Commodity Online
MUMBAI: The oil and gas industry has been instrumental in fuelling the rapid growth of the Indian economy. It contributes about 45 per cent of the total energy consumption of the country, which is the fifth largest energy consumer in the world.

Petroleum exports have also emerged as the single largest foreign exchange earner, accounting for 11 per cent and 15 per cent of the total exports in 2005-06 and 2006-07, and growing at the rate of 67 per cent and 58 per cent, respectively. The growth continues in the new fiscal with the export of petroleum products touching US$ 19.7 billion during April-December 2007.

Simultaneously, domestic production of Crude Oil has been increasing steadily. While production grew by 5.6 per cent in 2006-07 to 33.98 million tonne (mt) from 32.19 mt in 2005-06, it has increased to 34.11 mt during 2007-08.

Strategically located en route of Middle East crude for East Asian and Pacific-rim markets, India is emerging as the global hub for oil refining. It also enjoys competitive cost advantage, with capital costs lower by as much as 25 to 50 per cent over other Asian countries.

Already, the fifth largest country in the world in terms of refining capacity (up from 19thin 1995), with a share of 3 per cent of the global capacity, India is well placed to take advantage of the expected global refining capacity deficit of around 112 mtpa by 2010 with its planned expansion plans.

Indian companies plan to increase their refining capacity to 242 mtpa by 2011-12 from about 149 mtpa in 2007. This is well above the projected domestic demand of 196 million tones, leaving the rest to be exported.

Indian Oil Corp (IOC) plans to increase its refining capacity from 60.2 mtpa to 76.7 mtpa.

ONGC plans to scale up its refining capacity up to 45.5 million tonnes by 2009-10 from about 12 mtpa.

Bharat Petroleum Corporation is setting up a 6 mtpa at Bina in Madhya Pradesh.

Reliance Industries Ltd is constructing a new refinery in the Jamnagar SEZ with a capacity of 29 mtpa.

Nagarjuna Oil Corp is planning a new refinery at Cuddalore with a capacity of 6 mtpa.

Hindustan Petroleum is setting up a 9 mtpa refinery along with the LN Mittal group at Bhatinda in Punjab.

Essar plans to more than triple capacity at its refinery to 34 mtpa from the current 10.5 mtpa.

Hindustan Petroleum Corporation plans to invest US$ 2.5 billion in expanding its Visakhapatnam refinery capacity to 16 million tones.

In fact, Reliance's new refinery (which will be the world's only full-export-oriented refinery) will be the world's sixth-largest. And with the existing refinery of RIL, the combined capacity (RPL along with RIL) will turn the Jamnagar complex into the world's largest single-location refinery.

India is one among the four countries which have the world's richest gas hydrate reserves. But, the per capita consumption of Natural Gas is amongst the lowest in the world at 29 cubic meters as against the world average of 538 cubic meters, leaving huge potential in this sector.

An expanding economy with its concomitant increase in energy demand is likely to throw open huge investment opportunities in the oil and gas industry. According to a report by CII and KPMG, India's energy sector would provide investment avenues worth US$ 120-150 billion over the next five years.

India's energy demand is estimated to increase five fold over the next twenty five years. Another report by KPMG estimates India's oil demand to grow at an average annual rate of 3.6 per cent from 119 metric million tonne (mmt) in 2004 to 196 mmt in 2011-12 and 250 mmt in 2024-25.The Government also plans to expand the exploration licensing area from 44 per cent of the Indian sedimentary basin in 2007 to 80 per cent by 2011-12 and 100 per cent by 2015.

Courtesy: www.ibef.org

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