Research Methodology

PETRO RETAIL TRENDS - FOODGRADE HEXANE

1

Research Methodology

TABLE OF CONTENTS

S.No Particulars Page No

1. Executive Summary 32. Introduction 43. Specification, uses and brief 54. CPCL- An overview 6-8

5. Import Laws concerning Food Grade Hexane

8-10

6. Sample Questionnaire 11-14

7. Findings 158. SWOT Analysis 169. Conclusion 1710. Remarks 18

2

Research Methodology

EXECUTIVE SUMMARYThis study is mainly aimed at the understanding the functioning of the hexanemarket. The prime focus being a specialty product manufactured by the organization inconcern –CPCL.

A questionnaire was floated as a part of this process to various enterprises to understand their need and priorities in their purchases. These priorities are parameters that act as significant influences.

Some limitations associated with the study would be the time constraints and the number of sample data collected. The reportwould be primarily focused on the southern region of the Indian market, Andhra Pradeshand Tamil Nadu in specific.

3

Research Methodology

The study is concluded with a SWOT and findings.

INTRODUCTION

Hexane is an alkane of six carbon atoms, withthe chemical formula C6H14.The term may refer to any of the five structuralisomers with that formula, or to a mixture of them. In IUPAC nomenclature, however, hexane is the unbranched isomer (n-hexane);the other four structures are named as methylated derivatives of pentane and butane. IUPAC also uses the term as the root of many compounds with a linear six-carbon backbone, such as 

4

Research Methodology

2-methylhexane(C7H16), which is also called "isoheptane".Hexanes are significant constituents of gasoline. They are all colorless liquids at room temperature, odorless when pure, with boiling points between 50 and 70 °C. They are widely used as cheap, relatively safe, largely unreactive, and easily evaporated non-polar solvents.

Specification of Hexane (Food Grade):Sr.No

Characteristics Requirements  Method [P:] ofIS:1448

Ref. toAppendix

1 Distillation a) Initial (IBP)OC,Min b) Dry pointOC, Max c) Temperature rangeof final 10%OC, Max

63702

[P:18]Method B---- --

-- -- ----

5

Research Methodology

2 Composition :a) Aromatics, % v,Max b) Saturates, % v,Min

1.0 98.5

[P:63][P:23]

----

3 Density at 25OC, gm/ml, Max

0.687 IS:3470-66 A

4 Color (Say bolt), Min (+) 30 [P:14] --5 Sulphur content, ppm,

Max75 IS:3470-66 B

6 Copper stripcorrosion, 3 hrs. at50OC

1 [P:15]Method C

--

7 Doctor test Negative [P:19] --8 Lead, gm/ litre, Max 0.0005 IS:3470-66 C9 Phosphates, ppm, Max 20 [P:54] --10 Chlorides (as Cl),

ppm, Max20 IS:3470-66 D

11 Bromine number, Max 1 [P:44] --12 Non-volatile residue,

gm/ 100ml, Max0.001 IS:3470-66 E

13 Reaction of non-volatile residue

To pass the test IS:3470-66 F

Conforms to IS:3470-1966 Specifications for Hexane, Food GradeAs specified by Bharat petroleum.

It also conforms to the specifications of variousInternational organizations like WHO/FAO/UNICEF proteinadvisory group.

OVERVIEW

N-Hexane is a highly volatile component of the paraffin(also the alkane or aliphatic) fraction of crude oiland natural gas, and it is a constituent of heating and

6

Research Methodology

motor fuels refined from petroleum. Exposure fromcontact with vapors or emissions from these refinedpetroleum products is the most widespread form of low-level exposure for the general population. Most n-hexane in these fuels is oxidized (and thereforedestroyed) as part of the combustion process to provideheat or drive internal combustion engines. Smallamounts of n-hexane, along with other petroleumcompounds, volatilize to the atmosphere duringhandling, storage in fuel tanks, or through incompletecombustion. Recent research (Ahearn et al.1996)suggests that certain fungi may be able to produce n-hexane. These fungi may be common in older buildings,and in some parts of the country may provide exposuresfrom previously unsuspected indoor sources. n-Hexane isalso produced as a relatively pure product for a numberof specialized end uses, primarily as a solvent or as acomponent of certain glues and adhesives. Especially inurban areas, n-hexane may be a typical component ofnonpoint source runoff when rainfall washeshydrocarbons deposited on roads and other surfaces intosurface waters. Spills of refined petroleum products orof commercial n-hexane products may introduce n-hexaneinto soils or surface waters.

Around urbanized areas, spill sites, refineries, tank storage facilities, underground storage tanks (e.g., atgas stations), or waste sites, can be sources of n-hexane subsequently transported into sediments or groundwater. Once introduced into deeper sediments or groundwater, n-hexane may be fairly persistent since its degradation by chemical hydrolysis is slow and opportunities for biodegradation may be limited under

7

Research Methodology

anoxic conditions or where nutrients such as nitrogen or phosphorus are in limited supply. In the atmosphere,the main degradation pathways involve destruction through the action of free radicals such as hydroxyl radicals

Major uses of Hexane, Food Grade :

The product is essentially used as solvent in theextraction of vegetable oils like Groundnut,mustard, cottonseed, gingili seed, and rape-seed.Most of these oils are used for edible purposes andin the manufacture of soaps.

It is used for the extraction of essential oilsfrom flowers.

For the preparation of rubber adhesives and cansealing compounds.

Gas generation plants basically for laboratories. In pharmaceutical industries as a carrier.

Safety Information : Reactivity Data - Chemically stable and

incompatible with strong oxidizers. Reactsvigorously with oxidizing agents. Mixtures with di-nitrogen tetraoxide.

Health hazard Data - Routes of entry may be through

8

Research Methodology

inhalation, ingestion, dermal absorption and eye.

Effects of Exposure / Symptoms : Inhalation causes irritation of respiratory

tract may lead to cough, mild depression, andcardiac arrhythmia. Higher concentrations producedrowsiness fatigue and loss of appetite. Causessevere lung irritation coughing pulmonary oedema,excitement followed by depression.

Ingestion may lead to nausea, vomiting, swelling ofabdomen, headache and depression.

Skin and eye contact causes irritation.

Emergency contact :Inhalation - Maintain repulsive, give oxygen if needed.Enforce Bed rest. Ingestion - Do not induce vomiting.

Skin - Wipe off the affected area and wash with soapand water. For any type of exposure seek medicalaid immediately.

Eye - Wash with plenty of water for 15 minutes.

Handling and Storage Precaution :Store in a dry, cool and explosion-proof area. Avoidcontact with liquid or vapours. Provide face sheets orsafety googles to protect eyes, plastic or rubber handgloves, eye wash facilities.

It should be stored in closed container away from heat& source of ignition. As handling and safetyprecaution, avoid contacts with liquid or vapours anduse personnel protective equipment.

9

Research Methodology

The firefighting media to be used is foam, DCP/CO2. Donot use water jet.IMPORT LAWS CONCERNING HEXANE

As per Article XI of GATT, maintenance of QuantitativeRestrictions (QRs) on imports is not permitted.However, to provide protection to the domesticproducers the government can, if the situation sowarrants, utilize the mechanism of raising the appliedtariffs within the bound rates, if such a gap existsand take measures such as anti-dumping action,imposition of countervailing duties and safeguardsactions which are permissible under the WTO Agreements.Imports are being closely monitored and the governmentsare determined to ensure through the appropriate use ofthe above mechanisms that imports do not cause anyserious injury to the domestic producers.

Some of the recent measures taken in this regardare :-

Import of 131 products has been made subject to compliance of the mandatory Indian quality standards as applicable to domestic goods.

Import of all packaged commodities has been made subject to compliance of all the conditions of the Standards of Weights and Measures (Packaged

10

Research Methodology

Commodity) Order 1977, as applicable on domestic producers.

IS 3470 Hexane, Food grade

Manali Refinery (Tamil Nadu) -Chennai Petroleum Corporation Ltd. (CPCL)

Chennai Petroleum Corporation Limited (CPCL), formerlyknown as Madras Refineries Limited (MRL) was formed asa joint venture in 1965 between the Government of India(GOI), AMOCO and National Iranian Oil Company (NIOC)having a share holding in the ratio 74%: 13%: 13%respectively. From the grassroots stage CPCL Refinerywas set up with an installed capacity of 2.5 MillionTonnes Per Annum (MMTPA) in a record time of 27 monthsat a cost of Rs. 43 crore without any time or costoverrun. In 1985, AMOCO disinvested in favour of GOIand the shareholding percentage of GOI and NIOC stoodrevised at 84.62% and 15.38% respectively. Later GOIdisinvested 16.92% of the paid up capital in favour ofUnit Trust of India, Mutual Funds, Insurance Companiesand Banks on 19th May 1992, thereby reducing itsholding to 67.7 %. As a part of the restructuring stepstaken up by the Government of India, Indian OilCorporation Limited (IOCL) acquired equity from GOI in2000-01. Currently IOC holds 51.88% while NIOCcontinued its holding at 15.40%. Therefore, the CPCLbecame a subsidiary of IOCL in 2001. The Manali

11

Research Methodology

Refinery has a capacity of 10.5 MMTPA and is one of themost complex refineries in India with Fuel, Lube, Waxand Petrochemical feedstocks production facilities.CPCL has also implemented the following “First of itskind” Project in the Oil industry:

.

12

Research Methodology

13

. CPCL has commissioned a Wind Mill farm having 22

windmills with an installed capacity of 17.6 MW at Pushpathur, Tamil Nadu in September, 2007. The power generated is

being used by the Company’s captive Sea

water Desalination Plant through a wheeling

arrangement with tamil nadu electricity board.

• Under its Renewable Energy Initiative, a Wind Energy Farm with a capacity of 17.6 MW was commissioned at

Pushpathur, Tamil Nadu in 2007 at a cost of

Rs.90 Crores

Research Methodology

A Sample of the questionnaire floated

A Project based upon the study of –

“A BRIEF STUDY OF THE FOOD GRADE HEXANE MARKET”

Kindly circle or tick your options

Name and Address of the Respondent

Nature of Industry

Solvent Extraction Floral Extraction Chemical

Describe the nature of product your manufacturing unit produces-

How long have you been in this business?

Less than 3 Years 3-6 yrs 6-10 yrs 10-15 yrs 15-20yrs Above 20 yrs

Are you a registered firm?

Yes

14

Research Methodology

No

If yes under what

TNGST CST

Identify the relationship between you and the hexane manufacturer.

Direct contact Intermediary- Wholesaler, trader etc. Others- please specify

How often have you changed your supplier?

Within every 3years 3-5 yrs 5-7 yrs 7-10 yrs 10-15 yrs 15-20 yrs Greater than 20 yrs If other please specify

What is your average consumption of Hexane per month?

Less than one tonne 1-2 tonnes 2-4 tonnes 4-6 tonnes

15

Research Methodology

6-10 tonnes Above 10 tonnes

How frequent do your purchase?

Once in 15 days Once in a month Once in two months Once in three months

Based upon the below mentioned factors that affect yourconsumption, please tick the boxes about the level of your satisfaction- In case of other factors please do mention them as well.

S.No Factors Highly satisfying

Satisfied

Less Satisfied

Not Satisfied

1. Quality

2. Price

3. Credit Terms

4. Delivery Schedule

5. Logistics Terms

6. Order Processing Terms

Do you maintain any separate warehouse for the storage of Hexane?

Yes16

Research Methodology

No

Are you an importer of Hexane?

Yes No

If yes please identify the source-

If you are not a user of Hexane, would you like to prefer the same in your manufacturing process?

Yes No

Some of the important firms that were survey are

PONPURE CHEMICALS - TAMIL NADU

KEDIA SOLVENTS - ANDHRA PRADESH

CETHAR OIL LTD - TAMIL NADU

MAA SHARADA AGRO - ANDHRA PRADESH

KANAGADURGA AGRO - ANDHRA PRADESH

MAA VENKATADRI AGRO - ANDHRA PRADESH

The manufacturers were obtained from the Solvent Manufacturers Association of India.

17

Research Methodology

MARKET TREND ANALYSIS

No change60%

Change after 20 years20%

2-3 years20%

Frequency of change in supplier No

18

Research Methodology

50%50%

Relationship with Suppliers NoDirect contact Intermediary, wholesaler

Above 10 tonnes30%

6-10 Tonnes10%

4-6 Tonnes20%

Below 4 Tonnes40%

Average Hexane consumption P.M. No

19

Research Methodology

Very Highly significantPrice Quality Credit

termsDelivery Schedule

Logistics Terms

Order Processing Terms

Moderately significant Price Quality Credit

termsDelivery Schedule

Logistics Terms

Order Processing Terms

20

Research Methodology

Less SignificantPrice Quality Credit

termsDelivery Schedule

Logistics Terms

Order Processing Terms

Not SignificantPrice Quality Credit

termsDelivery Schedule

Logistics Terms

Order Processing Terms

Price

Quality

Credit terms

Delivery Schedule

Logistics Terms

Order Processing Terms

0

5

10Very Highly significantModerately significant Less SignificantNot Significant

FINDINGS

Most of these companies that were spoken to were very interested in the price of the product, since the

21

Research Methodology

quality was universal everywhere and the BIS standards had to be complied with.

The other conditions seemed relatively trivial for themduring the time of purchase.

The interesting fact that could be noted is that FG- Hexane is also imported in spite availability among thelocal market.

There exist two types of contacts in the market which either is direct contact or through an intermediary.

There happens to be a close relationship with supplier indicating high customer loyalty primarily due to reasons such as proximity to the buyer and lack of suppliers.

Numbers indicate that a majority of the enterprises require an order of less than 2 tonnes a month.

22

Research Methodology

23

SWOT

OpportunitiesVariety of uses of the speciality product- Vast market.Integration of developments in contemporarytechnologies such as electronics, material science,computer, bio-technology etc. offer vast scope forrapid improvement and progress.3. Opening of global markets may lead to export ofour developed technologies and facilitategeneration of ad

WeaknessIncreased cost of raw material due to the high imports of crude oil.Inadequate developement of R7D Inadequate automation- Information Management

StrengthsVast domestic market and an array of consumersHigh Brand ValuePSU - Resource Allocation

ThreatsCompetition from global playersConstantly changing global scenarios- Increased oil pricesCheaper prices offerred by competitoes

Research Methodology

CONCLUSIONSome of the findings made from the study can be seen as:

A very closely dealt supplier to consumer related market, which is hugely dependent upon the pricing of the product.

There is great need to market according to the volatilepricing prevailing in the FG-Hexane market.

It would very useful to research on further uses of theproduct for better profits.

Research checks can be done to discover superior processes by which the quality and efficiency of outputcan be increased.

The most important of all would be to tap the wide export market.

24

Research Methodology

Remarks

25