India's oil imports jump as refineries start up

June 7, 1999
India's crude oil imports are expected to rise substantially in the current 1999-2000 fiscal year as massive new refining capacity comes on stream. About 41 million metric tons/year of new Indian refining capacity is being commissioned in 1999. This is more than 60% of the 67.55 million tons/year of refining capacity set up in the country to date, including 6 million tons/ year at the Panipat refinery of Indian Oil Corp. (IOC) which will be fully commissioned in the next few weeks (OGJ,

India's crude oil imports are expected to rise substantially in the current 1999-2000 fiscal year as massive new refining capacity comes on stream.

About 41 million metric tons/year of new Indian refining capacity is being commissioned in 1999. This is more than 60% of the 67.55 million tons/year of refining capacity set up in the country to date, including 6 million tons/ year at the Panipat refinery of Indian Oil Corp. (IOC) which will be fully commissioned in the next few weeks (OGJ, Dec. 21, 1998, p. 28).

It has been projected that India will have to import about 78 million tons/year of crude oil by 2001-02-the last fiscal year of the ninth 5-year plan. This figure is about double oil imports in fiscal 1998-99. The country's refining capacity will have almost doubled during the 5-year plan, reaching 113.95 million tons/ year by 2002.

Growing crude shortage

The revised official projections for petroleum imports during the current fiscal year (Apr. 1, 1999-Mar. 31, 2000) place crude oil imports at 39.37 million tons, about 2.42 million more than the target. This is the highest in any year, mainly because of a setback in domestic crude output this year, reduced to an expected 31.61 million tons from the targeted 32.79 million tons. Partial commissioning of IOC's Panipat refinery exacerbated the problem.

As a result of the massive new refining capacity addition, crude oil purchases are set to increase from the Middle East. These crudes meet most of the Indian refineries' oil requirements.

A petroleum delegation from the United Arab Emirates visited India recently and was told by IOC that next year it intends to import more than 4 million tons of oil. As a friendly gesture to the Middle East nations, which employ a large labor force from India, New Delhi continues to buy crude from them on annual term contracts, which were signed during oil shortages in international markets.

The gesture also implies that oil security is at the back of the Indian authorities' minds, which is leading the national oil companies to try to acquire oil abroad.

New private refineries

The first refinery to be fully owned by a private-sector company is going to be commissioned at Jamnagar in Gujarat in October. Developer Reliance Petroleum Ltd. (RPL) already has plans in place to boost the capacity of the refinery from the initial 18 million tons/year to 27 million tons/year, making it one of the 10 biggest refineries in the world (OGJ, Dec. 21, 1998, p. 41).

The project has spurred the Reliance group to move upstream into field development in the Middle East. The idea is to have a permanent source of crude supply for the massive project.

This will be followed by another private-sector refinery, also at Gujarat. Essar Oil Ltd. is keen to expand its planned 10.5 million ton/year refinery to 24 million tons/year, but the target seems hampered by financial difficulties facing the group.

The emergence of these private refineries is also breaking IOC's monopoly on crude oil purchases from international markets. This explains RPL's first oil import contract, signed last month, for trial runs at its new refinery.

In addition to the Reliance and Essar refineries' contribution to India's capacity increase during the next fiscal year, another grassroots refinery, with 3 million tons/year of capacity, is being commissioned at Numaligarh in Assam. This is a public-sector refinery.

The rest of the new capacity will come from expansion and debottlenecking of the existing refineries in the public and joint sectors.

Total's interest

French oil giant Total recently expressed interest in investing in India's refining and marketing sector.

The company is reportedly looking to take minority stakes in existing state-owned plants. But its plan involves investing in retail marketing operations in India as well.

Total's strategy would be to supply crude from its Middle East operations to an Indian refinery in which it owns a stake. Processing condensate from its Iran operations is also an option.

Private oil firms are not yet allowed to own retail outlets in India, but Total sees the country as full of possibilities. If it gets a toe in the door by investing in a refinery, it will be in a good position if the marketing sector opens up.

Total's other plans for India include a joint-venture LNG import project with India's Tata industrial group (OGJ, Dec. 21, 1998, p. 36).

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