Sub: Detailed Feasibility Report on "Installation of Facilities for Improvement in Diesel Quality and Distillate Yield (Hydrocracker) Project

at Haldia Refinery. This Project Evaluation Committee of the Board considered the subject item in its meeting held on 12th November, 2005. After deliberations, the Project Evaluation Committee recommended the proposal with the following resolution to the Board for consideration and approval:"RESOLVED THAT approval of the Board be and is hereby accorded to the proposal for installation of facilities for Hydrocracker Project at Haldia Refinery at an estimated cost of Rs. 1876 crore (as of July, 2005)." xxxxxxxxxxx Sub: Detailed Feasibility Report on "Installation of Facilities for Improvement in Diesel Quality and Distillate Yield (Hydrocracker) Project at Haldia Refinery. 1.0 Background 1.1 The Board of Directors in its meeting held on 29th November 2000 had accorded 'inprinciple' approval for setting up of facilities for improvement in Diesel Quality and Distillate Yield at Haldia Refinery at an estimated cost of Rs. 1518 cr. inclusive of foreign exchange component of Rs. 357.8 cr. based on April 2000 prices, subject to obtaining Environmental Clearance from MoE&F. The Board had also sanctioned and amount of Rs. 44 cr. inclusive of a foreign exchange component of Rs. 18 cr. for carrying out preproject activities pending Environmental Clearance. Three major process units, vis., Once Through Hydrocracker Unit (OHCU), Hydrogen Generation Unit (HGU) and Sulphur Recovery Unit (SRU) were envisaged in the subject proposal. Environmental Clearance for the project was received in May'02. 1.2 Subsequently, the Board in its meeting held on 24th April'03 approved the road-map to meet the quality requirements of HSD & MS and suggested deferment of completion of Hydrocracker Project at Haldia till January 2010 so as to match with the quality

requirements of April 2010 onwards. Hence, all activities relating to the project were kept on hold. 1.3 As against the installed crude processing capacity of 6.0 MMTPA at Haldia Refinery, the operation of last three years has been as follows. Particulars 2002-032003-042004-05 Crude Intake, MMTPA 4.51 4.52 5.41 Distillate Yield (excluding LOBS), %w63.23 63.76 62.26 LOBS, TMTPA 124 154 187 (%w on crude) (2.75) (3.41) (3.45) FO, TMTPA 723 777 961 Bitumen, TMTPA 310 313 415 Fuel & Loss (%w) 10.02 9.98 8.90 As can be seen from above, the distillate yield in the refinery is about 62-63% w on crude (without LOBS), which is on lower side and needs improvements. 2.0 Quality Road-Map 2.1 As per road-map approved by the Board for quality improvement, the quality of MS/HSD would have to be upgraded from BS-II/Euro-III levels to Euro-III/Euro-IV levels by April 2010. 2.2 The refinery would be able to meet the above requirements in respect of MS after commissioning of the on-going MS Quality Upgradation Project at Haldia. The facilities are likely to be commissioned by October 2005. 2.3 For meeting HSD quality requirement beyond April 2010, it is necessary to initiate activities for installation of facilities for HSD quality improvement. Comparison of key HSD specifications conforming to the three emissions norms are tabulated below: Specification Density @ 15 C, kg/M3 Sulphur Content, ppmw (max) Cetane No. (min) Distillation, 95% vol. (0C max)
0

BS-II Eqv. 820.860 500 48 370

Euro-III Eqv. 820.845 350 51 360

Euro-IV Eqv. 820.845 50 51 360

Polycyclic Aromatic Hydrocarbons (PAH), %mass max.

No spec 11

11

2.4 Accordingly, necessary facilities are required to be set up to meet the future specification of HSD. 3.0 Options for Diesel quality improvement 3.1 The improvement in diesel quality to Euro-III/Euro-IV emission norms can be achieved by installing a Diesel Hydrotreating (DHDT) Unit. Since the refinery has to produce Euro-III/Euro-IV conforming diesel w.e.f. April 2010, facilities such as DHDT, HGU, SRU, GT and other offisite facilities shall be required to be installed at the installed crude processing capacity, i.e., 6.0 MMTPA. 3.2 The objective of producing HSD meeting Euro-III / Euro-IV equivalent quality requirements can alternatively be met by installing OHCU and associated facilities, 'inprinciple' approval for which was obtained from the Board in Nov. 2000. This option has been studies in detail in the present context at a crude throughput level of 7.5 MMTPA and would facilitate higher crude processing and better distillate yield in addition to improvement in diesel quality to Euro-III/Euro-IV emission standards. 3.3 Accordingly, a detailed study of the following cases has been carried out:

Installation of DHDT and associated facilities at 6.0 MMTPA (Base Case) Installation of OHCU and associated facilities at 7.5 MMTPA (Project Case)

3.4 The project cost for DHDT case has been estimated as Rs. 1175 cr. as against Rs. 1876 cr. for OHCU case based on study by the consultant M/s Lurgi India. A comparison of major facilities envisaged in the two cases is furnished below: S. No.Unit 1. 2. 3. 4. 5. OHCU, MMTPA DHDT, MMTPA HGU, TMTPA AAU/ARU, TPH SWS, TPH Capacity DHDT CaseOHCU Case -1.7 1.0 -18 75 77 272 6 25

6. 7.

SRU, TPD 1x60 CDU-II revamp, MMTPA--

2x80 from 2.5 to 4.0

4.0 APPROACH FOR TECHNO-ECONOMIC EVALUATION (INTEGRATED PLANNING MODEL) The above cases (DHDT and OHCU) were evaluated by integrating with Global IOC Refining, Pipeline and Marketing networks based on Integrated Planning (IP) Models of Corporate Optimization (Report attached as Appendix). 4.1 To carry out the above economic evaluation, following Integrated Planning (IP) Models were developed: a. Haldia Refinery with DHDT and Crude processing at 6 MMTPA (Base Case) b. Haldia Refinery with OHCU and Crude processing 7.5 MMTPA (Project Case) 4.2 In all the above models following common considerations were made:

Panipat refinery at 15 MMTPA capacity (P-15) Koyali refinery at 13.7 MMTPA with Residue Upgradation Project Mathura with capacity limit of 8.4 MMTPA having Diesel Hydrotreater (DHDT) and MS Quality Improvement (MSQ) Project in place. Barauni with capacity limit of 6.0 MMTPA Chennai with capacity limit of 10.0 MMTPA North East Refineries operating at existing level KBPL on crude service Paradip-Haldia crude Pipeline Koyali-Dahej Pipeline Branch lines from KVSS to Ajmer and Chittorgarh Chennai-Bangalore Pipeline Panipat-Tikrikalan Pipeline and Koyali-Ratlam-Itarsi-Khapri with branches to Indore and Nishatpura (with rail loading facilities at Koyali. Ratlam and Khapri)

Further, since Paradip refinery (15 MMTPA) and the proposed Paradip-Rengali-KorbaRaipr product PL with the branch from Rengali to Bundu could have an impact on the

subject proposal, impact of the same was also studied. Since the yield of Paradip refinery also included petrochemicals, the same was however configured as an extremepoint refinery (fixed Crude processing and fixed yield pattern) in the IP model with crude mix, product pattern and prices for petrochemicals (IPP as well as EPP) as provided by Ref. HQ Project. 4.3 Basis Adopted (A) Demand Product-wise demands were considered under following scenarios: Scenario-1 & 4 (Low Demand) Product-wise demand was considered at the same levels as in the Low-Demand scenario considered for Gujarat Residue Upgradation Project and P-15, basis of which was as below:

The demand numbers under this scenario are close to the levels per the outlook for the year 2005-06. Demand of Naphtha and FO have been substantially reduced considering the projections by Corporate Planning regarding switch-over by major customers to Natural Gas.

As regards LSHS, it has been assumed that the switch-over to gas would not be major. Demand of SKO is about 6.7% lower than the current outlook for the year 200506.

Scenario-2 (High Demand) Demand for 2011-12 for all products as currently projected by Planning Dept., Mktng HO. Scenario-3 & 5(Moderate Demand) Product-wise demand level is similar to the High-Demand scenario considered for the Gujarat expansion and P-15 study, basis for which is as below:

Growth rite of 10% for HSD and 15% for MS has been applied oil the demand nos. per Scn-1. In addition, ATF has also been escalated at 18% over and above the level in Scn-I

The level of product-wise demand considered under the various scenarios is provided in the table hereunder. Marketing HO's latest outlook of product-wise demand for the year 2005-06 has also been provided therein for the purposes of comparison. Product 2005-06 Outlook Demand Adopted in the Study Scenario-1&4 Scenario-2 Scenario-3&5 Low 3893 21920 5888 2185 907 3556 2571 657 2475 High 5353 27151 5211 2936 873 5482 1274 582 3143 Moderate 4477 24112 5888 2579 907 3556 2571 657 2475

Comparative level MS 3818 HSD 21032 SKO 6313 ATF 2174 Naphtha 2574 FO 4300 LSHS 3413 LDO 667 Bitumen 2323

Flexibility was kept in the model under all the scenarios in respect of meeting of the LSHS demand, i.e. the model had the option in all cases of not meeting the LSHS demand (Min. limit of LSHS kept as zero). In other words, LSHS production at the refineries was based on economics. (B) Product Exchange & Purchase

For all Scenarios it has been assumed that HPC's proposed Mundra-Delhi product PL as well as BPC's proposed extension of its Mumbai-Manmad -Indore product PL to Loni/Piyala would be in place. Gives to HPC and BPC ex-Koyali, Mathura and Panipat have accordingly been reduced from normal levels

No takes by HPC ex-Haldia has been envisaged under any scenario/case since it was observed under all the cases and scenarios that the subject expansion of Haldia refinery/commissioning of the proposed Paradip-Raipur PL/

commissioning of Paradip refinery result in substantial reduction in IOC's takes (vis-a-vis current levels) ex-HPC's Vizag refinery.

Subject to the above, gives to BPC & HPC ex-all refineries in each scenario are based on the refinery-wise numbers finalized per the MoU for the quarter JanMar'06 duly annualized and escalated by the product-wise demand growth rates adopted for IOC & Associates under the concerned scenario. Exchange of SKO has been assumed on a tonne-to-tonne basis since no company would be interested in taking additional SKO from another company.

Refinery-wise takes from BPC & HPC as well as purchases from RIL and ONGC have been retained at economic levels under all scenarios.

(C) Product Import & Export Options for imports/ exports kept open at refineries/ ports in the IP model under all scenarios are detailed hereunder: Product HaldiaParadipCPCLDahejBarauniPanipatMathuraKandla/IOTL Export Options MS Naphtha ATF HSD FO Petchem FO (D) Price

(Pak)

00000000000000000000000000000000

Bitumen Import Options

Crude prices considered as per average for last 3 years: April'02-March'05 adjusted for changes in duty (Post-Budget 2005-06). Product RTPs, assessable values and transaction values considered at the average of the actuals during the 3-yr period, April 02 - March 05, duly adjusted For changes in pricing methodology as per the Industry agreement during 2004-

05 as well as for the changes in duty rates (Post-Budget 2005-06). Necessary adjustments have also been made for the changes in quality of MS & HSD.

Price sensitivity of higher LS-HS spread and product cracks broadly inline with the latest long term IT forecast have also been carried out under following scenarios:

Scenario-4: Price sensitivity for Scenario-1 (low demand) with higher LS-HS spread and Product cracks Scenario-5: Price sensitivity for Scenario-3 (moderate demand) with higher LSHS spread and Product cracks.

A comparison of the 3-year average crude spreads and product cracks considered for Scenarios-l, 2 & 3 vis-a-vis those considered for Scenarios-4 & 5 are provided hereunder: (figs. in $/bbl) Scenario Scenarios-1, 2 & 3Scenarios-4 & 5 Pricing basis Apr 02-Mar 05 IT forecast Brent-Dubai 3.04 5.00 MS (S'pore)-Dubai8.22 13.80 HSD-Dubai 5.67 9.84 Naphtha-Dubai 2.30 4.49 SKO-Dubai 6.86 12.34 FO-Dubai (-)5.76 (-)10.00

No change has, however, been effected (from the 3-year average) in any scenario as regards the selling price of SKO in the market place, since the same continues to be controlled by the Govt.

As regards Paradip Refinery, petrochemicals price realization from tile domestic as well as export market, and the input cost for Benzene have been considered based on the 3-year average for the period Apr'02-Mar'05 (as worked out by Ref. HQ).

(E) Crude Choice & Crude Mix All regular crude oils being currently processed at Refineries have been kept open for the model for economic selection.

(F) Cases Studied Under each Scenario as defined at para 4.3 (A) above, 8 cases with different configuration (i.e. with/without Paradip refinery, with/without Paradip-Raipur PL and with/without subject project) were also examined as described hereunder: Case Paradip Refinery (PDRP) Case- Yes 1 Case- Yes 2 Case- Yes 3 Case- Yes 4 Case- No 5 Case- No 7 Case- No 6 Case- No 8 4.4 Results Summary Considering Paradip Refinery and Paradip-Raipur pipeline in place, the results of economic evaluation of the subject project for all of above scenarios for Case-1 and Case-3 is summarized below: Cases Objective Function* Rs. Cr./Yr (Profit) Scenario-1 Scenario-2 Scenario-3 Scenario- Scenario-5 Low High Moderate 4 Low Moderate Paradip-Raipur OHCU Product pipeline (PRPL) Yes Yes No No Yes Yes No No Project at Haldia Yes Yes Yes No Yes No Yes NOo

Demand level

Pricing basis

Apr 02-

Apr 02Mar'05 25272 25064 208

Apr 02Mar'05 22802 22626 176

IT forecast IT forecast 30120 29874 246 32432 32203 229

Mar'05 Project case with Paradip 21092 (Case-1) Base case with Paradip 20930

(Case-3) Delta Objective Function, 162 Rs Cr/Yr

*Objective Function = Product Realization - Raw Material Cost - Catalyst & Chemical Cost - Logistic Cost The scenario-wise projected incremental margin (i.e. delta in the LP Objective Function vis-a-vis the corresponding Base case) from commissioning of tile expansion of Haldia refinery under the various cases, i.e. with/ without Paradip refinery, with/ without Paradip product PL, is provided at Aanexure-1. As can be seen from the above table, even after commissioning of Paradip Refinery and Pipeline, IOC's margin on a global basis improves by installation of OHCU at Haldia as compared to Base Case, i.e., installation of DHDT. Under the low demand scenario (scenario-1), overall incremental margin is Rs. 162 Cr./year over the base case. This further improves to Rs. 246 Cr./year under Scenario-4 (price sensitivity for scenario-1). Under a moderate demand level scenario (scenario-3), overall incremental margin is Rs. 176 Cr./year over the base case. This further improves to Rs. 229 Cr./year under Scenario-.5 (price sensitivity for scenario-3) Under tile high demand scenario (scenario-2), overall incremental margin is Rs. 208 Cr./year. 4.5 Product Pattern of Haldia Refinery for Scenario-1 and Scenario-5 are given in Annexure-2 4.6 Refinery-wise capacity utilization under Scenario-1 and Scenario-5 is Presented in Annexure-3.

5.0 FACILITIES ENVISAGED 5.1 The process units envisaged under Hydrocracker Project are given below: S. No.Unit Capacity 1. OHCU, MMTPA 1.7 2. HGU, TMTPA 75 3. AAU / ARU, TPH 272 4. SWS, TPH 25 5. SRU, TPD 2 x 80 6. CDU-II revamp, MMTPAfrom 2.5 to 4.0 5.2 In addition to the above, certain utilities and off-site facilities such as Gas Turbine (20MW), ETP, Tankages, etc., have also been envisaged, which have been enumerated at Annexure-4. No additional facilities have been considered for product evacuation as the existing facilities are found to be adequate for despatch of incremental products. 6.0 PROJECT COST Based on the study by M/s Lurgi India, the capital coat of the Project with facilities as mentioned in Para 5.0 above is estimated m he Rs. 1876 crore inclusive of a Foreign exchange component of Rs. 308 crore (1 USD = Rs. 43.8) and financial cost of Rs.104 crore (based on July,'05 price level). The accuracy of cost estimates is -/+l0`%. The details of the capital cost are given in Annexure-5. Estimated cost of DHDT case is Rs. 1175 cr (July'05 prices), as estimated by Lurgi and considered in the base case. 7.0 FINANCIAL ANALYSIS 7.1 It is seen from the Integrated Planning Model Output, incremental GRM between the base case and the configured case varies with the following:

Product demand Spread between Brent-Dubai prices and Product Cracks.

7.2 IRR has been worked out based on the incremental GRM considering the following:

Scenario-1, i.e., lower product demand with LS-HS spread of $3.04/bbl for first 10 years of the project life of 15 years. This implies that the demand of major

products like MS, HSD and ATF approximately at the level of 2005-06 outlook till the first ten years of operation and last 3 years' average Brent-Dubai FOB spread of $3.04/bbl also remains constant for the first ten years of operation.

Subsequently, for balance 5 years out of 15 years, Scenario-5, i.e., moderate product demand with spread of 5.00$/bbl has been considered. Debt to equity ratio of 1:1 and Interest on long term loan has been considered as 9%.

7.3 The above basis is in line with the basis adopted for financial analysis of recently approved proposal for Residue Upgradation and MS/HSD Quality Improvement Project at Gujarat Refinery. 7.4 IRR based on the above is 17.52%. The sensitivity cases are as under: Sl. No. 1. 2. 3. 4. 5. 6. 7. Sensitivity cases IRR (%)

With 10% increase in capital cost 16.05 With 10% increase in operating cost 17.47 With 90% sales realization 15.63 With 10% increase in capital cost, 10% increase in operating cost and 90% 14.24 sales realisation With no demand growth and 3.04 $/bbl spread over entire 15 years of project life Simultaneous occurence of 1, 2, 3 & 5 above With 10% reduction in capital cost of DHDT case keeping Capital cost of OHCU case unchanged 16.63 13.30 14.36

7.5 From the above analysis, it is evident that even in the most conservative scenario of simultaneous occurrence of 10'% increase in capital cost, 10% increase in operating cost, 90% sales realisation and considering no demand growth and 3.04$/bbl spread over entire 15 years of project life, IRR for the project works out to 13.30%, which is higher than hurdle rate of 11%. This indicates the robustness of the proposed project. 7.6 In addition to the attractive IRR, the installation of' OHCU has following advantages over DHDT:

i. ii.

In case OHCU and associated facilities are installed, the expenditure incurred so far on process design / royalty for OHCU & HGU will get utilized. Process Design of major units (except SRU) is readily available. SRU licensor selection has already been done. So installation of OHCU alongwith associated facilities will take much less time as compared to that for DHDT.

8.0 FINANCIAL APPRAISAL: The financial appraisal for the project has been carried out by M/s. Industrial Development Bank of India (IDBI). As per their findings, the subject project is viable. The relevant excerpts from the appraisal report is enclosed as Annwure-6. 9.0 LAND The facilities are proposed to be installed within the refinery premises after dismantling of six tanks (three crude oil tanks, one tank for holding surface run-off and two fire-water tanks). LPG Bottling Plant and Old Flare Stack etc. It is worthwhile to note that a proposal for installation of a new LPG Bottling Plant of M/s IPPL is under approval. 10.0 PROJECT SCHEDULE The project will take about 38 months for mechanical completion from the date of approval and 3 months thereafter for commissioning. The activity chart is enclosed as Annexure-7. 11.0 PHASING OF EXPENDITURE Phasing of expenditure has been considered to be as follows: Year Amout (Rs. Lakh) 1st Year 9060 2nd Year54777 3rd Year 84478 4thYear 39246 Total 187561 The details are enclosed as Annexure-8.

12.0 PLAN PROVISION The pre-project / construction activities of the project are to be started in X plan period and the project is proposed to be completed during XI plan period. The provision under Budget Estimates (BE) for the year '05-06' is Rs. 1.0 cr. 13.0 ENVIRONMENTAL ASPECTS On commissioning of these facilities, there will not be any increase in the SO2 emission from the refinery in excess of 1466 kg/hr, the maximum limit imposed by West Bengal State Pollution Control Board (WBSPCB) while granting 'No-objection' to the Project. An estimated amount of Rs. 185 crore has already been earnmarked in the total project cost towards the Installation of ETP, SRU, AAU/ARU, SWS, etc. units under the project. Environmental Clearance to the project was received front the Ministry of Environment & Forest (MOE&F) in May '02. NOC obtained From WBSPCB in July 01 was valid till May 05. Extension of validity upto 31.12.09 has been now obtained from them. 14.0 PROJECT MANAGEMENT 14.1 Process packages of OHCU including SWSU & AAU (Licensor-Axens) and HGU (Licensor- Technip Benelux) are available- Basic Envu. for CDU-II revamp has been completed in-house. For SRU, M/s KTI S.p.A, Italy were selected as the licensor and SIA approval was obtained, but the job of preparation of process package was not pursued further. In view of the need to go ahead with the project, action has now been initiated for preparation of process package. 14.2 A reputed consultant who has experience in project management of OHCU shall be engaged as PMC whose services shall be utilized for preparation of' process package for ARU and Off-site/Utilities. The project is envisaged to be implemented on Lump Sum Turn Key (LSTK) basis for licensed units, offsites / utilities and all open art units except the revamp of CDU-II which is envisaged to be implemented in conventional mode. 15.0 Pre-Project Activities

Break- up of expenditure made for pre-project activities out of sanctioned amount of Rs. 44.0 crore is summarized below: (Rs Lakh) S.No.Description Amount 1 Fees for preparation of DFR Cost 41.8 2 3 4 5 6 7 Estimates (In-Principle Approval) Fees for Plant Cost Estimates for 5.7 Licensor selection Fees for Fin. Appraisal (in10.0

principle approval) Site Development 69.8 License and Engg Fees for OHCU617.3 Know-How Engg Fees for 1635.8 Reformer/PSA Consultant's Fees for preparation 37.9 of DFR Estimates (Investment Approval) Fees for Financial Appraisal (Investment Approval) Total Say. Rs. Cr.

15.0 2433.3 24.0

16.0 Delegation of Authority (DOA) As per the Clause No.9 (i) of Enclosure - I of Delegation of Authority, this proposal requires approval of Board of Directors. 17.0 Proposal It is proposed to obtain the approval of the Board of Directors for final investment approval for installation of facilities for Hydrocracker Project at Haldia refinery at an estimated cost of Rs.1876 cr. (as of July 2005) inclusive of a foreign exchange component of Rs.308 cr and financial cost of Rs. 104 cr. 18.0 Resolution

It is proposed that the Board of Directors may consider the above proposal and pass the following resolution with or without modifications as may deem fit. "Resolved that the approval of the Board of Directors be and is hereby accorded to the proposal for installation of facilities for Hydrocraker Project at Haldia Refinery a an estimated cost of Rs.1876 crore (as of July 2005) inclusive of a foreign exchange component of Rs.308 crore and financial cost of Rs.104 crore." Director (F) has concurred in the proposal. ==== Annexure - I Scenario-wise projected overall incremental margins from commissioning of the OHCU at Haldia vis-a-vis the base case Scenario No....> Demand Level ... > Price ....> With PDRP & PRPPL With PDRP and w/o Scenario - Scenario - Scenario - Scenario - Scenario - 5 1 Low 3-Yr Avg 162.4 158.0 2 High 3-Yr Avg 208.5 192.0 314.3 330.7 3 Moderate 3-Yr Avg 176.3 179.1 282.3 260.3 4 Low IT F cast 246.2 244.7 254.6 253.6 Moderate IT F cast 229.3 225.1 233.5 229.0

PRPPL W/o PDRP with PRPPL 213.7 W/o PDRP & w/o PRPPL 186.8 PDRP : Paradip Refinery Project

PRPPL : Paradip-Raipur Product Pipeline Annexure - 2 Product Pattern 1) Under Scenario - 1 (Figures in TMTPA)

Case -3 (Base LPG Naphtha MS-Normal MS-Premium Total MS SKO ATF JBO HSD-Normal HSD-UL HSD-HF Total HSD Sub-Total (%) FO Bitumen Sulphur MCW LOBS F&L Total LPG Naphtha MS-Normal MS-Premium Total MS SKO ATF JBO HSD -Normal HSD-UL HSD-HF Total HSD Sub total distillate (%) FO Bitumen Sulpher MCW LOBS Case) 183 548 165 130 295 224 280 37 1182 628 189 1999 3566 (61.2%) 834 632 30 3 244 514 5823 184 464 150 227 377 264 360 37 1193 742 208 2143 3829 (63.98) 721 632 30 3 244

Case - 1 (Project Case) 248 598 150 130 280 392 371 37 1732 628 189 2549 4475 (64.2%) 895 630 55 3 244 667 6969 254 598 167 149 316 706 449 37 1740 742 208 2690 5050(67.33) 805 630 56 3 244

Difference 65 50 (-) 15 0 (-) 15 168 91 0 550 0 0 550 909 61 (-) 2 25 0 0 151 1146 70 134 17 (-) 78 (-)61 442 89 0 547 0 0 547 1221 84 (-) 2 26 0 0

F&L Total Annexure -3

526 5985

712 7500

186 1515

Refinery-wise capacity utilization under different scenario (T puts in TMT) i) Scenario - 1 Case-1 Case-2 Case-3 Case-4 Case-5 Case-6 Case-7 Case-8 Gujarat Panipat Barauni Haldia Digboi BRPL CBDU CPCL Paradip Total 12374 12374 12548 12589 12377 12308 12855 12722 15000 15000 15000 15000 15000 15000 15000 15000 8351 3178 7155 800 600 2350 464 8286 3141 5823 800 600 2350 464 8301 3141 5869 800 600 2350 464 8368 3179 7325 800 600 2350 464 8355 3182 7495 800 600 2350 464 0 8400 3494 6000 800 600 2350 464 0 8400 3739 6000 800 600 2350 464 0 3177 6969 600 2350 464

Mathura 8353

Guwahati 800

10000 10000 10000 10000 10000 10000 10000 10000 15205 15205 15205 15205 0 75291 75476 74217 74318 60463 60552 59962 60074

ii) Scenario - 5 Case-1 Case-2 Case-3 Case-4 Case-5 Case-6 Case-7 Case-8 Gujarat Panipat Barauni Haldia Digboi BRPL CBDU CPCL Paradip Total 13700 13700 13700 13700 13700 13700 13700 13700 15000 15000 15000 15000 15000 150000 15000 15000 8400 4141 7500 800 600 2350 464 8400 4080 5985 800 600 2350 464 8400 4090 5985 800 600 2350 464 8400 4169 7500 800 600 2350 464 8400 4422 7500 800 600 2350 464 0 8400 5620 6000 800 600 2350 464 0 8400 5750 6000 800 600 2350 464 0 4141 7500 600 2350 464

Mathura 8400

Guwahati 800

10000 10000 10000 10000 10000 10000 10000 10000 15205 15205 15205 15205 0 78160 78160 76584 76593 62982 63236 62933 63063

Case definition Case Paradip Refinery Paradip-Raipur Case Yes 1 Case Yes 2 Case Yes 3 Case Yes 4 Case Yes 5 Case Yes 6 Case Yes 7 Case Yes 8 Annexure -4 Utilities and Off-Site Facilities envisaged under Hydrocraker Project at Haldia Refinery S. Facility No 1. Plant & Instrument Air System

OHCU Project at Yes Yes Yes Yes Yes Yes Yes Yes

Product pipeline Haldia Yes Yes Yes Yes Yes Yes Yes Yes

Capacity 1x4800 NM3/hr compressor 2x3600 NM3/hr Instrument Air dryer 2000 NM3/hr cryogenic Nitrogen Plant

2. Nitrogen System

2x100 M3 liquid nitrogen storage

2x200 NM3/hr Nitrogen vaporiser 3x2250 M3/hr CT cells 3x2250 M3/hr CW circulation pumps 1x400 M3/hr IFO tank + 2 pumps 1x15000 M3 OHCU feed tank + 2 pumps 1x15000 M3 OHCU bottom tank + 2 pumps 3x1500 M3 LPG mounded bullets 2x200 M3 Hydrogen bullets + Top-off Hydrogen compressor of 1x3000 NM3/hr capacity

3. Cooling Water System

4. Storage System

2x60000 M3 crude oil tanks 1x10000 M3 ATF Tanks + 2 pumps 20 MW GT alongwith HRSG New ETP of 600 M3/hr Teritary Treatment Plant of 1275 M3/hr to generate about 700 M3/hr Cooling water make - up and 150 M3/hr DM water

5. Electrical System 6. Effluent Treatment Plant with R.O. System for generation of DM water

DM water pumps - 2 x 150 M3/hr CRWS pumps - 2x552 M3/hr DM water tanks - 1x500 M3 CRWS tank - 1x 1000 M3

7. Fire Fighting System & alarms 8. Flare System augmentation 9 DCS and instrumentation

Annexure - 5

Capital Cost (Basis: July 2005) (Rs. Lakh) S. No. Description 1. 2 3 4 5 6 7 8 9 10 11 12 13 14 Land Site Development Royalty & Know - How Process Design/Engg. Plant & Machinery Roads & Buildings Water Sply/Pub. Health Railway Siding Const. Period Expenses Start-up Expenses Township Sub Total Financial Cost Grand Total Say (Rs. Cr) Annexure -6 Excerpts from Financial appraisal Report Conclusion

F. EX Ind. Comp Total 0 0 0 1519 0 1519 1819 7578 162054 842 0 200 0 435 620 1555 500 177122 10439 187561 1876

1516 303 2565 5013 25483 136571 0 0 0 103 0 0 308 842 0 200 0 435 517 500 10439 1568

Office Equipment and furniture 0 Construction site requirements 0

1165 390 30832 146290 30832 156729

IOCL is India's flagship National Oil company accounting for 42% of the national refining capacity, 46% of the downstream pipeline transportation network and 48% of the petroleum products market share in the country. IOCL, on its own as well as subsidiaries, operates 10 out of the India's 18 refineries with a combined rated capacity of 54.2 MMTPA as against the aggregate refining capacity of 127.4 MMTPA in the country is on April 1, 2004.

The petroleum refining / marketing industry in India was governed by the Administered Price Mechanism (APM) till April 2002, which provided assured returns to oil companies. Subsequent to the dismantling of APM, the prices of

petroleum products have been market determined, except in the case of' kerosene and domestic LPG where the prices are still controlled by GOI. Domestic prices of HSD & Motor spirit, although de-regulated, are yet to be linked to global prices and continue to be subsidized by GOI due to various social considerations. In the present deregulated scenario and dismantling of the APM, the refining margins of oil companies have Substantially improved but in view of the non-increase in prices of POL products in line with crude oil prices. the marketing margins have come under tremendous pressure. IOCL has, thus, recognized the need to Improve its profitability by debottlenccking of existing refining capacities at minimum costs and thus adding greater value. This strategy is being adopted in keeping with IOCL's vision, which envisages becoming a transnational, integrated energy company, expanding its activities across the hydrocarbon value chain into oil exploration and production, as, petrochemicals and globalization of its core activities'.

As a part of its ongoing diversification strategies, IOCL has recently commissioned Linear Alkyl Benzene (LAB) project at Vadodara and is presently implementing petrochemicals projects i.e PX / PTA & Naphtha Cracker with downstream units at Panipat. It has also ventured into Exploration and Production of Oil and NG. It has also expanded its market to Sri Lanka, Mauritius and UAE. It is also planning to set up an integrated refinery cum petrochemicals complex at Paradip.

IOCL proposes to implement a scheme, at its Haldia Refinery, envisaging revamping of existing Crude Distillation Unit - II as Well Set up additional secondary processing facilities like Once Through Hydrocracking Unit (OHCU) with capacity of 1.7 MMTPA, Hydrogen Generation Unit and Sulphur Recovery Unit so as to enhance the overall crude processing capacity of the refinery form 6 MMTPA to 7.5 MMTPA, for improvement in diesel quality so at to meet the Euro III/Euro IV norms as also to improve the distillate yield from 65.7% wt. to 69.48% wt. The proposed project of IOCL envisages maximum utilization/revamp of existing units and the incremental product slate can be sold in the Eastern Region which is deficient in POL products.

The project is planned to be implemented over a period of 39 months (including 3 months of trial run period) form the zero date (November 2005) and the COD is expected to be February 2009.

The aggregate project cost is estimated at Rs.1875 crore. The cost estimate are based on the cost estimates furnished by Lurgi, DFR Consultant considering price levels prevailing during July 2005 and has an accuracy levels of +/ - 10% . The project costs could vary, on completion on final negotiations and conventional bidding of contracts and also based on the final financing terms.

The Internal Rate of Return (IRR) of the project (base case) works out to 14.7% as against average cost of capital of 11%. The financial viability of the project would, however, be critically dependent upon the POL and crude prices. The sensitive analysis shows that the project would be viable under all likely scenarios but the IRR would be very sensitive to combined effect of increase in project cost by 10% and decrease in gross margins by 10%. Even after taking into account the capital expenditure of Rs 1175 crore required to be incurred for conforming to the statutory quality requirements is not expected to yield any significant return, the IRR, even in the most sensitive scenario, is still higher than the hurdle rate of 11 % approved by IOCL's Board for capital investment proposals. Debt servicing parameters are satisfactory. The proposed project is therefore considered to be financially viable.

Annexure - 8 Phasing of Expenditure Year PCWOFCFC Proj. CostEquityLoan ACC Loan 1st 8856 204 9060 4530 4530 4522 2nd 53137 1640 54777 27388 2738831864 3rd 79705 4773 84478 42239 4223974032 4th 35424 3822 39246 19623 1962393622 Total177122 10439187561 93780 93780 PCWOFC = Project cost without financial cost FC = Financial Cost ACC Loan = Accumulated Loan Basis:

Debt: Equity = 1:1 Interest Rate = 9% PER Annum Phasing

First Year 5% Second Year30% Third Year 45% Fourth Year 20% Annexure 9 Project Appraisal Group (Project appreciation note) Project: Detailed Feasibility Report (DFR) on Installation of facilities for improvement in Diesel Quality and Distillates yield (Hydrocracker) Project at Haldia Refinery. Project at a Glance Justification onEconomics GroundsOperating NecessitySafety Requirements

Project Cost Stage - IDFR Total (Rs. Crores)1518 1876 FE Component 357 308 Price Base Apr 00 July 05 Completion Schedule (Stage - I) Mechanical Completion 36 moths Commissioning 3 months Completion Schedule (DFR) Mechanical Completion 38 months Commissioning 3 months Project Economics - IRR State - I12.99% - Price Cycle (Apr 97 to Mar 00)

DFR

17.5% - Price Cycle (Apr. 02 to Mar 05)

Project Financing Stage - IDFR 1:1 1:1 7.5

Debt: Equity Capacity (TMT) Crude 6.0

Technology/Facilities 1. CDU - II revamp : 2.5 to 4.0 MMTPA 2. New units: OHCU : 1.7 MMTPA HGU : 75 TMTPA AAU/ARU : 272 TPH SWS : 25 TPH SRU : 2 x 80 TPD 3. Gas Turbine : 20 MW along with HRSG 4. New ETP of 600 M3/hr, Cooling water system (3x 2250 M3/hr), Nitrogen system, Storage system etc. 1.0 Proposal 1.1 The proposal seeks final approval of DFR from the Board of Directors for: Installation of Hydrocracker facilities at Haldia Refinery at an estimated cost. of Rs. 1876 crore (as of July 2005) inclusive of foreign exchange component of Rs. 308 crore. 2.0 Background 2.1 Vide agenda item No. R/936 dated 29.11.2000, Board has accorded i principle approval for installation of facilities for improvement in Diesel Quality and Distillate Yield at an estimated cost of Rs. 1518 crore inclusive of foreign exchange component of Rs.

357 crore based on April 2000 price level subject to obtaining statutory environment clearance from MOE&F. Board has also accorded expenditure approval of Rs. 44 crore inclusive of a foreign exchange component of Rs. 18 crore for carrying out pre - project activities pending Environmental Clearance. 2.2 Subsequently vide agenda item No. R/1005 dated 24.4.2003, Board has approved the road map to meet the quality requirement of HSD and MS and suggested deferment of completion of Hydrocracker Project at Haldia Refinery till January 2010 so as to match with quality requirement of April 2010 onwards. Hence, all activities relating to the project were kept on hold. 2.3 As per auto fuel quality road map, it has been stipulated that Euro IV specification for MS and HSD shall be implemented in Metros and Other Seven Cities from 1st April 2010 while rest of the country will have Euro III equivalent specification on that date. To meet the future quality norm of HSD, it is proposed to install Hydro - Cracker facilities at Haldia Refinery. 3.0 Technology/Facilities: 3.1 The following facilities are envisaged in the proposal:

CDU-II revamp from 2.5 to 4.0 MMTPA. New OHCU of capacity 1.7 MMTPA. New AAU/ ARU of capacity 272 TPH. New SWS of capacity 25 TPH New SRU of capacity 2 x 80 TPD One Gas Turbine of 20 MW with HRSG New ETP with RO system of 600 M3/Hr Cooling water system of 3 x 2250 M M3/ Hr CT cells Cryogenic Nitrogen System of 200 N M3/ Hr Plant and Instrument Air System

4.0 Project Cost

Estimated cost of the project is Rs. 1876 crore (as of July 2(305) inclusive of foreign exchange component of Rs. 308 crore. The accuracy of the cost estimates is 10%. The operating cost of the proposed facilities is Rs 26.5 crore / year. 5.0 Economics: Optimization Group has carried out the economic evaluation of the proposed proposal using Integrated Planning (IP) Model. The project has been studied considering five demand scenario and two pricing scenario. The summary of economic evaluation as per IP model is as under: Objective Function Rs. Cr/Yr (Profit) Scenario 1 Scenario 2 Demand level Pricing level Project case with Low High Apr 02 - Mar Apr 02 05 21092 March 05 25272 25064 208 Scenario 3 Moderate April 02 to March 05 22802 22626 176 Scenario Scenario 4 5 Low Moderate IT forecastIT forecast 30120 29874 246 32432 32203 229

Paradip (Case - 1) Base case with Paradip 20930 (Case - 3) Delta Objective Function, Rs. Cr/Yr 162

Objective Function = Product Realization - Raw Material Cost - Catalysts & Chemical cost - Logistic Cost Case - I : with Hydrocracker configuration Case - III: with DHDT configuration 6.0 Manpower: Additional manpower of 97 nos. has been proposed 7.0 Phasing of Expenditure of the project is as follows:

(Figs. in Rs./crores) 1st year2nd Year3rd Year4th YearTotal 91 548 845 392 1876 8.0 Financial Appraisal : The financial appraisal of the Project has been carried out by M/s. IDBI. It has been concluded that the proposed project is financially viable. The financial viability of the project would, however be critically dependent on the POL and Crude Prices. 9.0 Points for consideration: 9.1 The IRR based on incremental Gross Refinery Margin and project cost differential (Rs.1876 - 1175 = 701 crore) is as under: Sl. No. 1. 2. 3. 4. 5. Attributes Base case With 10% increase in capital cost With 10% increase in operating cost With 90% sales realization With 10% increase in capital cost, 10% increase in operating cost and 90% sales 6. 7. 8. realization With no demand growth and 3.04 $/bbl 16.63 IRR (%) 17.52 16.05 17.47 15.63 14.24 Hurdle rate (%) 11.0

spread over entire 15 years of project life Simultaneous occurrence of 1,2,3, & 5 13.30 above With 10% reduction in capital cost of DHDT case keeping Capital cost of OHCU case unchanged 14.36

Note : Base Case - Lower product demand scenario with LS-HS crude spread of $ 3.04/bbl (3 years average) for first 10 years of project life and balance 5 years with moderate product demand with spread of 5.00 $/bbl (IT projection) has been considered.

It may be seen from above, that the project is economically viable. The Break Even IRR of 11 % will be achieved with the investment of about Rs. 893 Crore in DHDT case. 9.2 An amount of Rs. 176 Crore (approx) has been considered if, the base case (Le with DHDT option) for procurement of 20 MW Gas Turbine. Presently Haldia Refinery has a generating capacity of 92 MW (4 TGs and 2 GTs) and the requirement of power with DHDT option will be 54 Mw (approx). In this case the requirement at GT in DHDT option may hot be required and hence the total cost will be Rs. 1000 Crore (excluding GT cost). In this scenario the IRR of the project will be reduced from 17.5% to 12.8%. 9.3 While working out the economics of the proposal it has been projected that in the low and moderate demand scenario the throughput of Barauni Refinery will be in the range of 3.2 to 4.2 MMTPA level post Hydrocracker and PDRP project. In view of the low throughput operation at Barauni the necessity for the third reactor of DHDT at Barauni at an estimated cost of Rs. 63 Crore at this stage .way be reviewed. 9.4 An additional manpower of 97 numbers has been proposed to operate the new facilities. A detailed manpower study is required to be carried out before separate approval of manpower requirement. 9.5 An amount of Rs. 5.00 Crore has been provided for the township in the cost estimate. In view of the present housing scenario there is a need to review the requirement of houses. 9.6 A new ETP of 600 M3/ Hr is proposed in addition to the existing ETP. Division may explore a combined ETP operation instead of two ETP operation. 9.7 While working out the economics. it has been projected in the IP model that 1.5 MMTPA diesel is being exported to Pakistan from Panipat Refinery. If the same is not materializes there will be an impact on margins. 9.8 After implementation of the Hydrocracker project there is an improvement in the distillate yield 3.0% to 3.4% wt (excluding LOBS yield).

9.9 It has been proposed to implement the project by LSTK mode for all units except revamp of CDU-II. An amount of Rs.79 Crores has been provided for LSTK mode of execution. The agenda may be considered for submission to the Board of Directors at an estimated cost of Rs. 1876 crore as per DOA clause of 9 (i) of Enclosure-I xxxxxxxx Sub: Installation of facilities for Improvement in Diesel Quality and Distillates Yield at Haldia Refinery Summary of the reply given by Refineries Division to the queries raised by Chairman's Office In seriatim is as under: 1. The major variation in project cost (DFR V/s in-principle i.e 1876 vs 1518 crore) is as under: Sr.No.Attributes Variation 1. FE variation (-) 48.0 2 Impact of pricing index (WPI/CPI-escalation)(+) 188.0 3 Change in Scope Revamp of CDU-II (+) 43.0 Higher capacity of Effluent Treatment Plant (+) 39.0 Addition of Tertiary Treatment Plant (+) 26.0 2 Nos. crude tank* (+) 25.0 4. Impact of high steel price over WPI/CPI (+) 19.0 5 Site development charge (+) 13.0 6 Financial cost (change in interest rate) (-) 8.0 7 others including inaccuracy of estimates (+) 61.0 8 Total (+) 358.0 * Discussion with Pipelines Divisions is on for sparing of tanks at HBCPL tank farm area. Based on the feed back from Pipelines Division, final view will be taken on construction of two crude tanks for which provision has been kept in Capital Cost Estimate.

2. With regards to completion period, it has been stated that actual completion including commissioning is 43 - 47 months in conventional mode and in case of Panipat expansion, it is 45 months (approx.) in LSTK mode as against 41 months proposed for Hydrocracker project in LSTK mode. 3 As stated by Optimization Group, in the post Panipat Expansion, Hydrocracker at Haldia and Paradip Refinery scenario, the projected throughput at Barauni is likely in the range of 3.2 to 3.7 MMTPA level with existing HB capacity and considering high LS - HS crude differential of last 3 years average of $3.04/ bbl which is expected to continue in future. In view of this, further investment (third reactor in DHDT) at this stage at Barauni is to be kept under hold and can be reviewed at a later stage.. 4. The proposed hydrocracker facility will be installed in the existing refinery premises. 5. Considering investment approval in November, 2005 and 41 months of completion schedule, the facility is expected to be ready by April, 2009 as against requirement of completion of project by Jan, 2010 by earlier Board decision. xxxxxx Sub: Study of Installation of facility at Haldia Refinery for Improvement in Diesel Quality and increase in Capacity Background: HSD quality requirement beyond April 2010 cannot be met by Haldia refinery with its existing configuration/facilities various alternatives for meeting the twin objectives of upgrading the diesel quality as well as the feasibility of processing crude up to 7.5 MMTpa at Haldia were evaluated by Refy HQ through LP modeling and installation of a Once Tarough-Hydrocracker (OHCU) was selected as the best option. Optimisation Dept. was accordingly requested to carry out a study through the Integrated Planning (IP) model and arrive at the savings from installation of the OHCU at Haldia refinery. The study was to compare the savings between the following two configurations at Haldia:

A. Crude processing at 6 MMTpa with DHDT- necessary for meeting Diesel specs (BaseCase) B. Crude capacity at 7.5 MMTpa with OHCU (project Case) The concerned RMPS models were accordingly developed and tuned along with the representative from Haldia refinery. Since by the time of completion of the subject project, Panipat expansion to 15 MMTpa, Gujarat Resid Upgradation Project and expansion to 13.7 MMTpa would also be in place, the RPMS models of Panipat and Gujarat included in the IP model for the subject study were as utilized earlier for the respective studies. Further, since Paradip refinery and the proposed Paradip-RengaliKorba-Raipur product PL with the branch from Renglai to Bundu could have an impact on the subject proposal, impact of the same was also studied. Since the yield of Paradip refinery also included petrochemicals, the same was however configured as an extreme point refinery in the IP model with crude mix, product pattern and prices for petrochemicals (IPP as well as EPP) as provided by Refy EQ. As desired, the scenarios studied, details of the basis adopted and the summary of the findings thereform are provided hereunder: Scenarios Studied: Scenario-1 : Low-Demand scenario as considered for Gujatrat expansion and P-15 study (and utilized in the IRR workings for years 1 to 10 of the said study). Scenario-2: Demand for 2011-12 for all products as currently projected planning Dept. Mktng HO. Scenario-3 : Growth rate of 10% for HSD, 15% for MS and 18% for ATF applied on the demand nos. per Scn-1, i.e. similar to the High-Demand scenario as considered for Gujarat expansion and P-15 study (and utilized in the IRR workings for years 11 to 15 of the said study). Scenario-4: Price sensitivity for Sen-1 with higher LS-HS spread and product cracks 9per details at Table-E of Attachment-A). Scenario- 5 : Price Sensitivity for Sen-3 with higher LS-HS spread and product cracks.

Under each Scenario, 8 cases with different configuration (i.e. with/without Paradip refinery, with/without Paradip-Raipur PL and with/without Haldia expansion) were also examined as described at Table-1 hereunder: Table:1: Cases Studied under each Scenairo Case NumberParadip Refy.Paradip PLHaldia Project Case 1 Y Y Y Case 3 Y Y N Case 2 Y N Y Case 4 Y N N Case 5 N Y Y Case 7 N Y N Case 6 N N Y Case 8 N N N Basis Adopted: Details of the basis adopted are provided at Attachment-A. Findings: Details of the optimal crude thoughput levels at refineries, arrived at on a global basis through the IP model, under various scenarios and cases in provided at Tables-2 & 3A hereunder: Table-2: Crude Thruput Levels-Scn-1,2 & 3 (MMTPa) Scenario No Scn-1 Scn-2 Scn-3 Demand Level Low High Moderate Case No. Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8 Paradip Refy & PLY Y N N Y Y N N Y Y N N Haldia Expansion Y N Y N Y N Y N Y N Y N Haldia 7.0 5.8 7.5 6.0 7.2 6.0 7.5 6.0 7.0 5.7 7.5 6.0 Barauni 3.2 3.1 3.2 3.7 3.9 3.9 4.7 5.7 3.5 3.5 3.7 4.3 Paradip 15.0 15.0 0.0 0.0 75.0 15.0 0.0 0.0 15.0 15.0 0.0 0.0 IOC Total 75.1 74.0 60.6 60.1 77.5 76.2 63.6 63.1 75.6 74.2 62.5 61.6 It can be seen from Table-2 above that based on the average prices during the 3-year period April 02 - March 05:

The Commissioning of Paradip refinery has an impact on the optimal thruput of Haldia refinery . Under scn-1 to 3, Haldia refinery achieves its maximum thruput post expansion of 7.5 MMTPa in cases where Paradip refinery has not been commissioned whereas post-commissioning of Paradip refinery, the optimal thruput of Haldia postexpansion on a global basis is about 7 MMTpa. Expansion of Haldia has an impact on the thruput of Barauni (which basically acts as the swing refinery based on the demand level, especially consequent to additional availabilities ex-Gujarat, Panipat and Paradip). Table-2 : Crude Thruput Levels-Scn-4&5 (MMTpa) Scenario No Scn-4 Scn-5 Demand Level Low Moderate Case No. Cs-1Cs-3Cs-6Cs-8Cs-1Cs-3Cs-6Cs-8 Paradip Refy & PLY Y N N Y Y N N Haldia Expansion Y N Y N Y N Y N Haldia 7.5 6.0 7.5 6.0 7.5 6.0 7.5 6.0 Barauni 4.0 3.6 4.2 3.9 4.1 4.1 4.4 5.8 Paradip 15.0 15.0 0.0 0.0 15.0 15.0 0.0 0.0 IOC Total 77.8 75.9 62.9 61.2 78.0 76.4 63.2 63.1 It can be seen from Table-2A above that based on pricing as per the latest IT forecast for the year 2010 (i.e. higher LS-HS spreads and higher product cracks vis-avis the 3year average during '02-05 considered for scn-1 to 3): Haldia refinery achieves its maximum thruput post expansion under both the scenarios irrespective of the status of the commissioning of Paradip refinery. Barauni's thruput also increases due to higher product cracks and the viability of exports ex-other refineries. Barauni almost achieves its maximum throughput in case-8 w/o Paradip & Haldia project) of Sen-5 (price sensitivity for Scn-3 Moderate Demand Level) Details of the product-wise and location-wise exports under various scenarios and cases are provided at Annexure-I. Details of the product pattern at Haldia refinery pre and post-expansion under the various scenarios/cases is provided at Tables-3 & 3A hereunder:

Table3: Product Pattern-Scn-1,2&3 (TMTpa) Scenario No Scn-1 Scn-2 Scn-3 Demand Level Low High Moderate Case No. Cs-1 Cs-3 Cs-6 Cs-8 Cs-1 Cs-3 Cs-6 Cs-8 Cs-1 Cs-3 Cs-6 Cs-8 Paradip Refy & PLY Y N N Y Y N N Y Y N N Haldia Expansion Y N Y N Y N Y N Y N Y N LPG 248 183 256 186 252 186 258 187 254 185 257 188 Naphtha 598 548 599 587 576 493 523 455 598 536 603 550 MS-K 150 165 174 155 228 218 223 223 136 122 155 167 MS-P 130 130 130 130 98 131 170 170 149 149 149 149 Total-MS 280 295 304 285 326 349 393 393 285 271 304 316 SKO 392 224 610 359 279 121 126 73 433 109 532 263 ATF 371 280 350 259 421 403 412 402 386 335 352 332 JBO 37 37 37 37 37 37 37 37 37 37 37 37 N-HSD 17321182198912861674949 217312241569103619491293 UL-HSD 628 628 628 628 787 787 796 787 691 691 691 691 HFHSD 189 189 189 189 272 272 234 119 208 208 208 168 Total-HSD 254919992806210327332008320321302468193528482152 Distillate Yield % 63.7 60.6 65.7 63.0 63.4 59.3 65.6 60.7 63.4 59.7 65.8 63.4 FO 895 834 884 758 10361014935 931 960 817 886 729 Bitumen 630 632 630 632 582 582 582 582 571 628 598 632 Sulfur 55 30 57 30 58 31 57 31 58 30 58 30 MCW 3 3 3 3 3 3 3 3 3 3 3 3 Lubes 244 244 244 244 244 244 244 244 244 244 244 244 Fuel & Loss % 9.6 8.9 9.6 8.7 9.6 8.9 9.7 8.9 9.8 9.2 9.7 8.8 Table 3A: Product Pattern -Scn-4 & 5 (TMTpa) Scenario No Scn-1 Scn-3 Demand Level Low Moderate Case No. Cs-1 Cs-3 Cs-6 Cs-8 Cs-1 Cs-3 Cs-6 Cs-8 Paradip Refy & PLY Y N N Y Y N N Haldia Expansion Y N Y N Y N Y N LPG 260 181 259 185 254 184 255 187 Naphtha 598 501 598 515 598 464 598 480 MS-K 173 222 176 215 167 150 182 225 MS-P 134 129 130 129 149 227 132 149 Total-MS 307 351 306 344 316 377 314 374 SKO 790 327 794 438 706 264 536 301 ATF 429 290 427 271 449 360 443 352

JBO N-HSD UL-HSD HFHSD Total-HSD Distillate Yield % FO Bitumen Sulfur MCW Lubes Fuel & Loss %

37 37 37 37 37 37 37 37 17381309173412801740119319851278 628 628 628 628 742 742 691 691 189 189 189 220 208 208 208 208 25552126255121282690214328842177 65.9 63.0 65.8 64.7 66.9 63.4 67.1 64.5 794 754 794 653 805 721 794 659 704 632 706 632 630 632 623 632 63 30 63 29 56 30 55 30 3 3 3 3 3 3 3 3 243 244 243 244 244 244 244 245 9.6 8.8 9.6 8.8 9.5 8.9 9.6 8.8

It can be seen from the above that in addition to increase in the crude processing capacity, the project also results in an improvement in the distillate yield at Haldia refinery. Product-wise details of the levels of additional gives to EPC & BPC and purchase from ONGC & RIL under the various scenariors and cases are provided at Tables-4 & 4A hereunder. Table-4: Addl. Given & Purchases - scn-1,2&3 (TMTpa) Scenario No Scn-1 Scn-2 Scn-3 Demand Level Low High Moderate Case No. Cs-1 Cs-3 Cs-6 Cs-8 Cs-1 Cs-3 Cs-6 Cs-8 Cs-1 Cs-3 Cs-6 Cs-8 Paradip Refy & Y Y N N Y Y N N Y Y N N PL Haldia Y N Y N Y N Y N Y N Y N Expansion Addl Gives to HPC WS HSD Addl Gives to BPC WS HSD Purchase241 242 221 221 259 254 27 38 228 230 160 167 730 730 730 730 947 947 257 257 800 803 803 778

472 472 472 472 568 555 390 412 539 539 532 532 1484148414841484 1878187815351535 1633162916291633

ONGC WS SKO HSD Purchase-RIL WS SKO HSD

93 93 93 93 150 150 150 150 107 107 141 117 316 316 757 815 279 279 737 732 342 351 815 815 494 494 494 494 722 722 722 722 544 544 544 544 25 25 25 25 104 104 140 140 67 67 78 78 258 258 650 650 158 158 650 650 215 562 650 650 217 217 217 217 269 269 402 676 239 239 239 239

Table-4A: Addl Gives & Purchases-Scn-4&5 (TMTpa) Scenario No Demand Level Case No. Paradip Refy & PL Haldia Expansion Addl Gives to HPC WS HSD Addl Gives to BPC WS HSD Purchase-ONGC WS SKO HSD Purchase-RIL WS SKO HSD Scn-4 Low Cs-1 Cs-3 Cs-6 Cs-8 Y Y N N Y N Y N 242 733 242 733 242 733 242 733 Scn-5 Moderate Cs-1 Cs-3 Cs-6 Cs-8 Y Y N N Y N Y N 278 803 278 803 227 800 254 800

502 502 502 502 543 543 543 543 1485 1485 1485 1485 1629 1629 1633 1633 93 314 494 25 265 217 93 333 494 25 550 217 93 426 494 25 650 217 93 815 494 25 650 217 107 350 544 29 220 239 107 356 544 29 565 239 107 815 544 67 650 239 107 815 544 29 650 239

The scenario-wise projected savings (i.e. delta in the LP Objective Function vis-a-vis the corresponding Basecase) from commissioning of the expansion of Haldia refinery under the various case, i.e. with/without Paradip refinery, with/without Paradip product PL, is provided at Table-5 hereunder: Table-5 : Saving from Haldia Expansion (Rs. Crores pa) Scenario No. Demand Level Scn-1 Low SCN-2 High SCN-3 SCN-4 ModerateLow SCN-5 Moderate

Price 3-Yr Avg3-Yr Avg3- Yr Avg IT F' castIT F' cast With Paradip Refy&Pl 162.4 208.5 176.3 246.2 229.3 With Paradip Refy, w/o Pl 158.0 192.0 179.1 244.7 225.1 w/o Paradip Refy, With PL213.7 314.3 282.3 254.6 233.5 w/o Paradip Refy & PL 186.8 330.7 260.3 253.6 229.0 Note: LP Obj. Fn. = Product Realization minus Raw material costs minus Catalysts and Chemical costs minus Fuel & Loss minus Logistic costs. The impact on the savings from the subject project due to the commissioning of Paradit refinery and PL is minimal under Scn-4 &5 due to lower differential in the overall thruput levels and higher utilization of Barauni in the concerned basecases (since the forecasted increase in product cracks vis-avis 3-year average is higher than the forecasted increase in LS-HS spreads: It can be seen from Tables-5 above that:

With pricing based on the 3-years average, savings on global basis from commissioning of the subject project varies from about Rs.160 to Rs.330 Crores per Annum based on the demand level/commissioning of Paradip Refinery.

With pricing based on the long term IT forecast, savings from commissioning of the subject project varies from about Rs.230 to Rs.255 Crores per Annum.

Attachment-A Basis Adopted Demand Scn-1 & 4: Product-wise demand was considered at the same levels as in the Low-Demand scenario considered for Gujarat expansion and -15 study (and utilized in the IR workings for years 1 to 10 of the said study). The demand numbers under this scenario are close to the levels per the outlook of the year 2005-06. However, demand of Naphtha and FO have been substantially reduced

considering the projections by Corporate Planning regarding switch-over by major customers to Natural Gas. As regards LSHS, it has been assumed that the switch-over to gas would not be major. Further, demand of SKO is about 6.7% lower than the current outlook for the year 2005-06. Scn-2: Product-wise demand has been considered at the levels per the latest projections by Planning Dept Mktng HO for the year 2011-12. Scn-3 &5: Product-wise demand level is similar to the High-Demand scenario considered for the Gujarat expansion and P-15 study land utilized in the IRR workings for year 11 to 15 of the said study), i.e. growth rate of 10% for HSD and 15% for MS has been applied on the demand nos. per Scn-1. However, in addition, ATF has also been escalated at 18% over and above the level in Scn-1. The level of product-wise demand considered under the various scenarios is provided at Table-A hereunder. Marketing HO's latest outlook of product-wise demand for the year 2005-06 has also been provided therein for the purposes of comparison. Table-A: Scenario-wise Demand Numbers (TMTpa) Product05-06 Outlook Sc-1&4 Low Scn-2 Projections for 11-12 Scn-3&5 High Demand per P-15 Study plus ATF Growth Moderate 4477 24112 5888 2579 907 3556 2571 657 2475

Demand per P- per Mktng HO High 5353 27151 5211 2936 873 5482 1274 582 3143

15 Study Comparative LevelLow MS 3818 3893 HSD 21032 21920 SKO 6313 5888 ATF 2174 2185 Naptha 2574 907 FO 4300 3556 LSHS 3413 2571 LDO 667 657 Bitumen 2323 2475

Flexibility was kept in the model under all the scenarios in respect of meeting of the LSHS demand, i.e. the model had the option in all cases of not meeting the LSHS demand (Min limit of LSHS kept as zero). In other words, LSHS production at the refineries was based on economics. The CARG adopted by Planning Dept Mktng HO for arriving at the demand numbers for the terminal years of the Plans (number for 2011-12 adopted for Scenario-3) is provided at Table-B hereunder: Table-B: CARG adopted by Planning Dept Mktng HO Product'06-7-08090809-11121112-16171617-2122 MS 5.2% 5.2% 5.0% 4.0% HSD 3.8% 3.8% 4.0% 3.0% SKO -4.0% -4.0% -1.8% 0.1% ATF 4.1% 5.0% 5.0% 5.0% Production: The maximum crude processing capacities at various refineries considered for the Study are provided at Table-C hereunder: Table-C: Max, Crude Capacities at Refineries (TMTpa) GujaratPanipatMathuraBarauniHaldiaGujaratDigboiBRPLCBDUCPCL Paradip 13,700 15,000 8,400 6,000 7,500 800 600 2,350 517 10,00015,000 Exchanges & Purchases For all Scenarios it has been assumed that HPC's proposed Mindra-Delhi product PL as well as EPC's proposed extension of its Mumbai-Manmad-Indore product PL to Loni/Piyala would be in place. Gives to HPC and BPC ex-Koyali, Mathura and Panipat have accordingly been reduced from normal levels as detailed at Table-D hereunder (based on the OMC 's current & takes from IOC at their future ToPs): Table-D: % Redn in Gives to HPC & BPC due to their PLS Refy % Redn from normal level

HPC HSD MS Koyali 65% 47% Mathura52% 43 Panipat 14% 5%

BPC HSD MS 45% 39% 39% 36% 10% 4%

Further, since it was observed under all the cases and scenarios that the subject expansion of Haldia refinery / commissioning of the proposed Paradip-Raipur PL/commissioning of Paradip refinery result in substantial reduction in IOC's takes (visa-vis current levels) ex-HPC's Vizag refinery, no takes by HPC ex-Haldia has been envisaged under any scenario/case. Subject to the above mentioned adjustments, gives to BPC & HPC ex-all refineries in each scenario are based on the refinery-wise numbers finalized per the MoU for the quarter Jan-Mar'06 duly annualized and escalated by the product-wise demand growth rates adopted for IOC & Associates under the concerned scenario. Exchange of SKO has been assumed on a ton-to-ton basis since no company would be interested in taking additional SKO from another company. Refinery-wise takes from BPC & HPS as well as purchases from RIL and ONGC have been retained at economic levels under all scenarios. Prices: Prices of Crudes and Products RTPs, Assessable Values and Transaction Values were considered at the average of the actuals during the 3-year period Apr'02 - Mar'05, duly adjusted for changes in the pricing methodology as per the Industry agreement for the year 2004-05 as well as for the changes in the rates of Customs and Excise Duty per Budget for the year 2005-06. Necessary adjustments have also been made for the changes in quality of MS & HSD. Price sensitivity of higher LS-HS spread and product cracks (broadly in line with the latest IT forecast) on the results of Scn-I (Low demand) and Scn-3 (Moderate demand) has also been examined vide Scenarios 4 & 5 respectively. A comparison of the 3-year average crude spreads and product cracks considered for Scenarios-1, 2 & 3 vis-a-vis

those considered for Scenarios-4 & 5 as well as the forecast by IT Dept for the year 2010 are provided at Table-E hereunder: Table-E: Comparison of Crude Spreads and Product Cracks (Figs in US$/bbl) Scenario Basis IT F'cast 2010Scn-1, 2 & 3 '02-'05 AvgScn-4 & 5 Brent-Dubai 4.55 3.04 5.00 MS (Sing)-Dubai13.14 8.22 3.80 HSD-Dubai 9.84 5.67 9.84 Naphtha-Dubai 4.49 2.30 4.49 SKO-Dubai 13.38 6.86 12.34 FO-Dubai (10.43) (5.76) (10.00) No changes has however been effected (from the 3-year average) in any scenarios as regards the selling price of SKO in the market place, since the same continues to be controlled by the Govt. As regards Paradip refinery, as also mentioned earlier, petrochemicals price realization from the domestic as well as export market, and the input cost of Benzene have been considered per workings provided by Refy HQ (based on 3-year average price data during the period Apr'02 - Mar'05). Imports & Exports: Options for imports / exports kept open at refineries / ports in the IP model under all scenarios are detailed at Table-F hereunder: Table-F: Imports / Exports Option in IP mode-I Product MS Naphtha ATF HSD FO HaldiaParadipCPCLDahejBarauniPanipatMathuraKandla/IOTL Exports (Pak)

Bitumen Petrochem FO Pipelines:

Imports

KBPL has been considered as on crude service. The Paradip-Haldia crude PL has been considered to be operational. The following other proposed product pipelines have been considered as operational: Koyali-Dahej, Branch lines from KVSS to Ajmer and Chittorgarh, Chennai-Bangalore, Panipat-Tikrikalan and Koyali-Ratlam-Itarsi-Khapri with branches to Indore and Nishatpura (with rail loading facilities at Koyali, Ratlam and Khapri) under all scenarios. Further, for cases 1, 3, 5 & 7 under each scenario the proposed Paradip-Jatni-Rengali (Sambalpur+Rourkela) - Korba (Eilaspur+Bishrampur)-Raipur product PL with branch line from Rengali to Bundu (Tatnagar+Namkum) has also been considered to be operational with a variable operating cost of Rs. 125/MT.