PROJECT REPORT ON

Market Potential of Plates in Oil & Gas Pipelines In

India
For
Jindal Steel and Power Limited

IN PARTIAL FULFILLMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF

Faculty Guide Company Guide
Prof. Renu Emily 1. Atul Lalit Srivastava
Professor, Marketing Associate Vice President, Plate Business
2. Monika Kaushal
Assistant General Manager,Plate Business

Submitted by

Gaurav Chaturvedi
Enrollment No.
20162164
M.B.A SEMESTER III
Jindal Global Business School
O.P. Jindal Global University
Sonipat
 Acknowledgement

Getting this research done was very difficult and it could have never been
possible without the invaluable inputs of my mentor, Mr Atul Lalit Srivastava,
Associate Vice President, Plate Business and Ms. Monika Kaushal, Assistant
General Manager Plate Business. Their hands-on experience on the subject made
my research work very structured and streamlined.

I would also like to extend my gratitude to the colleagues at New Delhi Corporate
office and Plate Mill, Angul to provide me answers to my questions with great
patience. I am also indebted to my Professor back at college to teach me the
basics of B2B marketing. The homework done at the college was a guiding light to
me.

In the end, this opportunity could never have come without the Assistance of Ms.
Sakshi Madaan (HRD) and Ms Suprava Manjari Behera (HRD), Jindal Steel and
Power Limited, who have continuously guided and helped me in all my endeavors
at JGBS and JSPL. I thank both of them sincerely, for this opportunity.

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 Project Certificate

This is to certify that Mr. Gaurav Chaturvedi ,Student-Jindal Global Business

School has successfully completed his Action Learning Project on Market Analysis
of Plate for Oil and Gas Pipelines in India from 05-05-2017 to 31-07-2017 and his
conduct has been satisfactory. We wish him all the best for his future endeavors .

For Jindal Steel and Power Limited

________________________

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Executive Summary

Indian Steel industry is one of the major contributors to employment and the Nations GDP. But
the low profitability, and extensive capital requirement has led to a slower growth of the
industry in the world, at around 0.6%. Despite of anti -competitive practices by China and low
demand, India is well poised to overtake Japan to be the second largest Steel Producer in the
world. The ambitious plan of Indian government to boost the domestic demand will be largely
guided by the Oil and Gas Sector which is all set to expand metamorphically with the planned
monetization of 67 new oil and gas blocks discovered under the Hydrocarbon Exploration and
Licensing Policy (HELP).

Over 58 Lacs tonnes of Plates, for the 15000 kms expansion of Natural Gas grid, and nearly 14
lac tonnes of Plates for oil rigs for the new blocks monetization, would be required in a period
of next 7 years.

The new policies of the government viz. Make in India, National Steel Policy and 100% FDI in the
steel sector will aid Jindal Steel and Power Limited to be the largest Steel Plate supplier to the
government Oil and Gas projects, as Jindal Steel and Power Limited already has a mammoth
experience in delivering world class products to global steel market.

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Contents
1.0 Project Scope .......................................................................................................................................... 5
2.0 Overview of the industry ........................................................................................................................ 5
2.1 Steel Industry Worldwide ....................................................................................................................... 5
2.2 Indian Domestic Steel Industry ............................................................................................................... 7
3.0 Company Profile-Jindal Steel and Power Limited ................................................................................... 9
3.1 Product Portfolio ................................................................................................................................... 10
3.2 About the Worlds widest 5000-millimeter Plate Mill JSPL, Angul ....................................................... 11
3.2.1 Capability of the Plate mill ................................................................................................................. 11
3.2.2 The Heat Treatment Complex Processes ........................................................................................... 12
3.2.3 Typical Grades At Plate Mill ............................................................................................................... 13
3.2.4 Value Added Grades at JSPL Angul ................................................................................................... 13
3.2.5 Usage of Value Added Grades in the Steel Industry .......................................................................... 14
4.0 Energy Demand: A Global Outlook ....................................................................................................... 15
4.1 Energy and Its Reliance on Oil and Gas ................................................................................................. 16
5.0 Oil and Gas Sector Pipeline Steel .......................................................................................................... 18
6.0 SWOT Analysis of JSPL Plate Unit .......................................................................................................... 20
7.0 Competitor Analysis JSPL Vs ESSAR Steel.............................................................................................. 21
8.0 The Pipeline Network In India ............................................................................................................... 24
8.1 Gas Transportation cost ........................................................................................................................ 25
9.0 Expansion Projects In India-Natural Gas Grid ....................................................................................... 26
10.0 Market Potential of Natural Gas Pipelines.......................................................................................... 27
11.0 What makes the Oil & Natural Gas Pipeline sector so Lucrative?? .................................................... 28
12.0 Sector Policy by the Union Government - .......................................................................................... 30
13.0 Opportunities & Challenges for Jindal Steel and Power Limited ........................................................ 32
14.0 Recommendation................................................................................................................................ 33
15.0 LIST OF TABLES .................................................................................................................................... 34
16.0 LIST OF FIGURES .................................................................................................................................. 34
Annexure 1 .................................................................................................................................................. 35

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1.0 Project Scope

Primary:
1) Determine the market potential and the concentration of the value-added steel in the B2B
manufacturing market segment
2)Evaluate the geographic accessibility and competitive advantage in the value-added grade segment

2.0 Overview of the industry

2.1 Steel Industry Worldwide

Steel is the basic building block of the development of the world. Since stone age, there have been
evidences where stone tools were rapidly replaced by iron tools and since then, continuous research has
led the industry to develop resilient and stronger grades of steel. It is an area of unlimited potential and
there is hardly any product which does not employ the use of steel in its value chain. Even the fully
plastic components in the toys of a child have been produced by machines made up of steel for the
production. From the oil rigging and drilling machines which operate under the earth surface to the
International Space Station in space, everything has been possible only because of iron and steel
industry.

On the other hand, there have been umpteen number of researches leading to ground breaking
inventions of substitutes of steel. As per various reports, Aluminium and other fiber composites are
largely replacing the steel in the automobiles. The only savior here is the economic viability of the
production costs of steel which is way lesser than the Aluminium parts and carbon composites. But the
major consumers of B2B market segment viz. Aerospace industry, Railway wagon industry, shipping and
automobile industry have started looking for alternative avenues to reduce the fuel costs. As a thumb

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rule, every 1 kg of weight reduction in an Aeroplane results in a savings of 1 million USD over the
lifetime of the aircraft. Boeing, Airbus, Bombardier have already started the use of composites in their
products. Hence for the marketing gurus, it is becoming harder to sell their products. Like any other
industry, business sustainability would only last if the innovation is as dynamic as possible. Or else you
have master the skills of marketing your products just like apple does. Apple markets its products, which
are technologically lesser advanced than existing products but still through niche marketing, they have
carved a terrific marketing output for bolstering the top line of the company.

On the same lines, both above-mentioned things become of grave importance for the steel industry.
With most of the grades having been standardized, there have hardly been any patents for an exclusive
grade. So, in the end you make something which very few players are making or you have a great
marketing team to hard sell your products.

The global steel industry is on a slowdown and has recorded abysmal growth of 0.6% for the FY 2015-
2016 as per the data of world steel organization1. The reasons are mainly due to infrastructure sector
slowdown in the developed countries and weaker demand from the automotive sectors in the
developing economies and emerging markets. This has effected the margins of steel producers.
Amusingly, the real villain is not the weakened demand of steel but the increased supply in the form of
exports of low end steel products to the markets by China which has witnessed a steep decline in their
domestic demand. China being the producer of nearly half of the world steel has started exporting
heavily at predatory non-competitive prices. This has further effected the profitability of the domestic

investors of the steel industry around the world, which is one of the least profitable sectors in the world

(ranked 90th out of 94) and the deepest in debt2. But the picture isnt as gloomy as it looks. The outlook
for the automotive, infrastructure and oil and gas sector would be reviving in the emerging economies
like India by the start of 2018 and Chinas official production cut would also be realized by then.

However, with China cutting on their production and the risk of insolvency of many steel producers, the
global outlook for steel would be a negative. Also, this global growth rate of 0.6% would decline further
due to weaker demand and abundant supply of steel from Chinese steel makers.

1
https://www.worldsteel.org/media-centre/press-releases/2017/world-steel-in-figures-2017.html
2
http://www.globaltrademag.com/global-trade-daily/news/global-steel-sector-risk-at-an-all-time-high-in-2016-
coface

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2.2 Indian Domestic Steel Industry

Steel industry is a highly concentrated industry in India due to its capital and labour intensive nature.
The total market capitalization of the large steel players is approximately 1,24,000 crores INR. There are
very few crude steel producers in India with the major chunk of share resting with PSUs (Steel Authority
of India Limited), Tata Steel and the O.P.Jindal Group Companies Jindal Steel and Power Limited (JSPL),
Jindal South West (JSW),Jindal Stainless Limited (JSL) . See Annexure 1,pg 36

Foreign players like POSCO Steel and Arcelor Mittal have long been trying to invest in India through
wholly owned subsidiaries but their efforts could not be realized due to various geopolitical reasons and
resistance from residents.

ArcelorMittal shelves investment plans on tough eco condition 3-March 5,2017

Project in Odisha is over, says Posco4- April 9, 2016

The news excerpts depict the challenges for foreign investment in Iron and Steel Sector. If realized, the
India will escalate its bid to be the most important player in the global steel scenario. However, the
existing steel establishments are easing into their expansion plans and are poised to make India the
second largest Steel producer in the world. Jindal Steel and Power Limited is pivotal in the domestic
sector growth having a vast line of B2B products. 2nd largest after project***

With India becoming the net exporter of steel in the month of May17 in a non -conducive global
environment speaks large volumes about the vast potential of the third largest economy of the world
and which is growing at the fastest pace too.
The per capita global steel consumption,216.6 kg is way larger than the average Indian consumption
which rallies around 63.0 kg. This consumption is poised to grow exponentially and would equal the

3
http://economictimes.indiatimes.com/industry/indl-goods/svs/steel/arcelormittal-shelves-investment-plans-on-
tough-eco-condition/articleshow/57475992.cms
4
http://www.business-standard.com/article/companies/project-in-odisha-is-over-says-posco-
116040801130_1.html

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world average by another 10 years5 as per the views of some experts due to the ramming push for
growth in Infrastructure, Defense, Make in India policy and the new steel procurement policy which
mandates the consumption of domestic steel in government projects further bolsters the thought.

Currently, the steel sector in India was stressed due to the high prices of raw materials, weak domestic
demand and the delay in mining of the domestic coal bank due to the cancellation of allocation of mines
by the Supreme Court of India.
The breakneck factor though was the dumping of steel at predatory prices by China into India. The
government has now greatly mitigated this practice by imposing measures such as Minimum Import
Prices, Anti Dumping duty, restricting the number of ports etc and this led to a significant decrease in
the imports. But the Minimum Import Price clause is expiring in August17 and the industry has to watch
out this space.

Indias steel production has increased to 95.6 MTPA and is only 9 MTPA to be third behind Japan which
stands second at 104.8 MTPA6. Out of the many emerging economies, India is the brightest star for all
the producers of the World and is witnessing one of the highest Foreign Direct Investment recipient.

For years to come, India does not need to look beyond the geographical boundaries of their own for
expansion. The domestic demand will soon see a surge to which the Indian steel industry needs to cater
to.

5
http://economictimes.indiatimes.com/industry/indl-goods/svs/steel/india-to-equal-world-per-capita-steel-
consumption-in-10-years/articleshow/52817065.cms
6
https://www.worldsteel.org/media-centre/press-releases/2017/world-steel-in-figures-2017.html

8|Page
3.0 Company Profile-Jindal Steel and Power Limited

Jindal Steel and Power Limited is a pioneer player in the Iron and Steel industry of the country. With an
installed capacity of 9 MTPA crude steel in India alone and further expansion to 15.5 MTPA in the
pipeline, JSPL is sure to be at the top of the list due to its vast line of state of the art products.

JSPL on its various locations have Indias largest and widest Plate mill with an integrated facility of Heat
Treated Plates, Worlds Longest rail manufacturing facility, Worlds first, largest and fastest TMT rebar
mill-Jindal Panther, Worlds only Coal Gasification Plant for integrated steel manufacturing, most
modern Coke oven, Blast Furnace just to name a few.

With a core strength of having one of the most competent and youngest team consisting of engineers,
metallurgists and managers from various fields recruited from premium colleges in India like IITs, IIMs
and its own National level Recruitment examination, JSPL has the potential to compete with any
organization in the industry-Domestic or Abroad.

The company has its presence in India, Africa, Oman, Australia and Middle East with interests in Mining,
Power and Steel manufacturing. See Table below

Table 3. 1 Geographical presence of JSPL

Chattisgarh Jharkhand
Wire rod & TMT
RAIGARH 3MTPA Integrated Steel Plant Patratu Rebar mills
6 MTPA greenfield
Integrated Steel
TAMNAR Power Plant Project
RAIPUR Heavy Machinery Workshop Jeraldaburu Iron ore mines
Cement Plant
Odisha
Angul 6 MTPA Integrated Steel Plant
Barbil 9 MTPA Pellet Plant
Tensa Iron ore Mine

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3.1 Product Portfolio

The product range at JSPL is diverse and some of the products are as follows:

1.Rail

2.Parallel Flange Beams and Columns

3. Plates and Coils

4. Angles and channels

5. Jindal Panther TMT rebars

6. Wire Rods

7. Fabricated Sections

8. Jindal Speedfloor

9. Semi-Finished Products

10.Power

11. Minerals

12. Jindal Panther Cement

For a detailed Product Portfolio, Please visit www.jindalsteelpower.com

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3.2 About the Worlds widest 5000-millimeter Plate Mill JSPL, Angul

JSPL has one of the most modern Plate mills at 2 locations- Raigarh (Chattisgarh) and Angul (Odisha)
with the latter being the Worlds widest Plate mill with installed capacity of 1.2 MTPA. The Plate Mill at
JSPL Angul, can produce one of the most diverse product array with over 26 Value added premium
grades successfully developed with 3 grades under application testing . With continuous innovation at
its Heat Treatment facility and highly equipped Quality control and metallurgical testing labs, the Plate
Mill has become capable of supplying plates to all the major Steel consumer businesses of the world viz.
Oil and Exploration, Defense, Infrastructure, Oil transportation Pipelines, heavy vehicle manufacturers.
With the passage of time, JSPL has developed and retained a diverse consumer portfolio which includes
names like:
Table 3. 2 Major customers of JSPL

ADANI MUNDRA LPG TERMINAL PVT. GAMESA RENEWABLE PRIVATE

LTD LIMITED
AFRICAN GAS & OIL COMPANT LIMITED GE POWER INDIA LIMITED
ALSTOM BHARAT FORGE POWER
PRIVATE GODREJ & BOYCE MFG. CO . LTD.
ARCELOR MITTAL HINDUSTAN CONSTRUCTION CO. LTD.,
BHARAT HEAVY ELECTRICALS LIMITED, JCB
BRIDGE AND ROOF CO. ( INDIA) LIMITED LARSEN AND TOUBRO
CATERPILLAR SUZLON ENERGY
FINCANTIERI S.P.A., THYSSENKRUP

3.2.1 Capability of the Plate mill

The plate mill at JSPL Raigarh is having the capacity to make 1 MTPA Plates in flat and coil form. At JSPL
Angul, 1.2 MTPA of Indias widest plates can be made in Flat form with integrated Heat Treatment
Facility. Both the mills are state of art mills located strategically near to the source of raw material with
integrated Railway lines and highway connectivity for economic logistic advantage over other steel mils.

Figure 3.2. 1 Slab Input to Plate Output Schematics

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 Input Slab Details
Thickness - 150-400 mm
Width - 1500 to 2300 mm
Length - 2800 to 4800 mm
Weight - 4.6 - 25(Max.) MT
3.2.2 The Heat Treatment Complex Processes
Figure 3.2. 2 The Heat Treatment Schematics
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Finished Plate Details
Thickness - 8 mm to 150 mm
Width - 1500 to 4800 mm
(Trimmed)
Length - 6m to 18 m
 3.2.3 Typical Grades At Plate Mill
Table 3. 3 Typical Grades at Plate MIll

No. Product Type Typical steel grades

1 Shipbuilding plate A, B, D, E,
AH32~AH40, DH32~DH40,Z15- Z35, E390
2 Pipeline plate X42~X80
3 Bridge plate 16q, 16MnCuq,16Mnq, 15MnVq,14MnNbq
4 Automobile beam plate 9SiVL, 16MnL,16MnREL, 09SiVL,08TiL
5 Boiler plate 16Mng, 20g,15CrMoVg,13MnNiCrMoNbg,12CrlMoVg
6 Pressure vessel plate 16MnR, 15MnVR, 20R
7 Mechanical engineering plate KQ450, HJ58
8 Quality steel plate 40Cr, 10#~50#,20Mn~70Mn
9 Carbon steel plate Q235A, Q235B, Q235C, Q235D
10 Low alloyed steel plate Q345A, Q345B, Q345C, Q345D, Q345, Q390A, Q390B, Q390C, Q390D, Q390E,
Q460D,E
11 High Level Building
Z15 - Z35
Steel

3.2.4 Value Added Grades at JSPL Angul 7

JSPL has successfully developed 26 value added grades which are depicted in the table given below:

Table 3. 4 Value added Grades

Sr No Segment Grade HTC

1 Boiler Quality & Pressure Vessel ASTM 515 Gr 60 / 70 FN
2 Boiler Quality & Pressure Vessel ASTM 516 Gr 60 / 70 FN
3 Boiler Quality & Pressure Vessel ASTM 517 Q&T
4 Boiler Quality & Pressure Vessel ASTM 387 Grade 11 / 12 / 22 FN / Q&T
5 Boiler Quality & Pressure Vessel ASTM 204 FN
6 Boiler Quality & Pressure Vessel ASTM 738 FN
7 Boiler Quality & Pressure Vessel ASTM 299 FN
8 Boiler Quality & Pressure Vessel ASTM 537 Class 1 / 2 FN / Q&T
9 Boiler Quality & Pressure Vessel P 355 N / NH / NL1 / NL 2 FN
10 Boiler Quality & Pressure Vessel P 460 N / NH / NL1 / NL 2 FN

7
Proprietary Data: Not to be reproduced or shared in any form, print or digital without permission of the owner.

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 11 Ship Building AH 40 / DH 40 AR / FN
12 Ship Building EH 40 / FH 40 AR / FN
13 API Plate Application 2H FN
14 API Plate Application 2Y Q&T
15 API Plate Application 2W TMCP
API 5 L X 52 - 70 / 80 , PSL 2 (
16 API Plate Application AR
Sour Application )
17 High Tensile Weldox / S 690 QL Q&T
18 High Tensile Rock Hard 400 / 450 Q&T
19 High Tensile Rock Hard 500 Q&T
20 High Tensile S 890 QL Q&T
21 High Tensile S 460 N / NL , S 460 M / ML FN / TMCP
22 High Tensile E450 FN / TMCP
23 High Tensile E 550 FN / TMCP / Q&T
24 Confidential Confidential Q&T
25 Confidential Confidential Q&T
26 Confidential Confidential Q&T

3.2.5 Usage of Value Added Grades in the Steel Industry

The Value-added Grades are the grades that become distinct from the base grades due to the additional
alloying and further metallurgical treatment which enhances the metallurgical properties of the steel.
This includes the relief from internal stresses, finer grain structure and enhanced mechanical strength of
the material. All the value-added products are thus sold at a premium and are accordingly used in high
end application where the Human Safety is at the zenith of any processes. Such areas include, but not
limited to, Bridges, Shipping Vessels, Boilers in Industrial Power Plants, Defense Equipment, Aerospace
and Automobile Industry. The more critical applications being usage in nuclear reactors, submarines,
super critical boilers, very high-pressure oil and gas transportation pipelines.

This study is based on the market potential of the plates to be used for the construction of Petroleum
products and Natural gas pipelines throughout the country.

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4.0 Energy Demand: A Global Outlook

Figure 4. 1 Global Energy Demand Outlook

India has the third largest energy demand in the world and this demand is poised to increase
consistently. With the focus on cleaner energy sources the government is taking steps to reduce the
reliability on coal for producing power and to increase the share of renewable energy sources in the
supply chain. Nevertheless, the demand for fossil fuels are at an all-time high for the fertilizers plant,
and some small scale industries.

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4.1 Energy and Its Reliance on Oil and Gas

As per latest published data for energy consumption, India stands third behind China (3123 Mtoe) and
the USA (2204) at a consumption of 884 Mtoe8. The population of these three are on 1st July 20179 are

Table 4. 1 Population of Top three Energy Consumers of the World

1 China 1,388,232,693
2 India 1,342,512,706
3 U.S. 326,474,013

India consumes a quarter of energy in Asian subcontinent. With comparable population of India and
China, this energy gap is due to the non electrification of the rural Indians. Nearly 67% of India reside in
Rural Area as per the data of World Bank. A substantial proportion of these villages remain deprived of
energy and hence development per se. Even after 70 years of independence there are 45 million rural
households waiting for electrification10. India has emphasized its commitment to increase the energy
production and reduce the reliance on coal for the coming decade. For the same, the government is
reliant upon its expansion plans of gas grid to feed its fertilizer plants and gas based power plants.

8
https://yearbook.enerdata.net/total-energy/world-consumption-statistics.html
9
http://www.worldometers.info/world-population/population-by-country/
10
http://www.hindustantimes.com/india-news/in-2-years-bjp-govt-electrified-13523-villages-only-8-were-
completely-electrified/story-FWzAtRcHnCbEwF1DcV3pmM.html

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Let us take a look upon the production and consumption pattern comparison of India:

Figure 4. 2 Energy Production and Consumption

India has a big deficit of 298 mtoe to cover. The dependence on oil and gas imports for energy
production can only be reduced by ramping up the domestic production. The government has allotted
over Rs 87000 crores for various activities. See Annexure XX. Apart from this the oil companies in India
have their own expansion budgets as well. Now let us have a look upon other stats

For the FY 2016-2017 India produced a crude oil output of 41MT which is roughly 11% of the total Asia
production whereas the crude oil input to the Indian refineries is 249 MT. India produced a total of 203
MT of crude oil products which is the third highest in the world after China and US. 11

Regarding Natural Gas, India witnessed a drop in the output from the KG Basin and produced 31 bcm of
gas, whereas the consumption stood at 55 bcm in 2016-2017.12

11
https://yearbook.enerdata.net/crude-oil/world-production-statitistics.html
12
https://yearbook.enerdata.net/natural-gas/world-natural-gas-production-statistics.html

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From, the above data, it is evident that India has to ramp up its production to meet the ever-increasing
demand of energy.

5.0 Oil and Gas Sector Pipeline Steel

The current Union Government of India has clearly shown its intent for cleaner energy sources and have
ramped up the natural gas and LPG delivery networks throughout India.

A major cost component of LPG and refined petroleum products is the transportation cost which the
government aims to cut down. The accessibility of the people of North East India to the petroleum
products has always been a concern and any inclement weather leads to a complete blockage of the
supply chain due to which the residents and subsequently the economy suffers.

These intermittent but grave problems have resulted in the birth of a new project of expansion of the
existing National Gas grid (15000 kms) and an excess of 15000 kms has been planned which would
increase the Gas Grid network to a 30000 kms . Out of the planned 15000 kms 13000 kms has already
been authorized to execute. Apart from these, the existing 15000 kms of gas grid is also planned to be
upgraded during the next 20 years.

This serves a tremendous opportunity for the producers of Plates which would be used in transportation
of the gases. These pipe are made up of value added grades and in some cases it is a mandate to use
only American Petroleum Institute(API) Certified Plates. To produce such a plate grade, the
manufacturer needs to have a license to display the monogram, from API itself and the licensing is done
through auditing process. The audit process for API is one of the most stringent among all the
certification processes in the world.

The Geographical disparity in the sources of Crude Oil and Natural Gas in India makes it even more
important to develop distribution lines for the whole country. As per the government statistics
Geographical distribution of Crude oil indicates that the maximum reserves are in the Western Offshore
(39.79%) followed by Assam (25.89%), whereas the maximum reserves of Natural Gas are in the Eastern
Offshore (36.79%) followed by Western offshore (23.95%)13.

13
http://mospi.nic.in/sites/default/files/publication_reports/Energy_Statistics_2017r.pdf.pdf

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Figure 5. 1 Natural Gas and Oil Reserves in India

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6.0 SWOT Analysis of JSPL Plate Unit

STRENGTH WEAKNESS
Integrated Plate Mill at all locations Limited product lines. Only B2B
Widest Plate mill of India (5000 mm) manufacturing and supply capability
High Cost Effectiveness whereas competitor can execute turn key
Stringent quality norms projects.

Highly qualified workforce hired from Tier Distance from the western part of the
1 MBA and engineering colleges and IITs country where supplies would be hit by

Simplified Strategic Business Unit (SBU) comparatively high logistical cost.

organizational structure
TQM and Integrated Management Systems
fully implemented
Only the second organization in the world
to have the API certificate for manufacture
of Plates. API certification is mandatory for
Plates to be used in Offshore drilling
projects
OPPURTUNITIES THREATS
Developing the supply chain in the Very stiff competition from ESSAR Steel
western part of the country. which has a pipe manufacturing facility as
Secure long term PPA with pipe laying well.
companies which have bid for the Raw Material linkage for fuel to effect the
expansion of the gas grid. company in short run.
Can do a study for the installation of a pipe
manufacturing unit.
New steel procurement policy which is
directed towards the promotion of
domestic steel producers.
Marketing activities for the newly acquired
API monogram license

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7.0 Competitor Analysis JSPL Vs ESSAR Steel

When we look at the Plate business

Table 7. 1 Comparison of JSPL and Essar Steel

SL NO WEIGHT JSPL SCORE ESSAR SCORE

1 CAPACITY 0.15 2 0.3 4 0.6

2 PRODUCT LINES 0.20 3 0.6 5 1
3 FINANCIAL STABILITY 0.30 5 1.5 2 0.6
4 EXPERIENCE 0.05 2 0.1 4 0.2
5 LOGISTICS ACCESS 0.30 4 1.2 5 1.5
WEIGHTED AVERAGE
SCORE 3.6* 3.9*

Score 1-5 (Based on the response of 30 employees)

1: Alarming
2: Average
3: Improvement needed
4: Very Strong
5: Keep it up

Analysis

Capacity

JSPL has a Plate Mill Capacity of 2.2 MTPA with 1.2 MTPA at JSPL Angul and 1 MTPA at JSPL Raigarh
capable of producing the plates in coil form up to a thickness of 16 mm and in flat form over 16 mm size.
With a state of the art facility of integrated Heat Treatment complex, JSPL promises to manufacture one
of the most widely accepted plates among customers.

Pipe manufacturing capacity of India is 6 MTPA and runs at only 35% mill utilization. This means that at
Max 2.01 MTPA is being produced and in the event of increased demand JSPL will not be able to cater to
the demand spike.

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ESSAR on the other hand has a hot rolled coil capacity of 8.2 MTPA and a flat plate capacity of 1.5 MTPA
which makes it the biggest plate supplier of the country in Private Sector. ESSAR can easily take up the
additional demand spike.

Product Lines

ESSAR has a clear advantage due to availability of 0.6 MTPA Submerged Arc Welded pipe plant and also
undertaken turnkey projects for laying pipelines of gas. It has a diverse product portfolio with an array of
finished products like galvanized, color coated, primed, chequered, welded plates. It is the only Mill in
the country to have an integrated raw material pipe plant. So, its position is enviable in the pipe plate
segment. Also, its the only other plate manufacturer in India to have the stringent and mandatory
license from American Petroleum Institute to manufacture plates for offshore oil and gas projects.

Financial Stability

Essar is one of the biggest lender of Indian banks and its net debt stood at INR 31200 crores.

Essar Steel Ltd and Monnet Ispat and Energy Ltd have become the first of the 12 big bad loans cases identified
by the Reserve Bank of India (RBI) against which bankruptcy proceedings have been filed14

The image of sustaining the business of ESSAR has severely been dented by the inability to pay the
installments of loan on time. Despite many efforts to restructure their debts, the management has not
been able to justify their financial soundness to the law enforcement authorities in India.

In such a scenario, there is huge uncertainty in the sustainability of the business house. This is a huge
opportunity for JSPL to capitalize on the situation and scale up its marketing activities. Being the only
other API certified company in the country, JSPL is poised to take up the offshore orders which would be
realised soon on the account of the new Hydrocarbon Exploration and Licensing Policy (HELP).

14
http://www.livemint.com/Industry/0wd5bNA4SJqTujjcEfpZqJ/Bankruptcy-proceedings-started-against-Essar-
Steel-Monnet-I.html

22 | P a g e
*PWC Report

Figure 7. 1 New Oil and Gas Reserves

One oil rig usually has 20000-40000 tonnes of steel as a thumb rule. Based on the above figures sourced
from a report of PWC, these oil fields hold a large potential for steel companies, and seeing the financial
instability of ESSAR Steel, JSPL has the potential to become the major supplier for steel for these
projects.

Experience

Marketing activities in steel sector is largely based on relationship marketing and experience can be
pivotal in exploring, realizing and retaining the customers. But in this open market economy and highly
competitive environment, one can not sit back upon the conventional strategies ESSAR Steel again has
an edge over JSPL by their higher comparative experience in the Oil and Gas segment but this factor is
not so significant in long course of business.

23 | P a g e
Logistics Access

ESSAR has the geographical advantage over JSPL as its production location is near to sea port and ESSAR
itself owns and operates 2 ports through its subsidiary Essar Logistics Ltd. Essar steel has outsourced its
entire logistic business to Essar Logistics Limited. Being in vicinity to the port Essar has access to shorter
waterways for export business.

JSPL has integrated its dispatch through railways till Vizag port in Vishakhapatnam, Andhra Pradesh. It
also extensively uses the Paradip port in Odisha and the logistics cost of the plates is very competitive to
that of Essar.

8.0 The Pipeline Network In India

In India, the petroleum players are divided into 2 categories- Crude Oil Producers and the refineries. The
players are:

Table 8. 1 Government Oil & Gas Players

Exploration & Production Refinining & Marketing Sector

Oil and Natural Gas Corporation Indian Oil Corporation Ltd.
Gas Authority of India Limited Hindustan Petroleum Corporation Ltd.
Hindustan Petroleum
Corporation Ltd. Bharat Petroleum Corporation Ltd
Bharat Petroleum
Corporation Ltd. Chennai Petroleum Corporation Ltd.
Indian Oil Corporation Ltd. Numaligarh Refinery Ltd.
Oil India Ltd Mangalore Refineries and Petrochemicals Ltd.
Oil & Natural Gas
Corporation Videsh Ltd. Indian Oil Corporation Ltd.
Hindustan Petroleum Corporation Ltd.
Gas Authority of India Ltd
Mangalore Refineries and Petrochemicals Ltd.
Numaligarh Refinery Ltd.

24 | P a g e
8.1 Gas Transportation cost

As per a data published by NTDPC in 2015 the cost of transportation of oil in India is

1. Pipeline - 1.5 $/bbl/km

2. Rail - 5.0 $/bbl/km
3. Road - 7.8 $/bbl/km

As evident from the figures, the pipeline cost is way cheaper than the other two modes of transport.
Keeping an eye on this, the government has planned the oil and Gas Transportation Grid in India of
which JSPL would be a stakeholder in the form of being the potential supplier of the plate which serves
as a raw material for the pipelines.

$/bbl/km
10

0
Pipeline Rail Road

Figure 8.1. 1 Cost of Oil and Gas Transportation

25 | P a g e
 9.0 Expansion Projects In India-Natural Gas Grid

Public/ Budget
Name of Name of Length Scheduled State through
S.No. Private Crores Status as on 31/5/17
Pipeline Entity (Kms.) completion which it passes
/ SPV INR

Uttar Pradesh, Bihar,

Jagdishpur- Haldia & Laying Started Phulpur to
1 GAIL (India) Ltd PSU 2619 12940 Dec.2020 Jharkhand, West Bengal Dobhi
Bokaro- Dhamra
and Odisha
Kochi-Koottanad-
GAIL (India) Kerala, Tamil Nadu
2 Bangalore- Mangalore PSU 1060 4493 Feb.2019
Limited and Karnataka
(Ph-II)
Surat-Angul GAIL (India) Gujarat, Maharashtra, Bidding Process annuled. New
3 PSU 2112 10280 2019
(Paradip) Limited Chattisgarh and Odisha bidding will soon take place
Reliance Gas
Shahdol - Madhya Pradesh and
4 Pipelines Private 312 1302 2016* commissioned
Phulpur Uttar Pradesh
Limited
APGas
Kakinada -Vizag - State Andhra work order awarded, work to
5 Distribution 391 1013 2017 be started from August
Srikakulam PSU Pradesh
Corporation
Mallavaram Andhra Pradesh,
- Bhopal - Bhilwara GSPL India Telanagana,Chattisgarh, Laying of 477 Kms in progress
6 SPV 2042 8086 Dec.2017
via Transco Limited Madhya Pradesh and by EIL
Vijaipur Rajasthan
Fund crunch. Start Q1 2019,
finish Q1 2022
Mehsana - GSPL India Gujarat,Rajasthan,
7 SPV 2052 6864 Dec.2017 Essar projects have won a
Bhatinda Gasnet Limited Haryana and Punjab contract for turn key 100 kms,
from Jalandhar to Amritsar
Bhatinda -Jammu GSPL India Punjab,Jammu & project stalled, high court has
8 SPV 725 1520 Dec.2017 asked for status
- Srinagar Gasnet Limited Kashmir
Gas
Andhra Pradesh and
9 Ennore - Nellore Transmission Private 430 730 2017 project being executed
Tamil Nadu
India Pvt. Ltd
Tie-in connectivity to H-Energy contract awarded in Mar 2017.
10 the proposed Jaigarh Gateway Private 60 300 2018 Maharashtra Pipelines laying to start in
LNG Terminal Pvt. Ltd. September 2017
Vijaipur- Auriya- GAIL (India) Madhya Pradesh and orders for first 315 km placed
11 PSU 672 4309 Dec.2020 on JSAW and Essar Steel
Phulpur Limited Uttar Pradesh
Ennore- Thiruvallur- surveying complete. Friction in
Indian Oil land acquisition expected as
Bengluru- Puducherry- Tamil Nadu and
12 Corporation PSU 1399 4497 2018 land owners have moved
Nagapatina m-Madurai- Karnataka applications showing inability
Ltd.
Tuticorin to give land
survey complete. Enquiries
Jaigarh- H-Energy Maharashtra,Goa
13 Private 749 2389 2019 floated to various pipe
Mangalore Pvt. Ltd. and Karnataka suppliers
MBBPL Dahod
GSPL India
Connectivitywith Gujarat and Madhya
14 Transco SPV 749 - - NA
GSPLs Pradesh
Ltd.
Gujarat Gas Grid
Bihar, Assam,
Barauni-Guwahati
15 Assam Gas PSU 750 - - Arunachal Pradesh and EOI 24/6/2017
pipeline
rest of NE
16 Siliguri to Parbatipur GAIL PSU 131 WB to Bangladesh Planning
Total 16253 58723
Table 10. 1 Status of Natural Gas Pipeline Projects In India

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10.0 Market Potential of Natural Gas Pipelines

As per the internal calculations of JSPL averaged over a wide array of sizes of pipes, the per km
consumption of plates for pipes comes out to be 350 400 metric tonnes roughly.

Table 10. 2 Demand Estimation:

LENGTH IN KMS 16253

COMMISSIONED LENGTH (kms) 1500
LENGTH TO BE LAID (kms) 14753
PER KM WEIGHT IN TONNES 350
TOTAL WEIGHT OF PLATES (Tonnes) 5163550
LAST COMMISSIOINING DATE year 2022
PER YEAR LAYING 2950.6
PER YEAR DEMAND (tonnes) 1032710
PER YEAR DEMAND** 722897

**CONSIDERING EXTERNAL FACTORS VIZ. POLICY CHANGES, MONSOON,LAND ACQUISITION AND SHORTAGE OF FUND, THE PEAK DEMAND IS EXPECTED TO REACH
ONLY TO 70 % OF THE TOTAL DEMAND

JSPL has an annual capacity of 22 lac tonnes per annum plates and has enquiries about 3 lac tonnes for
miscellaneous gas pipeline projects. That is about 42 percent of the total estimate of per year demand
JSPL sold a rough total of 12 lac tonnes in FY 2016-2017. It is expected that JSPL would get increased
enquiries for at least 4 lac tonnes Gas Grid projects in the 3 rd quarter of FY 17-18 and should gear up for
this year, as projects by H-Energy are expected to kick off by the end of this year.

Summing up the above JSPL should be able to capture 60 % of the above demand with increased
marketing efforts for the Gas Grid project.

27 | P a g e
11.0 What makes the Oil & Natural Gas Pipeline sector so Lucrative??

In the earlier part of this report, the impetus of the government on Oil and Gas sector is pretty
evident.The attractiveness of the sector can be seen in the following points

GAS FIRED POWER PLANTS COMMERCIAL CNG VEHICLE IN DELHI

45000
INSTALLED CAPACITY SHUT PLANTS
40000
35000
30000
25000
16000,
39% 20000
15000
25000 10000
5000
0
2011 2012 2013 2014 2015

Number of CNG Vehilcles IMPORT

4500000 78% 77%
4000000
76%
3500000
74%
CNG Vehicle

3000000
2500000 72%
2000000
1500000 70%
1000000 68% 67%
500000
66%
0
Uzbekistan

Bangladesh
Iran

Thailand

Georgia
Russia
China

India

Armenia
Pakistan

64%
62%
2016 2022

Clockwise left to right from the top

Figure 11. 1 Gas Fired Power Plants

Figure 11. 2 Rise of CNG Vehicles in the National Capital

Figure 11. 3 Global account of CNG Vehicles

Figure 11. 4 Import of Crude Oil percentage of the total input to refineries

28 | P a g e
 As per the annual report of PNGRB 2015-16 the government wants the reliance of 77% import
to be curbed to 67% by 2022. On the other hand due to the Paris climate agreement, the central
government has already signaled the automotive industry to innovate and switch to electric
vehicles. Also the number of CNG Vehicles has seen a surge, but no of CNG stations is limited to
under 70 cities in India.15
India aims to become 100% e-vehicle nation by 2030: Piyush Goyal16

If we read between the lines, such a big surge in electric vehicles would stimulate the demand
for batteries which in turn would stimulate the demand for power to charge those batteries.
This power will come from the power plants for which the natural gas route as a fuel is being
planned by the government.

The next and most significant demand comes from the gas based power plants in this country
which is on the verge of shutdown. The following excerpt from the report of cabinet committee
on economic affairs is a delight to manufacturers anticipating gas pipeline expansion.

Out of 24,150 MW gas grid connected power generation capacity in the country, 14,305 MW
of capacity has currently no supply of domestic gas and may be considered as stranded. This
represents an investment of over Rs 60,000 crore which is at the threshold of becoming Non
Performing Assets (NPAs). The balance capacity of 9,845 MW involving an investment of over
Rs. 40,000 crore is also working at a sub optimal level based on the limited quantity of
domestic gas in the country. 17
As per the latest estimate 16000 MW of gas based power plants are untilized and are awaiting
gas.

India to invest Rs 50,000 crore to revive four mothballed fertilizer plants18

Indian government wishes to connect 4 fertilizer plant,at Gorakhpur (Uttar Pradesh), Barauni (Bihar),
Sindri (Jharkhand) and Talcher (Odisha) to gas grid and add 75 lakh tonnes to Indian production capacity

15
http://www.ngvjournal.com/wp-content/uploads/pdfmags/asian99_mayo.pdf
16
http://economictimes.indiatimes.com/industry/auto/news/industry/india-aims-to-become-100-e-vehicle-nation-by-2030-piyush-
goyal/articleshow/51551706.cms
17
http://pib.nic.in/newsite/PrintRelease.aspx?relid=117698
18
http://economictimes.indiatimes.com/industry/indl-goods/svs/chem-/-fertilisers/india-to-invest-rs-50000-crore-to-revive-four-mothballed-
fertilizer-plants/articleshow/58403537.cms

29 | P a g e
 Expansion of City Gas Distribution (CGD) and Piped Natural Gas (PNG) . The government will
expand the CGD network to 326 cities more by 2022.

Conducive environment for domestic producers in the form of new National Steel Policy which
promotes Made in India Steel for all government projects.19

12.0 Sector Policy by the Union Government -20

1. Government has approved Hydrocarbon Exploration & Licensing Policy (HELP) and same has
been notified on March 30, 2016. This policy provides a uniform licensing system to explore and
produce all hydrocarbons such as oil, gas, coal bed methane, shale oil/gas, etc. under a single
licensing framework, option to select the exploration blocks without waiting for formal bid round
and also provides many incentives such as reduced royalty rates for offshore blocks, marketing &
pricing freedom and easy to administer revenue sharing model.

2. Discovered Small Fields Policy announced in March, 2016 for monetization of 67 discoveries
thorough international competitive bidding.

3. Under the New Domestic Gas Pricing Policy, a transparent new gas pricing formula linked to global
market made effective w.e.f. November 1, 2014.

4. Marketing and pricing freedom for gas produced from geologically difficult, high risk / high
cost areas with a provision of ceiling price based on landed cost of alternate fuels announced
on March 10, 2016.

5. Policy Framework for relaxation, extensions and clarifications at the development and
production stage under PSC (Production haring Contract) regime for early monetization of
hydrocarbon discoveries was approved on November 10, 2014.

6. Policy for grant of extension to the Production Sharing Contracts of 28 Small and medium sized
discovered blocks was approved on March 10, 2016.

7. Policy on Testing Requirements for discoveries in New Exploration Licensing Policy (NELP) blocks
was approved on April 29, 2015.

19
http://steel.gov.in/sites/default/files/NATIONAL_STEEL_POLICY_2017.pdf
20
http://www.makeinindia.com/sector/oil-and-gas

30 | P a g e
 8. Hydrocarbon vision 2030 for North East India has been released in February, 2016

9. Pooling of gas in Fertilizer (Urea) sector was approved on March 31, 2015 for supply of gas at
uniform delivered price to all fertilizer plants on the gas grid for production of urea through a
pooling mechanism of domestic gas with R-LNG

10. The Petroleum and Natural Gas Regulatory Board Act, 2006 regulates refining, processing,
storage, transportation, distribution, marketing and the sale of petroleum, petroleum products and
natural gas.

11. The National Biofuel Policy, 2009 promotes bio-fuel usage, the Government of India has
provided a 12.36% concession on excise duty on bio-ethanol and exempted bio-diesel from
excise duty.

12. Government is implementing Ethanol Blending Petrol programme under which oIL marketing
companies are mandated to sell Ethanol blended petrol with upto 10 % Ethanol. Mechanism for
procurement of ethanol by Oil Marketing Companies (OMCs) to carry out Ethanol Blended Petrol
programme was approved on December

10, 2014. In order to give a stimulus to the above programme, the Government has enhanced the
Ethanol Procurement Price and opened alternate route like cellulosic and ligno cellulosic
materials, including Petrochemical route.

13. Direct sale of bio-diesel by private manufacturers/suppliers to bulk consumers like Railways and
State Transport Corporations was allowed on August 10th, 2015.

14. The milestones set in Auto Fuel Policy 2003 have already been achieved. Ministry of
Petroleum and Natural Gas has issued a communication to all the concerned stake holders
including Oil Marketing Companies for implementation and expansion of Supply of BS-IV auto
fuels in phases covering the entire country by April 1,2017 as per the road map given in Auto Fuel
Vision & Policy -2025

15. The Government has decided to leapfrog from BS-VI to BS VI fuels w.e.f. April 1, 2020.

31 | P a g e
13.0 Opportunities & Challenges for Jindal Steel and Power Limited

Plate market in India for pipe grade is duopolistic in nature as far as producers are concerned. Only JSPL
and ESSAR Steel are the major producers in India. Essar is facing bankruptcy due to staggering loan of
over INR 40000 crores.

For offshore projects, plates used for structures and pipes can only be produced by manufacturers
having license from American Petroleum Institute (API). In India, only JSPL and ESSAR has the license.
Hence, the New steel procurement policy makes the Indian market truly duopolistic. In the wake of this
new policy GAIL cancelled the order to Chinese firm which was to supply 85 % of pipes for Surat-Angul
(Paradip) lines.

GAIL cancels tender over policy to buy local steel-Value of the project was Rs 1,200 cr 21

Advantage JSPL: 70 % of the projects are being executed through South India Andhra Pradesh,
Karnataka, Tamil Nadu and Odisha and JSPL has greater geographical advantage as its plant is
strategically located in Angul, Odisha and one project is passing through Angul itself. Also its vicinity to
North East makes JSPL the cost effective option for project executors in North East.

The greatest challenge to JSPL would be to be ready to ramp up their production for such high levels of
anticipated demands. Also the newly acquired license of API has to be marketed to the Oil and Gas E&P
companies.

21
http://www.business-standard.com/article/companies/gail-cancels-tender-over-policy-to-buy-local-steel-117062000055_1.html

32 | P a g e
14.0 Recommendation

Jindal Steel and Power Limited has great future in the Oil and Gas Sector as it is only the second Plate
Mill in India to have the coveted API certificate and the only one having a financial stability.

JSPL should escalate its marketing activity in the segment and should create a segment named Oil & Gas
for distinction. Also, JSPL can explore ways to secure long term purchase contracts with the Pipeline
vendors in the sector for order security and Price stability

Lastly JSPL can also explore to vertically integrate the Pipeline manufacturing by installing a Pipe
manufacturing plant as the premium is over Rs 10000 to manufacture pipe. Although it would be a
challenging task to streamline the logistics of Pipes as the volume of pipes is large compared to Plates
but it is worth a thought due to the potential of the sector.

33 | P a g e
15.0 LIST OF TABLES

Table 3. 1 Geographical presence of JSPL ..................................................................................................... 9

Table 3. 2 Major customers of JSPL ............................................................................................................ 11
Table 3. 3 Typical Grades at Plate MIll ........................................................................................................ 13
Table 3. 4 Value added Grades ................................................................................................................... 13

Table 4. 1 Population of Top three Energy Consumers of the World ......................................................... 16

Table 10. 1 Status of Natural Gas Pipeline Projects In India ....................................................................... 26

Table 10. 2 Demand Estimation: ................................................................................................................. 27

16.0 LIST OF FIGURES

Figure 3.2. 1 Slab Input to Plate Output Schematics .................................................................................. 11

Figure 3.2. 2 The Heat Treatment Schematics ............................................................................................ 12

Figure 4. 1 Global Energy Demand Outlook................................................................................................ 15

Figure 4. 2 Energy Production and Consumption ....................................................................................... 17

Figure 5. 1 Natural Gas and Oil Reserves in India ....................................................................................... 19

Figure 11. 1 Gas Fired Power Plants ........................................................................................................... 28

Figure 11. 2 Rise of CNG Vehicles in the National Capital .......................................................................... 28
Figure 11. 3 Global account of CNG Vehicles.............................................................................................. 28
Figure 11. 4 Import of Crude Oil percentage of the total input to refineries ............................................. 28

34 | P a g e
Annexure 1

22

22
https://www.worldsteel.org/en/dam/jcr:0474d208-9108-4927-ace8-
4ac5445c5df8/World+Steel+in+Figures+2017.pdf

35 | P a g e
36 | P a g e