Oil & Gas

The oil and gas industry has been instrumental in fuelling the rapid growth of the Indian economy. The petroleum and natural gas sector which includes transportation, refining and marketing of petroleum products and gas constitutes over 15 per cent of the country's gross domestic product (GDP).

As per an Investment Commission report, petroleum exports have also emerged as the single largest foreign exchange earner, accounting for 11.5 per cent and 15 per cent of the total exports in 2005-06 and 2006-07. The growth continues in the new fiscal with the export of petroleum products touching US$ 20.03 billion during April-December 2007.

However, India's domestic demand for oil and gas is also on the rise. As per the Ministry of Petroleum, demand for oil and gas is likely to increase from 176.40 million tonnes of oil equivalent (mmtoe) in 2007-08 to 233.58 mmtoe in 2011-12.

As per the BP Statistical Review of World Energy, 2006, India's primary commercial energy consumption (including coal, oil and gas) was 423 mmtoe in 2006, making it the fourth largest consumer in the world with a four per cent share of the global primary commercial energy consumption. The primary commercial energy consumption in India grew at a compound annual growth rate (CAGR) of 4.5 per cent during 1996-2006, which is more than double the global CAGR during the same period. Of the total primary commercial energy consumption in India, oil constitutes 28 per cent and natural gas 8 per cent. Coal continues to be the dominant fuel accounting for 57 per cent of total energy consumption.

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.

Global Refining Hub

India is emerging as the global hub for oil refining as it 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 19th in 1995), with a share of 3 per cent of the global capacity, India is likely to boost its refining capacity by 45 per cent or 65.3 mtpa (million tonne per annum) over the next five years, according to a Deutsche Bank report. According to the report, Indian companies plan to increase their refining capacity to 242 mtpa by 2011-12 from about 149 mtpa in 2007.

• Indian Oil Corp (IOC) plans to increase its refining capacity from 60.2 mtpa to 80 mtpa.
• The two public sector undertakings, GAIL (India) Ltd and Indian Oil Corporation Ltd (IOCL), are looking at setting up a US$ 2.09 billion petrochemical plant at Barauni, which would be of a minimum 3 lakh tonnes capacity.
• ONGC plans to scale up its refining capacity up to 45.5 million tonnes by 2009-10 from about 13 mtpa in 2006.
• Reliance Industries Ltd is constructing a new refinery in the Jamnagar SEZ with a capacity of 29 mtpa, which will be operational shortly.
• Nagarjuna Oil Corp is planning a new refinery at Cuddalore with a capacity of 6 mtpa to be operational by 2011 at an investment of US$ 1.05 billion.
• Essar Oil plans to more than triple the capacity at its refinery at Vadinar to 34 mtpa from the current 10.5 mtpa at an investment of US$ 6 billion.
• Hindustan Petroleum Corporation plans to invest US$ 2.5 billion in expanding its Visakhapatnam refinery capacity to 16 million tonnes.

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.