministry of Petroleum & Natural Gas, 4 part time Independent Directors, also called Navratna Directors are on the Board. All these 6 Directors are nominated by the Government of India.
2.3 Financial Performance of the company[16] Total sales turnover of the company for the financial year 2011-12 is Rs. 185087.26 crores which is almost 50,000 crores than last financial year. This is a giant leap by HPCL in the forward direction. Net profit comes to 175.96 crores which is very less compared to last year’s profit and hence comparatively the company has not earned much this year Segment wise performance of the company is still not published by the company. 2.4 SWOT analysis of the company. SWOT stands for strengths, weaknesses, opportunities and threats for the company and they are as mentioned below:
Strengths 1. Strength of the HPCL is that it has strong government backing. 2. Prices depends on the rate in International market and hence no competition in terms of pricing. 3. Profit percentage is low but steady and the profit margin is always maintained. 4. Country’s largest lube refinery gives it the edge in competition. 5. Holds petrol pumps throught India giving it better connectivity with citizens and edge over competitors. Weaknesses 1. Requires large capital and high level of planning before setting up. 2. Always need to monitor prices and deal with heavy losses sometimes due to international pressures. 3. High level of infrastructure and technology required to extract and refine oil. 4. As it is state governed, it cannot take certain hard decisions without the supervision of government. Opportunities 1. Linking the company to public sector makes it quite easy to attract capital required for high investment capital projects. 2. To come out with a green solution as an alternative to petroleum in order to stabilize the prices.
3.
Develop inter-city projects to facilitate better connectivity.
Threats 1. Biggest threat to oil companies is the international tensions which can lead to drying up of oil supplies bringing the economy to a stand-still. 2. Research related works on oil reserves which lead to huge losses if unsuccessful.
2.5 2.5.
Various strategies employed by the company in past 2 years. a. Hierarchical changes[15]
1. Ms. Nishi Vasudeva took charge as Director – Marketing effective July 04, 2011. Prior to this she was the Executive Director (Marketing Co-ordination) of HPCL. She took over the post which was left vacant by Mr. S. Roy Chaudhary as he became the Chairman and Managing Director of the company in August 2010. 2. Mr. S. K. Roongta joined the HPCL board as an Independent Director effective January 10, 2011. He also holds Directorships in Axis Bank, Neyveli Lignite Corporation Ltd., Shipping Corporation Ltd., Jubilant Industries Ltd., Jindal Power Ltd. and ACC Ltd. 3. Mr. Anil Razdan joined the HPCL board as an Independent Director effective January 10, 2011. Shri Anil Razdan was Secretary to the Government of India, Ministry of Power during 2007-08. He has held various significant assignments in the Government of Haryana, and the energy sector in the Government of India, including that of Additional & Special Secretary with the Ministry of Petroleum & Natural Gas. 2.5. b. Business divisions 1. HPCL is nearing a close in with regars to setting up an oil refinery in Barmer at Rajasthan. Currently it holds two refineries in Mumbai and Vishakhapatnam. This move by HPCL is seen as an expansionist strategy by other competitors. 2. Pollution board asked HPCL to cut 30% production with respect to oil refinery in VIshakhapatnam on account of excessive pollution. 3. HPCL wins Marketing Company of the Year award. 2.5. c. Regional strategies 1. HPCL is nearing a close in with regars to setting up an oil refinery in Barmer at Rajasthan. Currently it holds two refineries in Mumbai and Vishakhapatnam. This move by HPCL is seen as an expansionist strategy by other competitors. 2. HPCL's vast marketing network consists of 13 Zonal offices in major cities and 101 Regional Offices.
This in all gives the company analysis of Hindustan Petroleum Corporation Limited.
3. References 1. http://www.petroleumonline.com/content/overview.asp?mod=1 2. http://www.socialstudies.org.uk/events/183-a-global-perspectiveoil-industry-oldreservoirs-and-new-tricksby-vural-sander-suicmez?catid=1%3Aevents 3. http://www.slideshare.net/indicusanalytics/competition-in-the-indian-petroleum-industry 4. http://www.ril.com/downloads/pdf/business_petroleum_refiningmktg_lc_ipi.pdf 5. http://www.petroleumbazaar.com/Internationalnews.aspx 6. http://www.commodityonline.com/news/irans-new-oil-fields-to-add-output-by-70000barels-per-day-49027-3-49028.html 7. http://www.scribd.com/doc/31803171/Pestle-analysis-of-oil-and-petroleum-industry 8. http://exportimportindia.in/2011/11/top-10-oil-petroleum-gas-companies-in-india-by-2011/ 9. http://www.gail.nic.in/final_site/index.html 10. http://www.business-standard.com/stockpage/stock_details.php?bs_code=6898 11. http://www.gailonline.com/gailnewsite/businesses/citygasdistribution.html 12. http://www.hindustanpetroleum.com/En/UI/AboutUs.aspx 13. http://www.hindustanpetroleum.com/en/UI/RTIInfo_Manual.aspx 14. http://www.hindustanpetroleum.com/En/UI/IRShareholderProfile.aspx 15. http://www.hindustanpetroleum.com/En/UI/BoardOfDirectors.aspx 16. http://www.moneycontrol.com/stocks/company_info/print_main.php 17. http://www.moneycontrol.com/financials/hpcl/consolidated-ratios/HPC 18.
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