Energy update: Coal

and petcoke

Mumbai, India

January 14, 2016

Webinar presentation

CW Group LLC | T: +1-702-866-9474 | F: +1-928-832-4762 | Connecticut, USA

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Introduction

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CW Group: Advisory, Research & Media

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Advisory Research Media

Strategy and M&A advisory advisory.cwgrp.com

Business decision support research.cwgrp.com

Media & meetings Various platforms

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assessments

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Seasoned experts Business & technical Network & access Proprietary data

Cement, Building

Materials &

Construction

Steel, Metals & Mining Chemicals Dry bulk cargo, ports

and infrastructure

Power, energy and solid

fuels

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Presenter

5

Prashant Singh Associate Director

ps@cwgrp.com

M: +91-8879607047

Associate Director of CW Group, Mumbai,

India

MSIB from Seton Hall University, USA

Extensive experience in management

consulting and market research

Manages CW Advisory queries for the India

operations

Sushmita Rai Sr. Associate Analyst

srai@cwgrp.com

M: +91-9004285550

Sr. Associate Analyst at CW Group,

Mumbai, India

Lead analyst on India petcoke market

and pricing services

6+ years of market research

experience in energy sectors

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India petcoke price assessment overview

Bi-monthly prices of imported petcoke delivered on a

cost and freight (CFR) basis

Compare pricing on an mmBtu basis to coal

Tracking landed pricing at India West and East Coast

ports

Mid-month price update

End-of-month extended price and market assessment

Price index for uncalcined petcoke (medium and high-

sulfur

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Client Confidential Information

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Bi-monthly price assessment and monthly price index for fuel-

grade petcoke is based on data which includes transactions, bids,

offers, volumes, counterparties, specifications and any other

information that contributes materially to the determination of price

Market data will be taken from all credible market sources,

including producers, consumers, intermediaries and other market

participants

Price assessment covers:

– Periodically revised statistical model for mid and high-sulfur petcoke with

minimum 40 and maximum 70 Hardgrove Grindability Index (HGI)

– Coal to petcoke comparison (BTU basis)

– India CFR West and East Coast

Methodology highlight: market price index

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From the end-users’ perspective

Trade volumes (tons)

End-user production data (e.g. cement)

Market and trader feedback

Industry news (coking, refineries, shipping)

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Coal vs Petcoke for Cement Industry

1. Calorific Value:

RB1 Coal – 5,500 Kcal/Kg; Petcoke – <8,200 Kcal/Kg

– Lower cost per Kcal for petcoke

– Less quantity of petcoke to be burnt at cement kilns

2. Ash Content:

RB1 Coal – Maximum 15%; Petcoke – Maximum 1%

– Better use of limestone for efficient sulfur capture

– Higher ash from coal is absorbed in clinker, enhances clinker volume

3. Hard Grove Index (HGI):

RB1 Coal – Minimum 45; Petcoke – Minimum 40

– Lower HGI for petcoke, hence difficult to grind

– Grinding petcoke requires higher power consumption

– Excess wear and tear on grinding equipment

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Global scenario

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Indian petcoke demand on the rise, Chinese demand fading

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Import region

CFR JAPAN

Import/export region

Export region

Indian petcoke imports are

expected to continue

increasing. Reliance’s

gasification project is expected

to use half of India's own

petcoke production, thereby

increasing the need for imports.

China’s amended Air Pollution

and Control Law includes

restriction on import, sale or

use of more than 3% sulfur

petcoke.

Source: CW Research

CFR INDIA

Global petcoke trade (Jan-Oct 2015)

CFR CHINA

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Is India the next China?

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Source: ITC, CW Research

• Slower economic growth in China is resulting in significant decline in imports

• Increase in fuel switching in the end-user (cement) sector has led to an increase in

petcoke demand in India

• With decline in US petcoke prices, bids for petcoke shipments from power producers

have increased on the West coast of India

• Demand for imported petcoke is expected to increase in India post Q1/2016 due to

decline in availability from domestic market (Reliance Gasification plant)

-

1,200

In t

ho

usa

nd

to

ns

US petcoke exports by destination

India China

Client Confidential Information

13 Source: CW Research

US Gulf to India: Petcoke price (FAS) trend

US Refineries petcoke production volumes

0

100

200

300

400

500

-

20

40

60

80

100

Quantity (In thousand tons) - right axis Price $/t - left axis

-

5

10

15

20

25

30

Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15

In m

illi

on

to

ns

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Indian fuel market overview

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Client Confidential Information

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Source: CW Research

Petcoke sources in India – existing and new additions

• Lack of petcoke

producing capacity on

the East coast of India

compels consumers to

import the product.

• Consumers on the East

coast find it logistically

advantageous to import

rather than transport

the product from the

West coast.

• These new additions

will help balance the

supply after RIL’s

gasification project

comes online.

Existing

New Additions

HPCL - Bhatinda

IOCL - Panipat

BPCL - Bina

IOCL - Koyali

RIL - Jamnagar

Essar - Jamnagar

MRPL - Mangalore CPCL - Chennai

HPCL - Vizag

IOCL - Paradip

IOCL - Mathura

IOCL - Haldia

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RIL’s petcoke gasification project

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Existing

New Crude Refinery

Imported LNG

Gasification

Petcoke

Replace imported LNG with Syngas

Integrated gasification combined cycle project will convert captive petcoke to synthetic

gas (syngas)

Syngas will be used as a fuel in the refinery to generate power, steam and hydrogen,

which currently are being produced using expensive imported LNG

The improved product mix will maximize refinery margins, ensure sustainability and

maintain competitive advantage

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India import sources and industry-wise consumption

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0

800

1600

2400

In t

ho

usa

nd

to

ns

US Saudi China Others

0%

50%

100%

Cement PC suppliers Steel Others

Consumption of petcoke in cement industry declining due to reduced cement demand in Q3-2015

Saudi Arabia has emerged as a tough competitor to the US in the past two quarters

China’s exports to India started declining from Q3-2015

India import sources Industry-wise consumption

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Indian coal consumption

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India’s coal imports are

approximately 35% of

domestic production,

seen reducing lately

Domestic production

was around 620 million

tons in FY15

Imports may decline as

the country is

increasing domestic

production

Coal accounts for about

70% of India’s total

power generation

Coal - Domestic production & imports (million tons)

Source: Ministry of Coal, CW Research

-

10

20

30

40

50

60

70

80

90

In m

illi

on

to

ns

Domestic production Imports

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Price-wise, petcoke has relatively become more competitive to coal

for Indian end-users

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Petcoke discount to Richards Bay coal CFR India West Coast - Petcoke vs Coal ($/ton)

Source: CW Research

$0.00

$1.40

Oct-15 Nov-15 Dec-15

Richards Bay coal 5,500 kcal/kg NAR

Bhavnagar Lignite 4,500 kcal/kg

>5% petcoke

<5% petcoke

0%

50%

100%

Oct-15 Nov-15 Dec-15

Bhavnagar Lignite 4,500 kcal/kg

>5% petcoke

<5% petcoke

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Outlook: cement production set to relentlessly drive need for fuels,

petcoke remains a viable alternative

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FSAs are signed only for 75% of

normative requirement

Substantial cement production

capacities added, yet FSAs not

signed

Cement sector paying 35% higher

price for preferred grade of coal

compared to power grade coal 0

250

-

1,400

2014-15E 2015-16E 2016-17E 2017-18E 2018-19E 2019-20E

Domestic production Total demand Gap

Source: Ministry of Coal, CW Research

Indian coal consumption (Million tons)

Cement consumption (Million tons)

0%

10%

-

400

2010-11 2011-12 2012-13 2013-14 2014-15 2015-16E 2016-17E 2017-18E 2018-19E 2019-20E

Cement production Growth rate (%)

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Join CW Research at the SFS 2016 meeting in Dubai

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SFS Middle East & Africa 2016 – April 5-6, 2016 - Dubai, UAE

The 4th edition of the Summit global concept will focus on

the challenges and opportunities in distinct areas of the

coal and petcoke:

Outlook for coal trading in the Middle East

Fuel evolution in the cement industry in the Middle

East

Demand for coal and petcoke in the Middle East

Coal use in Egypt’s cement sector

Coal and petcoke sourcing

India’s petcoke – a game changer

Petcoke pricing and dynamics

Port and rail infrastructure expansion

Environmental and health implications of coal mining

Petcoke vs coal - Technical, process and

environmental issues

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