CASE STUDY: GLOBAL

SYNFUELS

Economic
boom in India
in the past two
decades
Efflux of
Precious
Foreign
Exchange

Influx of
Petroleum

Increased
Vehicular
Ownership
Increased
consumption
of liquid fossil
fuel

Strategic Fit of CTL project for GSPL

Timely delivery of plant technology from Lurgi

thus reducing Time and Cost overruns.
Engagement of CCS reduces CO2 emission and
thus reduces air pollution.

Ash content in the coal only favors its conversion

to liquid by CTL process.
CTL being implemented in India by GSPL.

455 million tonnes mined of 256 million tonnes

reserve
High ash content in Indian coal.

Constraint
s
Addressed

Process

Abundant
Coal
Reserve

 Thus CTL project becomes a strategic fit for GSPL.

Availability of
alternate
energy
resource
Self sufficient
in energy
resource

India becomes
energy secured

Low efflux of
Foreign
Exchange

Low influx of
petrol and
petro fuels
from outside

Indias Energy Security

Opportunities
Preferential funding for the project
from international sources.
Huge market due to scarcity of
crude oil.
Opprtunity fo future cost reduction
by 20%

Strengths
Govt. awarded Coal Blocks.
Operating cost much lower than
conventional refinery projects.
Sulphhur free and low in nitrogen

SWO
T

Threats
Probable time and cost overruns by
Lurgi.
Higher risk: lower investments.

Weakness
Additional cost for environmental
issues. Higher CO2 emission.
Requires 3.5 gallons of water for 1
gallon of fuel.
Higher Capital investment

RELEVANT INFORMATION REQUIRED FOR

FINANCIAL EVALUATION OF INVESTMENT

NET PRESENT VALUE METHOD (NPV): TRIES TO FIND OUT THE

WORTH OF A RUPPE TODAY AGINST ITS FUTURE WORTH. IT IS
CALCULATED BY FOR

FORECAST THE CASH FLOW GENERATED BY NEW VENTURE OVER

ITS ECONOMIC LIFE.
DISCOUNT THE CASH FLOW.
FIND PV (PRESENT VALUE)
FIND NPV (NET PRESET VALUE)
WACC METHOD: THE DISCOUNT RATE USED WHILE CALCULATING
NET PRESENT VALUE OF A PROJECT WITH RISK. ITS CALCULATED ON
THE BASIS AFTER TAX COST OF CAPITAL WHERE THE COST OF THE
NEXT SOURCE OF CAPITAL ARE WEIGHTED BY THE PROPORTION OF
THE CAPITAL COMPONENT IN THE CAPITAL STRUCTURE.
INTERNAL RATE OF RETURN : THE INTERNAL RATE OF RETURN IS
DEFINED AS THE DISCOUNT RATE THAT MAKES NPV (NET PRESENT
VALUE) EQUALS TO ZERO. THE IRR (INTERNAL RATE OF RETURN)
RULE IS TO ACCEPT A PROJECT IF IRR IS HIGHER THAN OPPORTUNITY
COST OF CAPITAL. IF IT IS THEN IT MEANS THAT THE PROJECT HAS

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