Growth in Refining Sector

In the liberalised scenario, the Government has opened the refining sector to "Joint Sector" as well as to the private sector for achieving faster growth. About 27 million tonnes per annum additional capacity is planned to come up under PSUs. Under joint venture, 43 million tonnes per annum capacity will be added in the next 54-6 years. Out of this 43 million tonnes per annum capacity will be added in the next 5-6 years. Out of this 43 million tonnes per annum capacity, IOCL have tied up with Kuwait Petroleum Company for one refinery, HPCL with Oman Oil Company and Saudi Aramoco for two refineries and BPCL with Oman Oil Company and Shell International for two refineries. In the private sector, etters of intent (LOIs) have been issued for about 41 million tonnes per annum refining capacity. The companies to whom LOIs have been issued are Reliance (15 MTPA), Essar (9MTPA), Ashok Leyland (2 MTPA), Nippon Denro (9MTPA) and Soros Foud (6 MTPA) . Under the EOU category, about 29 million tonnes per annum capacity has been approved. In sum, additional refining capacity of about 110 million tonnes per annum excluding EOUs is planned for implementation during the next 5-6 years.

Opportunities Creating additional refining capacity of about 110 million tonnes per annum during the near future will require an investment of over US $ 22 billion. With such phenomenal growth in this sector, there is ample scope and opportunity for the transfer of technologies required and export of capital goods, etc., to India. The technologies required will be for upgrading the bottom of the barrel and to meet the predominant demand for middle distillates and also to improve the quality of petroleum products to make them environment-friendly and globally competitive.

Most of the new refineries will be located on the coasts while the major centres of demand for the petroleum products are in the inland locations, particularly in North/North-West regions. Therefore, there are opportunities for building inland refineries in the country. The refineries in the country are also allowed forward integration in the fields of petrochemicals, etc., for better value-addition, which opens up another vast area for investment.

India has a strong commitment to pursue an energy policy which will take due account of the environmental considerations. Accordingly, the country is adopting more environmentally benign measures with regard to usage and quality of fuels. Lead phasing-out & benzene reduction in gasoline, sulphur reduction and cetane improvement of diesel are amongst the prominent measures that are under implementation/consideration. Such quality up gradation of fuels will call for adopting latest/state-of-the-art technology requiring huge investments of the order of US$ 2500 million by way of providing reformulated gasoline producing units, hydro crackers, hydro-treaters, hydro desulphurisers, etc.

India's Advantages India has large reserve of trained and highly skilled manpower at a relatively much lower cost compared with advanced countries. Further, with a large population base and a currently very low per capita consumption of petroleum products, India is amongst the fast emerging markets . The country has also acquired enough experience in the installation and efficient operation of petroleum refineries in the last 35 years. It is, therefore, considered that the operating cost will be low and the value-addition in Indian refineries will be of a very high order and that the setting up of refineries in India for the domestic market as well as for exports would be economically attractive.