Will India become an export hub for petroleum products?

statesman

Recent demand-supply projections reveal that India's refining capacity is expected to reach 218 MMT by 2012 and a whopping 286 MMT by 2018. Given that demand is expected to range between 160-179 MMT by 2012, the excess capacity will be of the order of 83-92 MMTPA by 2012. Does this mean that India will end up with a large under-utilised refining capacity, or will it transform into a major export hub in the next five years? Although India possesses the potential to emerge as an export hub, it would require a concerted effort by the industry and the government to realise this potential. While the government has to provide the initial momentum by creating an empowered policy environment for the growth of export-oriented refining capacity, the industry has to carry this momentum forward by building refineries which can compete with the best in the world, not only on cost considerations, but also in terms of product quality.

Petroleum products: Why is consumption faltering?

The Compounded Annual Growth Rate (CAGR) of consumption of petroleum products for the first four years of the Xth Plan (2002-03 to 2005-06) was only 2.6%, much lower than the projected CAGR of between 3.7% (base case) and 5.7% (upper case). Actual consumption was lower in all four years, but the trend accelerated in 2005-06, when actual consumption was lower than the projected CAGR by as much as 6.7 per cent. In the current year (2006-07), growth is expected to be lower than target by as much as 6.5 per cent. Quite a few reasons have been propounded for the lower consumption. The huge rise in prices of petroleum products has had a negative impact on demand, particularly in the last two years. But that alone cannot explain the dichotomy between rising economic growth and falling demand for hydrocarbons: the gap is far too wide to be explained through price elasticity alone. Another explanation is that the Indian economy has become more efficient in its use of petroleum products. In other words, the growing economy is being oiled by a more fuel-efficient engine. But such large gains in fuel efficiency could not have been clocked in such a short span of time. It is likely that there has been a redistribution of demand within the hydrocarbon segment. For example, more inefficient and expensive fuel oil and naphtha are being replaced by natural gas and LNG. But even after factoring in significantly higher growth in the use of LNG and CNG and the sharp decline in sales of naphtha and FO, the overall growth in hydrocarbon demand should have been higher than what has been registered. Are there other hidden factors at work? One theory says that as the economy matures, it becomes less oil dependent. In other words, there is a lesser requirement of hydrocarbon consumption for every percentage increase in GDP. Data available with this website shows that the oil elasticity of GDP (ratio of GDP growth to growth in oil demand) has been showing a decline from the mid-eighties till now. Between 1985-90, the oil elasticity was 1.15, whereas the projected elasticity for 2002-07 was only 0.46. That could be one reason. It is a fact that a significant portion of our economic dynamism is centred around the services sector, which is not dependent on the hydrocarbon economy. Whatever the rationale, it is only hoped that the depressing performance of the oil sector does not one day pull down the overall economic growth of the country.
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STATESMAN

Bystander · Telugu Teja Joined: 13 Oct 2004 Posts: 438

Yes, India will be exporting value added hydrocarbons derives products soon. RIL mega refinery which will be the largest in the world when completed, is specifically looking at potential export HSD and other ready to use products to far away as USA. Essar refinery at same Vadinar, Jamnager Gujarat also has similar ambitions. PSU refineries will have to buck up to meet the iternational standards. OVer all the scenario will be very positvie and Indian refineries will be exporting refined products. If they can not export due any reason other than demand say war, yes the situation can be harmful to those refineries, which built up capacities beyond the requirement of local markets.
Any major rise in crude prices, with our APM for petrol, diesel etc, can adversely effect the margins of refineries. Due to high crude prices and the govt policy to keep the fuel available with in the reach of at least middle class, if not lower strata, major PSUs like IOC, HPCL, BPCL are trading at much below their market price in stock exchanges, due to daily losses running in crores. For example with current bull run of stock markets, say BHCL should have been any where near 800-1000, but it trades 350-400. If one is interested in stock markets, refinery stocks are presenting a buying opportunity with 2-3 years perspective. This can be safely be said, all experts predict the crude prices will come down to near $40 a barrel in next 2-3 years. Infact RIL at present market price of 66 against issue price of 60 on IPO a few months ago, will be gold mine stock with3 years perspective. I am not into stock broking.
With the strategy being followed by India Inc. things will be stable. India has been offering partnership to Gulf major in our refinery projects, as this will ensure smooth and regular supply of raw materials - crude - at reasonable prices, as these Gulf partners will also loose, when these refineries make losses.
I put better hopes on petrochemicals. RIL again leads, with Surat facility and the upcoming facility in Jamnagar. This helps by making raw materials readily available for derivative industries like plastics, fertilizers etc.
For energy needs mainly, more finds of crude or gas will greatly help to reduce crude import bills, which will dramatically change wealthyness of nation. Recent offshore find off Kakinada make such dreams possible. In future we could do more deep sea drilling and get some more reserves.
We should also go with nuclear energy.
Power generation: Glad to hear the proposals from Union govt to start 5-6 new coast based NU plants. We should not fall into the trap of intimidating IndoUS nuclear deal, recently approved by US senate. We must preserve our right to mine, enrich, do research, or test missiles etc. Simply put it, future NU plants should not have the compulsion on them to use only imported fuel from US or their allies. This is largely a political issue.
Generating electricity from NU energy will help reduce dependence on petro products, as we have large rail network, which can meet large portion of transportation needs without petro- products.
Yes, I see future is bright. This sector will not bring down or negate gains from service sector.

statesman · Posted: Wed Nov 29, 2006 8:56 pm Post subject:

SPM facilities at HPCL's Visakh refinery: ICB tender fails to evoke response, EIL to implement project on nomination basis

In order to expedite the implementation of Single-Point Mooring (SPM) facilities at its Visakh refinery, Hindustan Petroleum Corporation Ltd (HPCL) is likely to nominate Engineers India Ltd (EIL) to take up the project works via the lumpsum turnkey (LSTK) route. Readers will note that international competitive bidding (ICB) tenders floated for appointment of Project Management Consultancy (PMC) contractors to the project had failed to elicit any response in spite of repeated extension of bid submission date. Consequently, HPCL has now decided to go along with EIL's offer, wherein the Indian engineering firm has proposed installation of the SPM facility by April 2008. Pertinently, EIL's prior experience with SPM projects on LSTK basis under national oil companies (NOCs) IOC and ONGC was instrumental in the HPCL decision. The project envisages installation of SPM facilities at Visakh to handle crude offtake via Very Large Crude Carriers (VLCC). This will supplement the proposed capacity expansion of the refinery from 8.33 MMTPA to 15 MMTPA. The standalone capital cost of the SPM facilities has been estimated at Rs 300 crore. However, inclusion of the crude oil terminal will push up projected cost of project facilities to Rs 535.28 crore. The total savings on account of reduction in freight and wharfage charges once the SPM facilities are in place will be Rs 239 crore per annum for 15 MMTPA crude oil handling. With an attractive payback period of 15 months, the Internal Rate of Return (IRR) for the proposed 15 MMTPA project works out to 44.23%. In view of such tremendous cost-efficiency the National Institute of Oceanography (NIO), Goa has already been roped in for conducting geophysical, geotechnical, oceanography surveys and Rapid Environment Impact Analysis (REIA) studies at the proposed location for the SPM facility.
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STATESMAN

ved · Telugu Veera Joined: 26 Feb 2006 Posts: 2029

Cairn India to invest Rs 7500cr to produce 1,50,000 bpd

Which fields in AP the above report is referring to?

This is interesting