INTRODUCTION
The expectations of boon in the supply of
petroleum products in the Ninth Plan could be overshadowed by
slackening demand.
The Union Ministry of Petroleum and Natural Gas
is expecting India's refining capacity to peak at 122 million tonnes (mt)
for petroleum products. The excess supply situation, however, hinges
on just how fast 19 new projects get off the ground. This situation is
likely to continue will into the Tenth Plan as the refining capacity
is set to increase further to around 170 mt against a revised demand
of 156 mt.
The supply could outstrip demand inspite of the
fact that the capacity remained unchanged during 1997-98, I now likely
to stabilize and start commercial production only during current year.
The total refining capacity of 14 refineries
stood at 61.55mt per annum. Of this, a whopping 57.40mt capacity
belongs to the public sector. The six refineries of IOC, the largest
refinery company in India, accounts for total crude refining capacity
of 25.7mt per annum, thus controlling around 42 percent of the total
capacity.
The extent of growth projected for the refining
capacity over the next four years is evident from the capacity
prevailing a decade ago; the capacity was stagnant at 51.58mt between
1988-89 and 1992-93, while only 1.5mt capacity was added during the
next two years. In 1993-94, Madras Refineries completed its expansion
and raised its total capacity to seven mt.
India's first joint venture refinery, Manglore
Refinery & Petrochemicals commissioned the first phase of it's
three mt refining capacity in 1995-96. Cochin Refineries and
Bongaigaon Refineries also completed their respective expansion plans
during the year. As a result, the total refining capacity shot up to
60.4 million tonnes.
According to data base, there are presently 19
proposals for setting up new refineries and five projects for
expanding. These projects would together install an additional
capacity of 62mt per annum at total investment of Rs. 78,376 crores.
If these projects are implemented on schedule, by
2002 the country will have, as envisaged by the petroleum Ministry, a
total refining capacity of 122mt per annum. That, however seems
unlikely as of the proposed 19 refineries only eight are currently
under implementation, and even their progress is very slow.
On the other hand, many of the proposed
refineries, both public and private, did not move from the proposal
stage. Delay in finalization of partners, land acquisition and
inability to mobilize funds are some of the reasons for the slow
progress.
Expected Refining Capacity (million tonnes)
Public Sector Refineries
|
Business Group
|
1997-98
|
1998-99
|
1999-00
|
2000-01
|
2001-02
|
by 2007
|
|
IOC
|
25.70
|
31.70
|
32.60
|
35.60
|
35.60
|
37.40
|
|
HPCL
|
10.00
|
10.00
|
10.00
|
13.00
|
13.00
|
13.00
|
|
BPCL
|
6.00
|
6.00
|
6.00
|
6.00
|
6.00
|
6.00
|
|
Cochin Refineries
|
7.50
|
7.50
|
7.50
|
10.50
|
10.50
|
10.50
|
|
Madras Refineries
|
7.00
|
7.00
|
7.00
|
7.00
|
7.00
|
10.00
|
|
Bongaigaon Refinery
|
2.35
|
2.35
|
2.35
|
2.35
|
2.35
|
2.35
|
|
Numaligarh Refinery
|
|
|
3.00
|
3.00
|
3.00
|
3.00
|
Joint Sector Refineries
|
Business Group
|
1997-98
|
1998-99
|
1999-00
|
2000-01
|
2001-02
|
by 2007
|
|
Manglore Refinery
|
3.00
|
3.00
|
9.00
|
9.00
|
9.00
|
9.00
|
|
IOC-Kuwait Petrol JV
|
|
|
|
6.00
|
6.00
|
6.00
|
|
Paradip Refinery
|
|
|
|
9.00
|
9.00
|
9.00
|
|
Bharat Oman JV
|
|
|
|
6.00
|
6.00
|
6.00
|
|
HPCL-Bhatinda
|
|
|
|
|
9.00
|
9.00
|
|
CRL-Kuwait Petrol JV
|
|
|
|
|
10.00
|
10.00
|
Private Sector Refineries
|
Business Group
|
1997-98
|
1998-99
|
1999-00
|
2000-01
|
2001-02
|
by 2007
|
|
Reliance Petroleum
|
|
|
6.00
|
12.00
|
18.00
|
18.00
|
|
Essar Oil
|
|
|
|
6.00
|
10.50
|
18.00
|
|
Pennar Refineries
|
|
|
|
6.00
|
6.00
|
6.00
|
|
Petro Energy
|
|
|
|
4.80
|
4.80
|
4.80
|
|
Hinduja Group
|
|
|
|
2.00
|
2.00
|
2.00
|
|
Soros
|
|
|
|
6.00
|
6.00
|
6.00
|
|
Tamilnadu Petroprod.
|
|
|
|
6.00
|
6.00
|
6.00
|
1999-2000 would witness the commencement of
India's first private sector refinery, Reliance Petroleum, at Jamnagar.
The long delayed Numaligarh refinery is also expected to commission
its three mt refinery by March 2000. Besides, Manglore Refinery would
enhance its refining capacity to nine mt per annum by November 1999.
In all the total refining capacity in the country
would rise to 83.45 million tonnes by March 2000.
With Reliance Refineries attaining full capacity
of 18 mt and the two other private refineries, Essar Oil and Pennar
Refineries, commissioning theirs, the total refining capacity would
rise to 122 mt per annum by end of the ninth Plan.
Among the Joint Ventures proposed by IOC, BPCL
and HPCL, except for the Bina refinery of Bharat Oman, no other
refineries are expected to be completed during the current Plan.
Of the 46mt refining capacity proposed to
installed by public sector companies only six mt will be set up by
them. The remaining 40 mt will be installed in the joint venture, with
foreign oil majors like Kuwait Petroleum, Oman Oil Corporation, Shell
International, Exxon and Aramco.
PUBLIC SECTOR REFINERIES
Panipat Refinery
IOC completed its six million tonnes refinery in
March 1998, after nearly a none-year delay. The Rs. 4,200 crore
refinery was to cost Rs. 1,044 crores when it was approved by the
Central Government in Oct., 1992. But in the last six years the
project cost has been revised thrice. The refinery is expected to
stablise and commence commercial production during 1998-99. UOP
Inter-America of the US is the technical collaborator.
Numaligarh Refinery
Numaligarh Refinery is being jointly setup by the
Assam industrial Development Corporation, IBP Co. and BPCL. The delay
is acquisition of land and the contractor's failure to complete the
job in time have delayed the completion of the project by almost
one-and-a-half years. The original cost of the present Rs. 2,682 crore
project was Rs. 1,275 crore in 1992, when it was cleared by PIB; it is
now expected to be completed by March 1999.
JOINT SECTOR REFINERIES
Manglore Refinery & Petrochemicals
The Rs. 2,274 croes, three mt refinery in
Manglore, setup jointly by Adity Burl group and HPCL, started
commercial production on 25 March 1996, three months ahead of
schedule. ABB Lumus Crest, Kinetics Technology Inc. and UOP Inter
American Inc. of the US and Shell and Netherlands are the technical
collaborators.
The PIB, on 8th March 1996, had cleared the
expansion plan of the refinery from the present three million tonne
per annum to nine mt per annum. The contract to implement the Rs.
3,690 crore expansion has been awarded to consortium of Japanese
companies comprising Toyo Engineering, Mitsui and Mitstubishi
Corporation. According to MRPL's annual report, the project is
progressing as per schedule.
Bharat Oman Refinery
Of the five Joint Sector refineries planned in
the public sector, Bharat Oman is the only refinery under
implementation. BPCL has taken in Oman Oil Co. as an equal partner to
setup the Rs 7,513 crore six million tonne refinery. Apart from Oman
Oil, which would hold 26 percent of the equity, ONGC is also expected
to pickup 15 %. The project coming up at Bina in Sagar district of
Madhya Pradesh, is expected to be completed by December 1999. The
project cost also includes the cost of laying a crude pipeline from
Vadinar in Jamnagar district of Gujrat to Bina.
HPCL Bhatinda Refinery
The nine mt HPCL Bhatinda Refinery was to be set
up in a joint venture with Aramoo of Saudi Arabia. However, when
Aramco decided to opt out, HPCL started negotiating with Exxon from
equity participation. HPCL plans to implement the Rs. 9,645 crore
refinery by 2002. However, the initial delay in finalising the
co-promoters will see the refinery humming only during the Tenth Plan
period.
IOC-Kuwait Petroleum (Paradip) Refinery
In June 1995, the Cabinet Committee on Economic
Affairs (CCEA) approved IOC's proposal to take on Kuwait Petroleum
Corporation as its private partner for six mt refinery at Paradip in
Orissa. Later, the proposed capacity was raised to nine mt per annum.
According to latest reports, the two partners would hold 50 % each of
the entire project equity. The Rs. 8,117 crores project is expected to
be completed by March 2002.
CRL - Kuwait Petroleum Refinery
Cochin Refinery proposes to set up a 10 mt, 100 %
export oriented refinery at Ambalamugal in Kerala. The Rs. 6,000 crore
refinery would be set up in financial collaboration with Kuwait
Petroleum Corporation. The project proposal was pending with the
Petroleum Ministry for over a year. It was only recently that the
Ministry reportedly asked the company to submit a revised MoU for its
refinery.
PRIVATE REFINERIES
Reliance Petroleum
Reliance Petroleum, promoted by Reliance
industries, is setting up India's largest refinery of 19 mt per annum
capacity at Jamnagar in Gujrat. The company received a license to set
a nine mt refinery in December 1992. However, the capacity of the
upcoming refinery was raised to 15mt in September in 1994 and later
18mt per annum.
UOP Inter-America Inc. is the technology
collaborator and Bechtel is the main contractor. BPCL, HPCL and IOC
would market the end products. As of the March 1998, the company has
spent Rs. 7,687 crore on the project and despite the severe cyclone
which hit the project site in June, RPL is confident of completing it
by December 1999.
Essar Oil Refinery
The 10.5mt refinery is being promoted by Essar
oil along with the Comcraft group, controlled by the NRI, Mr.
Chandaria, ABB Lumus Crest Maurtius, a wholly-owned subsidiary of ABB
Lumus Crest Inc., US, has been appointed as the project management
consultants. Engineers India and Tata Consulting Engineers have been
appointed as project engineering consultants.
The company entered the primary market in
February 1995 and raised Rs. 1,650 crore to the pat-finance the
project. An MoU has been signed with IOC for distribution of the
refinery products. Recently, the company complained to the state
government that the project might miss the revised completion date of
December 2999 due to paucity of funds and the cyclone that hit
Jamnagar in June.
Petro Energy Product Refinery
Petro Energy Product Co. India, a subsidiary
company of Petrodune Inc. of the US, proposes to set up a 100 % export
oriented, 4.8mt per annum refinery at Karaikal in Pondicherry. The
government clearance for Rs. 1925 crore refinery was received in June
1994. The company has entered into agreement with Petro Cananda for
outright purchase of its existing Port Moody Refinery at Vancouver.
The project was to be completed by March 1997, however, not much
progress has been made in its implementation; neither has the company
announced as revised completion date.
Soros Fund Management
The US-based Soros group proposes to set up a six
mt refinery near to its upcoming petrochemical complex at Haldia in
Medinapur district of West Bengal. The Rs. 2,971 crore refinery was
cleared by FIPB in January 1995. However, it is awaiting clearance
from the Petroleum Ministry. The group might take up the project on
the completion of its ongoing petrochemicals complex at haldia.
Hinduja Refinery
After parting with IOC, the Hinduja group decided
to set up a two mt lube oil refinery at a cost of Rs. 1,700 crore. The
Orissa government has allotted about 700 acres of land near Haridaspur
in Cuttack district. Further, the company would be also be provided
with 150 acres of land near Paradip port for stocking the imported oil
and refined products. The Company hopes to complete its project by
2002.
MAJOR EXPANSION PLANS
Three public sector refineries have undertaken
the expansion of their existing capacities by whooping 10.8mt per
annum at a cost of Rs. 5,460 crore.
Hindustan Petroleum Corporation
HPCL proposes to expand the capacity of its
Visakhapatnam refinery from the existing 4.5mt to 7.5mt per annum at a
cost of Rs. 1,138 crore. The proposal was cleared in August 1995. The
project cost has shot up by Rs. 268 crore since the receipt of the
license in June 1996. After missing the first completion date of
September 1998, the expansion is now expected to be over by December
1999.
Cochin Refineries
The Union government's approval for the proposed
expansion of Cochin refineries came in September 1997, nearly two
years after the initial proposal was submitted. The company has
invited bids for carrying out the expansion from 7.5mt to 10.5mt at a
cost of Rs. 1,470 crore.
Indian Oil Corporation
IOC is expanding the capacity of its Koyali
refinery in Gujrat from the present 9.5 mt per annum to 12.5 mt per
annum. The Rs. 1,053 crore expansion, when approved by PIB in May
1990, was expected to cost Rs. 635 crore. The project has already
missed twice its schedule commissioning dates of May 1992 and December
1997. According to latest reports, the expansion is now expected to be
completed by December 1999.
IOC also plan to expand its Barauni refinery
capacity by 1.8 mt per annum from the existing 4.20 mt per annum. The
company is awaiting a final clearance from the Petroleum Ministry for
implementing the RS. 1,800 crore project.
REFINERY NEWS
- The Union Ministry of Industry has approved
four proposals to setup mini refineries on one million tonne each. Of
the four refineries, three will be set up in Andhra Pradesh by Pennar
Cements, Pearl Petrochemicals and the US based United Technologies.
The fourth mini refinery of US based MT prospect & Pelorus Inc.
would be located at Tuticorin in Tamil Nadu.
- IOC has reportedly revised its earlier plan to
set up a 10 million tonne refinery at Nagapattinam in Tamil Nadu. The
Company has earmarked a Rs. 25,000 crore investment plan for Ninth
Plan Period.
- The Punjab government has decided to take an
equity stake of 26 % in the nine million tonnes Bhatinda refinery of
HPCL. An MoU to this effect was signed between HPCL and PSIDC on 14
September 1998
- On 14 July 1998, the Cabinet Committee on
Economic Affairs (CCEA) cleared the BPCL's Rs. 7,513 crore, six
million tones per annum refinery project proposed to be set up in the
joint venture with Oman Oil Company. The project, located at Bina in
Sagar district of Madhya Pradesh, is expected to commence commercial
production by July 2001.
- Gontermann - Peipers (India), an Ispat group
company, has reportedly decided to relocate it's refinery from paradip
in Cuttack district of Orissa to Kakinada in East Godavari district of
Andhra Pradesh following the refusal of the Petroleum Ministry to
clear the refinery. The FIPB has also rejected the company's proposal
to extend the validity period for foreign collaboration on the ground
that the progress made by the company was not satisfactory.
Investment Opportunities in Natural Gas
Sector, Exploration and Production
While the utilisation of natural gas in India
began in the early 1960s, the volume of gas utilised increased
significantly only in the early 1980s after gas became available from
early the Western Offshore fields. Over the decade of the 1980s, the
production of gas increased by 20% annually. The current production
potential is around 65 MMSCMD and is likely to increase to around 75
MMSCMD by 1997-98, and go up further to 84 MMSCMD by the year 2001-02.
The recoverable reserves of natural gas in the country are around 643
BCM
Authority and Approvals
Intoduction
Under the new investment policy for different
sectors announced in july 1991 for facilitating the inflow of foreign
capital and to encourage entrepreneurs to invest in and to encourage
entrepreneurs to invest in India, a number of policy initiatives have
been taken by the Government of India, such as:
1. Equity participation in commercial and
industrial ventures has been freed from all restrictions and foreign
companies can now invest up to 100% of equity in different activities
in the petroleum sector.
2. Rupee convertibility on the Current account.
3. Deregulation and delicensing of various petroleum products in the
country.
4. Gradual decontrol of pricing and distribution.
5. Freedom to form JVCs for the development of infrastructure and for
marketing and refining acitivities.
6. The procedure for obtaining industrial licences has been greatly
simplifie
General Section
