COCHIN PORT TRUST INVITATION EXPRESSION OF INTEREST FOR

COCHIN PORT TRUST INVITATION EXPRESSION OF INTEREST FOR SETTING UP OF EXPORT ORIENTED OIL REFINERY / OIL TRADING HUB IN THE PROPOSED OUTER HARBOUR OF COCHIN PORT

COCHIN PORT TRUST INVITATION EXPRESSION OF INTEREST FOR SETTING UP OF EXPORT ORIENTED OIL REFINERY / OIL TRADING HUB IN THE PROPOSED OUTER HARBOUR OF COCHIN PORT (This notice is issued only to elicit an Expression of Interest from Parties interested in the Project and does not constitute any binding commitment from Cochin Port Trust to proceed with the Project or invite any or all the Parties in the subsequent bidding process.) p Background: Cochin Port is an all-weather natural Port, located strategically close to the busiest international sea routes from the Gulf to Singapore and Europe to Far East circuits. Among all the Indian Ports, Cochin is located closest to the international routes, being only 11 nautical miles from the Gulf to Singapore route and 76 nautical miles from the Europe Far East route. The existing Port facilities are located on Willingdon Island, Cochin which divides the navigational channel into the Ernakulam channel and the Mattancherry channel, inside the harbour. In addition, Cochin Port has developed a dedicated container transshipment terminal on DBFOT basis through DP World at Vallarpadam with an ultimate capacity of 3 million TEUs. Cochin Port also services BPCL s SBM which is 19.8 KM away from the coastline off Puthuvypeen. Cochin Port also has a 5 MMTPA LNG terminal of Petronet LNG Ltd. at Puthuvypeen; the Port is currently developing a 4.1 MMTPA LPG-cum-Oil terminal at Puthuvypeen funded by Indian Oil Corporation Ltd. The Vallarpadam and Puthuvypeen areas of the Port with a total area of 401.09 hectares have been declared as two Special Economic Zones (SEZ). Units within the SEZ are exempted from all Customs & Excise Duties, Service Tax and State Taxes, and are provided with other exemptions as per SEZ Act, 2005 and SEZ Rules, 2006. Outer Harbour Project Cochin Port Trust now intends to develop an Outer Harbour. Conceptual studies through IIT, Madras and CWPRS, Pune show that the development of an Outer Harbour is technically feasible. Cochin Port had entrusted M/s.i-maritime Consultancy Pvt. Ltd., Navi Mumbai with preparing a Feasibility Report for the Outer Harbour project; as per their draft report, the Outer Harbour project is technically and financially feasible. The feasibility report has proposed that 2 breakwaters on both sides of the approach channel can be constructed, and that it would be possible to reclaim about 1 EoI for Setting up of Export Oriented Oil Refinery / Oil Trading Hub in the proposed Outer Harbour of Cochin Port

2600 acres of land inside the northern ern breakwater and about 650 acres inside the southern ern breakwater. breakwater The he consultants have identified the following business activities in the proposed Outer O Harbour: i) Export Oriented Refinery Unit ii) Oil Trading Hub iii) Offshore Rig Fabrication Facility iv) Free Trade Ware Housing Zone v) Ultra Mega Power Plant Export Oriented Refinery An n export oriented refinery at the Cochin Outer Harbour H appears to be an ideal fit due to the following factors: First, India has a comparative advantage in building large projects rapidly and cheaply. It is reckoned that a refinery in India can be built at two two-thirds thirds of the cost of building one in Europe or the USA. Second, tough environmental standards impose addi additional tional costs on refineries in western countries. The US USA,, for instance, insists that all tankers should be both double-bottomed bottomed and double double-hulled hulled (to avoid accidental oil leakages), whereas 2 EoI for Setting up of Export Oriented Oil Refinery / Oil Trading Hub in the proposed Outer Harbour of Cochin Port

tankers touching India (and much of Asia) have to be double-bottom bottomed but not necessarily double-hulled. Third, salaries and operating costs are lower in India. Fourth, the Cochin Outer Harbour will be deep enough to permit the berthing of large product carriers of up to 130,000 tonnes capacity. Big product tankers can load different products in different compartments, and so can unload say petrol at one location and diesel at another, overcoming the problem of small receiving terminals. Fifth, a complex refinery that can crack low-quality crudes profitably can now be built. With the flexibility to refine a wide variety of crudes, crude varieties that are cheapest in relation to the products they yield can be sought out; this will give the refinery here a profit advantage over conventional refineries designed to process just one or two varieties. Sixth, the area will be part of the Port Based Special Economic Zone at Puthuvypeen which will bring the investor tax advantages and save capital and running costs. Seventh, given that no habitation is to be displaced, R&R issues s will be at a minimum. Government of India has taken many initiatives to boost investment in the petroleum refining sector. 100% FDI is allowed in refineries. India currently has a refining capacity of about 215 MMTPA, of which 120 MMTPA is contributed by the public sector companies such as IOCL, BPCL, HPCL, ONGC, MRPL and CPCL. About 15 MMTPA of oil refining capacity is shared by the JV of public and private entities at Bina and Bhatinda. Of the remaining 80 MMTPA capacity, Jamnagar oil refinery (which is an export oriented refinery) contributes to about 60 MMTPA (including Jamnagar and Jamnagar SEZ), whereas 20 MMTPA is contributed by the Vadinar (Essar) refinery. The Jamnagar refinery was commissioned in 2008 and is an export oriented refinery with an output of about 64 MMTPA. Asian or Third World region have potential for setting up refinery to contain cost on manpower coupled with opportunity to upgrade technology as well as meet the Environmental norm. However, the feasibility of such a refinery shall be carried out by prospective investors after fully satisfying themselves regarding the technical, financial and regulatory aspects including the area required for the refinery and approvals needed for the project. Oil Trading Hub Oil storage trade is a trading strategy where oil tank owners and companies that develop or lease storage tanks, buy oil for immediate delivery and hold it in their storage tanks, then sell contracts for future delivery at a higher price. When delivery dates approach, a they close out existing contracts and sell new ones for future delivery of the same oil. 3 EoI for Setting up of Export Oriented Oil Refinery / Oil Trading Hub in the proposed Outer Harbour of Cochin Port

The oil never moves out of storage. Trading in this fashion is only successful if the forward market is in "contango", that is if the price of oil in the future ure also known as forward prices are higher than current prices or spot prices. The Oil storage covers Crude as well as Finished Petroleum products, which calls for Oil storage tankage, SPM connected with submarine lines or POL berths for product handling and Storage. Storing oil became big business in 2008 and 2009, with many participants - including Wall Street giants, such as Morgan Stanley, Goldman Sachs, and Citicorp turning sizeable profits simply by sitting on tanks of oil. Institutional investors bet on the future of oil prices through a financial instrument, oil futures, in which they agree on a contract basis, to buy or sell oil at a set date in the future. Investors can choose to take profits or losses prior to the oil-delivery date arrives. Or they can leave the contract in place and physical oil is "delivered on the set date" to an "officially designated delivery point", in the United States, that is usually Cushing, Oklahoma. By May, 2007 Cushing's inventory fell by nearly 35% as the oil-storag storage trade heated up. According to Steve Christy researcher with Gibson Shipbrokers in London, a specialist in tanker markets, at the end of October, 2009, one in twelve of the largest oil tankers were being used for the storage, rather than transportation of oil, and that if lined up end to end, the tankers would stretch out for 26 miles. "The trend follows a spike in oil futures prices that has created incentives for traders to buy crude oil and oil products at current rates, sell them on futures markets and store them until delivery". Oil trade business in India is yet to get matured; hardly any European players have explored the possibility to create storage tank and stock up Oil for trading purpose, due to complexity on Governmental law and understanding of investors in oil trading business like in USA. Having above, we still find there are players already started there pursuit to explore such options in India due to emergence of no. of Refiners in South East Asian pocket. Following are potential Oil Traders already operating as crude supplier as well as trading company ex India; Glancore Mitsubishi Commodity trading companies such as MCX The Free Trade Warehousing Zone (FTWZ) facility under the Special Economic Zones Act, 2005 provides the apt regulatory framework in India for such a project. FTWZ In India, a Special Economic Zone (SEZ) is a specifically delineated duty-free enclave and is deemed to be a foreign territory for the purposes of trade operations and duties and tariffs. Free Trade and Warehousing Zones (FTWZ) are a special kind of SEZs S to create trade related infrastructure to bridge the gap in the existing facilities available for trading and storage activities for foreign trade with freedom to carry out trade 4 EoI for Setting up of Export Oriented Oil Refinery / Oil Trading Hub in the proposed Outer Harbour of Cochin Port

transactions in free currency. The SEZ/FTWZ is regulated by the provisions s of the SEZ Act, 2005 and SEZ Rules, 2006. FTWZs can be developed as international trading hubs, serving as key links in global logistics and supply chains servicing both India and the world. Under the scheme of the SEZ Act, the SEZ/FTWZ is developed and set up by a developer along with co-developers. 100% Foreign Direct Investment is permitted under the automatic route, which means, without any specific prior approval either by the Government or the Reserve Bank of India, for setting up of FTWZ. So foreign companies can also develop and set up SEZ/FTWZs by becoming a developer or co-developer. The co-developer is expected to run the FTWZ in accordance with the SEZ Act, 2005 and SEZ Rules, 2006. 06. He will have the right to allot on lease, on commercial basis, land or built up space within the FTWZ to SEZ units who need to take approval for their activity in the FTWZ from the Development Commissioner, Cochin Special Economic Zone. It is also open to the co-developer to run an FTWZ unit himself and offer services to importers/ exporters. Units operating in the FTWZ enjoy the following benefits: Operators in an FTWZ can import goods duty-free and warehouse it in the FTWZ; they can re-export export these goods without paying duty. They can also procure goods free of excise duties from the Indian market. This facility is available for the goods the unit trades in, as well as for goods required for the development, operation and maintenance of the SEZ unit. SEZ units can also have external commercial borrowing upto US $ 500 million in a year without any maturity restriction, through recognized banking channels. FTWZ units are exempted from Central Sales Tax. They also enjoy exemption from Service Tax for all activities in the FTWZ (including labour, rentals, etc.). Products from India entering the FTWZ are treated as deemed export providing immediate benefits to suppliers Indian companies exporting into FTWZ are able to count the exports against their export quotas FTWZ units also have single window clearance for Central and State level approvals. There is also exemption from VAT for procurement from India. The availability of onsite Customs means reduced time for Customs clearances. 5 EoI for Setting up of Export Oriented Oil Refinery / Oil Trading Hub in the proposed Outer Harbour of Cochin Port

Units in FTWZ are allowed to hold the goods on account of the foreign supplier for dispatches as per the owner s instructions and can trade with or without any processing. The units can re-sell or re-invoice or re-export export the goods imported by them. All transactions in an FTWZ are only in convertible foreign currency. Operators in FTWZ can act as custodians of foreign entities and hold stock for them. Since the FTWZ is deemed to be port, it is eligible for a LoCode under the Indian Customs procedure, which enables goods to be moved directly from gateway port to such Zone without any documentation on the part of the importer and under a sub-manifest. Thereafter, if the goods are to be cleared to an entity in the Indian market on orders of foreign client, the Bill of Entry for Home Consumption will be filed by such Indian entity as per Rule 48 of SEZ Rules, 2006 and duty paid thereon. Hence, goods do not need to have a Bill of Entry till dispatch to the Indian entity if the goods are imported under Bill of Lading that identifies the FTWZ as the place of destination. The primary difference with existing warehouses wherein goods can be stored without payment of duty till time of clearance is that the Bill of Entry will have to be filed on entry into India for which Bill of Lading will have to be issued in favour of Indian importer and which automatically means release of payment. Nor would the supplier like to relinquish control of the goods without receiving payment. Further, goods stored in Customs bonded warehouses are liable to interest on duty so deferred while it is not a liability in the FTWZ based on foreign territory concept. Therefore, foreign suppliers would be able to hold their stocks as close to their markets as warehousing costs will permit and in the globalized system of trade and manufacturing, is a facility that blends well with its philosophy of supply of quality demanded by market at least cost. Foreign exchange hedging and cost equalisation by resorting to forward trading as required in a bulk liquid cargo trading hub are possible in the FTWZ. Project Proposal: Cochin Port Trust is considering a proposal for setting up of 20 MMTPA Export Oriented Oil Refinery or / and Oil Trading Hub in the proposed Outer Harbour on Design, Build, Finance, Operate and Transfer basis (DBFOT) basis. The interested party has to develop the facility (Export Oriented Oil Refinery or / and Oil Trading Hub ) including the following other infrastructural facilities and operate it for 30 years: i) Northern breakwater for a length about 7 km. 6 EoI for Setting up of Export Oriented Oil Refinery / Oil Trading Hub in the proposed Outer Harbour of Cochin Port

ii) iii) Reclamation of 2,600 acres area Shore/ off shore jetty or SBM for receiving / dispatching oil cargo The party shall pay wharfage to Cochin Port at a rate per metric tonne for receiving / dispatching oil cargo at the shore/ off shore jetty or SBM, which shall be the bidding parameter, for the assured throughput. In addition to the wharfage, the party is expected to pay annual lease rental of the land to be reclaimed to the Port, which is presently Rs.29.65 lakhs per ha. However, the terms and conditions for tendering will be finalized based on the responses received through this EoI. Submittal: Interested parties shall submit their proposals with complete details for the following. i) Back ground details of the Party including a) Financial capabilities and annual turnover. b) Activities c) Past experience in development and operation of oil refinery(ies) and oil trading centers. ii) Proposed methodology for developing the facility. iii) Time required for developing the facility. iv) Expected year-wise throughput of the facility in metric tonne. v) Capital expected to be incurred for developing the facility. vi) Name and address of firm along with Contact persons (s) and contact details vii) Any other suggestions for developing the facility INTERESTED PARTIES ARE REQUESTED TO SEND THEIR EOIs FOR SETTING UP OF EXPORT ORIENTED OIL REFINERY / OIL TRADING HUB IN THE PROPOSED OUTER HARBOUR OF COCHIN PORT TO THE CHIEF ENGINEER, COCHIN PORT TRUST, W/ISLAND, COCHIN, INDIA 682 682009 st SO AS TO REACH HIM NOT LATER THAN 31 OF DECEMBER, 2013. The cover containing the Expression of Interest shall be marked SETTING UP OF EXPORT ORIENTED OIL REFINERY / OIL TRADING HUB IN THE PROPOSED OU UTER HARBOUR OF COCHIN PORT. For further details please contact Chief Engineer, Cochin Port Trust Cochin, India- 682 009. Tele Fax: 0091484 2666414, Email: coptce@sify.com /ce@cochinport.gov.in Cochin 682 009 22 nd November, 2013 (G.P.Rai) CHIEF ENGINEER 7 EoI for Setting up of Export Oriented Oil Refinery / Oil Trading Hub in the proposed Outer Harbour of Cochin Port