Managing B2B Marketing

Channels in Oil & Gas

Industry
BY
M A L L E B O I N A S R I K A N T H YA D AV
P RAV E E N H A N S D A
S A N J E E T S A U RAV K U J U R
A N KU R R OY
E S ANTOSH KUMAR
S ANTOSH KUMAR S
S H A N TA N U

Indian Oil and Gas Industry

 At the end of 2014, India had 222.4 MMTPA of provisional refining capacity, making it the second
largest refiner in Asia an. By 2017 the oil refining capacity of India is expected to rise and reach more
Second largest refiner
than 310 million tonnes. Private companies own about 29.31 per cent of total capacity
in Asia

Worlds fourth-largest
energy consumer

Indias energy demand is expected to double to 1,464 Mtoe by 2035 from 595 Mtoe in 2013.
Moreover, the countrys share in global primary energy consumption is projected to increase two fold
by 2035

In 2014, India consumed 3.85 mbpd oil, while the consumption is estimated to reach 4.0 mbpd by
FY16, expanding at a CAGR of 3.2 per cent during FY08FY16F. By 2025, India is expected to
In 2014, Fourth-largest
consumer of oil and
overtake Japan to become the third-largest consumer of oil.
petroleum products

Fourth-largest LNG
importer in 2014

LNG imports accounted for about one-fourth of total gas demand. India's gas demand is estimated to
be more than double over the next five years .
India increasingly relies on imported LNG; the country was the fourth-largest LNG importer in 2014 and
accounted for 5.68 per cent of global imports.

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ADVANTAGE INDIA
Growing demand

2014
Oil
Consumption:
3.85 mbpd;
Gas
Consumption:
50.6 bcm

India is the worlds fourth-largest energy

consumer (2014); oil and gas account
for 37 per cent of total energy
consumption

Demand for primary energy in India is to

increase threefold by 2035 to 1,516
million Tonnes of Oil

Equivalent from 563 million Tonnes of

Oil Equivalent in 2012

Supportive FDI
guidelines

Skilled workforce

About 136,347 people were employed

in the petroleum industry at the end of
FY13

The University of Petroleum and

Energy Studies in Dehradun,
Uttarakhand, is Asias first and only
energy university

Advantage
India

The government allows 100 per cent Foreign

Direct Investment (FDI) in upstream and
private sector refining projects
The FDI limit for public sector refining projects
has been raised to 49 per cent without any
disinvestment or dilution of domestic equity in
the existing PSUs

Policy support
Government has enacted various policies
such as the New Exploration Licensing Policy
(NELP) and Coal Bed Methane (CBM) policy
to encourage investments

In a new policy in 2013 companies that have

existing petroleum and mining licenses are
allowed to apply for shale oil & gas licences

New domestic natural Gas pricing guidelines

has been enforced on 10th January 2014

FY16F
Oil
Consumption:
4.0 mbpd;
Gas
Consumption:
119.05 bcm

STATE-OWNED COMPANIES DOMINATE OIL AND GAS IN INDIA

India has become the third-largest energy consumer in 2015
In 2015,oil production in the country reached 0.75 mbpd as compared to 0.76 mbpd in 2014 registering a decline of 0.85
percent, In 2014, country had, 5.7 billion barrels of proven oil reserves
India had 1.4 tcm of gas proved reserves and produced 33.66 bcm of gas in 2015 which is expected to rise and reach
33.73 bcm in 2016
Upstream
segment exploration and
production

Indian Oil and Gas

sector

Midstream
segment
storage and
transportation

Downstream
segment
refining,
processing and
marketing

State-owned ONGC dominate the upstream segment

It is the largest upstream company in the Exploration and Production (E&P)
segment, accounting for approximately 68 per cent of the countrys total oil
output (FY14)

IOCL operates a 11,214 km network of crude, gas and product pipelines, with
a capacity of 1.6 mbpd of oil and 10 mmscmd of gas
This is around 30 per cent of the nations total pipeline network

IOCL is the largest company, operating 10 out of 22 Indian refineries, with a

combined capacity of 1.30 mbpd
Reliance launched Indias first privately owned refinery in 1999 and gained
considerable market share (30 per cent)
Essars Vadinar refinery has a capacity of 20 mmtpa, currently accounting for
around 10 per cent of total refining capacity

DOWNSTREAM SEGMENT: DISTRIBUTION AND MARKETING

In FY13, total sales of petroleum products by companies

were 148.52 mmt, up 1.73 per cent from the previous fiscal
year

The total number of retail outlets increased to 489,85

(including private) in April 2014 from 46,182 in April 2013

IOC owns the maximum number of retail outlets in

the
country (48.98 per cent of total), followed by HPCL (26.27
per cent) and BPCL (24.74 per cent); private firms own the
remaining

As of April 1, 2014, there were 13,896 LPG distributors in

India

Downstream distribution statistics (000 tonnes)

3.34

3.63

3.63

3.77

3.83

52.10

55.52

58.98

57.65

59.30

FY10

FY11

FY12

FY13

FY14

3.50

2.75

36.16

FY08

41.85

FY09

LPG Pipeline

Pipeline

Product Pipeline

Length (km)
Capacity (mmtpa)
As of April 1, 2014 As of April 1, 2014

Product Pipeline

77.41

11,811.90

LPG Pipeline

4.53

2,312

MARKETING AND DISTRIBUTION-DOWNSTREAM

MARKETING OF FINISHED PRODUCTS FROM PRODUCTION CENTRES (REFINERIES) TO

CONSUMPTION CENTRES (INDIVIDUAL CUSTOMER/ INDUSTRIAL CONSUMER)

CONSIST OF STORAGE AND DISTRIBUTION CENTRES ( INSTALLATION / TERMINAL / TAP OFF /

DEPOT), LPG BOTTLING PLANT, AIR FIELD STATION (AFS), LUBEOIL BLENDING PLANT(LOBP),
RETAIL OUTLETS(RO), AND ADMINISTRATIVE OFFICES

Down-stream supply chain

Refinery
terminals

Inland / Tap
Off Terminals

Depots

Port
Terminals

Customers

Retail Outlets

MARKETING AND DISTRIBUTION-DOWNSTREAM

Memorandum of Collaboration (MOC) between the oil companies

for sharing product and facilities to optimize effective utilization
of product and facilities

Monthly industrial logistic plan meeting (ILP) for finalizing

product movement and distribution pattern for ensuing month on
the basis of refinery production, product availability, consumption
and demand

Industry Coordination Regional level coordinator (RLC) , State

level coordinator (SLC) and District level coordinator (DLC)
I.

RLC- Developing an industry approach to any difficulties /

problems encountered by the industry

II.

SLC- Reports to RLC. An intermediary between Industry and

the State Government with regard to availability and
distribution of products

III. DLC- Report to SLC. To ensure coordination with district

authority with regard to distribution of products in the district

MARKETING AND DISTRIBUTION-DOWNSTREAM

Industry meeting for price fixation To monitor / fixing prices
of retail products (MS / HSD / PDS KEROSENE/LPG(D)) in
respect of following
i.

Commissioning of new refinery

ii.

Commissioning of new installation / terminal

iii. Commissioning of new pipelines

iv.

Commissioning of new depot / tap off point

v.

Commissioning of new retail outlet

vi. Change in the RTKM of retail outlets

vii. Revision in freight charges
viii. Shifting of pricing points
ix. Changes / imposition of statutory levies

MARKETING AND DISTRIBUTION-DOWNSTREAM

Types of Market

A Class Market Metros and other cities having population over 10 lacs as per 1981 census

B Class Market Cities having population between 2 lacs to 10 lacs as per 1981 census

C Class Market All other towns / cities not covered A, B and E markets excluding
locations on National / State Highways

D Class Market ROs on National / State Highways

E Class Market Remote areas not covered by National / State Highways and pockets of
consumption having no Retail Outlet within 10 Km radius

Types of Marketing Channels

Retail

A site RO Company owned facilities and company controlled or dealer controlled

B site RO Dealer owned facilities and dealer controlled
Agency for Kerosene / LDO , Lubricants / Greases

Direct Consumer pumps for HSD

a.

Direct Customers for HSD , FO , LDO , LSHS , NAPTHA, LPG , BITUMEN, BASE OIL ,
LUBRICANT AND GREASES, ATF ETC

Demand Forecasting

They track last five years sales figure Same happens in BPCL.
and find out the growth rate
They also track growth rate of
automobile sales.
Petroleum ministry gives total
production plan.

After sale service

For industrial products they take

feedback of huge customer and
carefully look about the need.
For retail products there is no after
sales services, all the services are
available on petroleum pump.
Facility for truck drivers to take bath,
have food and cold drinking water.
Drivers can sleep and relax on pump.

No standard feedback mechanism,

feedback is taken only from large
customers.
Special petro-card for logistics
companies is provided.
Logistics companies get 2 month
credit period.

SCM In/outbound logistics

Inbound as well as outbound logistics Inbound logistics is outsourced.

are outsourced.
Outbound logistics is 50%
Industrial customers have an option
outsourced and 50% company
of using their vehicles or companys
owned.
vehicle.
Any customer dont have any option
No company owned vehicle.
to use their vehicle.

Appointment of dealer.

They 1st decide the place and then

give advertisement.
Interview is taken of applicants.
If any person is willing to open a
retail outlet in his locality then he can
apply in HPCL.

Same process is followed by BPCL.

Only company decides where to
open retail outlet.

EOL
Essar Oil is a fully integrated oil & gas company of
international scale with strong presence across the
hydrocarbon value chain from exploration & production to
refining and oil retail.
Essar Oil owns India's second largest single site refinery
having a capacity of 20 million tonnes and complexity of
11.8, which is amongst the highest globally.
It has a portfolio of onshore and offshore oil & gas blocks
with about 1.7 billion barrels of oil equivalent in reserves &
resources.

EOL
Essar Oil, through a franchise model, today operates
approximately 1,550 operating retail fuel outlets across
India. Another 1600 are in various stages of
implementation.
The company is now looking at expanding its retail
network.
Additionally, the company is increasing non-fuel retailing
activities in this portfolio of retail outlets to provide an
additional source of revenue.

EOL
Essar Oil is the first private company in India to enter the
refined products marketing sector.
Essar reaches every corner of the country covering the
national and state highways and the rural areas. Essar Oil
supplies high-quality petrol and high-speed diesel.
Widespread network has created an excellent land bank
resulting in the development of Non-Fuel Retail (NFR). It is a
promising business channel for our retail today since it
facilitates high footfalls, increased customer activation and
high recall value with a profitable utilization of the retail
site.

EOL
Applications for Petrol Pumps
Essar Oil invites applications from interested people to set up petrol pumps across
the country. Interested people must possess land suitable for petrol pumps at
prominent locations. Essar Oil sees immense potential for growth in business for
diesel and petrol stations.
We are now looking at opening retail network in formats like Company Owned
Company Operated (COCO), Company Owned Dealer Operated (CODO), in addition
to the existing Dealer Owned Dealer Operated (DODO)

EOL has recently been aggressively adding multi-fuel options for its customers and
already has tie-ups with GSPC, GAIL GAS, Sabarmati Gas, Adani Gas and Gujarat
Gas Corporation for selling CNG, besides tie-ups with MGL and Aegis Logistics for
selling Auto LPG in its outlets.Currently, 29 of EOLs retail outlets have CNG
facilities, and five have Auto LPG nozzles.

EOL
Tie-ups with other oil marketing companies also gives Essar Oil
access to product, and the right to use their terminals and facilities
for the placing and marketing our products. Through this we have a
presence at more than 30 supply locations across India.
All NFR activities are designed to serve the varying needs of our
customers. This has created some mutually beneficial alliances
across various categories such as Automobiles, Lubricants,
Agrochemicals, Banking, Telecom and Food and Beverages. These
tie-ups with leading players such as Exide, SERVO, CASTROL,
TOTAL, ELF, J K Tyres, Bosch, SBI , Western Union Money Transfer,
Amul, Caf Coffee Day, Dinshaws, Heritage Foods, Pepsi, Biryani
House, National Seeds Corporation have facilitated maximum
customer convenience and satisfaction.

Bulk Business
EOL offers a wide range of products to bulk customers
(traders and direct customers) in the industrial and
transport sectors. A range of petroleum products covering
numerous applications are on offer to industrial customers
like power plants, and chemical, fertilizer and shipping
companies.
It has received approvals to supply Aviation Turbine Fuel
(ATF) to the Indian Armed Forces, and has tie-ups with oil
marketing companies, namely Bharat Petroleum
Corporation Ltd (BPCL) and Hindustan Petroleum
Corporation Ltd (HPCL).