PETROLEUM EXCHANGE OF INDIA PRIVATE LIMITED (PetEx)
Indian Economy has shown a consistent growth of above 6% in the last two decades and more so in the last five years. Petroleum, being one of the key drivers in a growing economy, has also been growing above 5% every year with a refining capacity of 4.6 million barrels per day. India consumes around 4 MBPD, making it the 3rd largest consumer of Petroleum Products. Petroleum products in India used to be a highly regulated market in the past but is now completely deregulated for the Industrial and Commercial segment, and most products are priced on the market dynamics of supply and demand.
The growth and opening of the petroleum sector in India have thrown an opportunity and the need to provide an efficient, innovative and value-added service for conducting transactions between the buyers and sellers. It is with this endeavor and principle that PetEx (Petroleum Exchange of India Private Limited) has been incorporated.
PetEx has developed a fast, transparent and efficient process for transacting petroleum product on a digital platform, in association with NCDEX e-Market Limited (NeML) (a subsidiary of NCDEX). NCDEX is a subsidiary of National Stock Exchange of India (NSE). PetEx will provide the platform for “Online trading” exclusively for Petroleum products. The Business Model of PetEx will result in physical delivery (Spot) of all the Petroleum Products. PetEx platform will facilitate ease of conducting transactions and price discovery for the industries consuming petroleum products, amongst various other advantages. In the long run, PetEx may establish a “Marker Price” for Indian petroleum market against well-established NYMEX, Platts, ICIS or ARGUS.
India’s total consumption of all the Petroleum products is around 211 million metric tonnes, valuing approximately rupees nine lac crores. The Industrial and Commercial sector consumes around 25% of the total consumption at 55 MMT and approx. valued at two lac crores.
Considering the large size of the Industrial and commercial markets for the petroleum products, the platform for spot market for this focused group, will go a long way in providing value to all the stakeholders
The Products proposed to be offered in PetEx : Crude Oil, Petcoke, Furnace Oil, Aviation Turbine Fuel (ATF), Naphtha, Light Diesel Oil, Liquefied Petroleum Gas (LPG), Propane, Bitumen, Kerosene, Base oil, Bio-Diesel, Methanol, Ethanol, solvents (Toluene, Benzene, Xylene, MTO, SBP etc.). Natural Gas / CNG / LNG, Motor Spirit (MS), High Speed Diesel (HSD) etc. PetEx plans to offer Petrochemicals and Chemical in due course of time.
PetEx Value proposition will change the whole dynamics of the Industrial and Commercial Markets
The Value for Consumers
- Visibility to multiple sellers at a click
- Ease of procurement of all types of petroleum products
- Negotiate a price online and pick up product at acceptable prices, thereby Price Discovery
- Transparent Pricing and discount structure
- Due to logistics cost and transparent pricing options, possibility of alternate supply locations.
- Consumer can leverage by paying only margin money of 5% to 10% and book the product at a price.
- Consumer has the option to hire tankages beyond its capacity, particularly during contango.
The Value for Sellers
- The PetEx provides an additional business channel for the sellers to market its product.
- Access to new consumers at least cost, thereby expand their market share
- The regular price discovery shall help selling petroleum products at current market price rather price revision at pre-determined interval
- Avoids hoarding or stock stripping just before the pre-determined price revision cycle
- Enables Oil Company to import product beyond their refinery production and increase their market penetration and size
- PetEx has made provision for transparent Inter Oil Company transactions and expand the availability beyond their comfort zones
- PetEx shall ensure delivery of product by seller, and fulfillment of payment obligations by buyer, thus paving the way for risk free transactions.
- Removes intermediaries to a large extent, thereby improving margins.
- Enables Oil Company to optimize their Infrastructure cost in new tankages, etc.
- Increased earning by offering the storage of the product, at no extra capital cost
Every Buyer and Seller will undergo a stringent due diligence and KYC to ensure their genuineness and provision of all the statutory licenses and approvals.
PetEx is a very innovative business process and first of its kind in India. It intends to create convenience with the use of latest software technology and a value for real-time transaction for buying and selling of petroleum products. PetEx looks forward to partnering with various stakeholders and bring a change in the Petroleum Eco system.