India is pressing efforts to involve foreign companies in upgrading its refining industry.
A government board chose British Petroleum plc and Caltex Petroleum Corp. to provide technical assistance to India's refineries for expansion and upgrading plans.
More such involvement by foreign companies in India's downstream industries is likely in the 1990s as that country seeks to cut its imports of petroleum products.
NEW GOVERNMENT EMPHASIS
India's new government has placed greater emphasis on increased domestic production of certain refined products that are in sharply rising demand.
The new minister for petroleum and chemicals, M.S. Gurupadaswamy, said his ministry will give top priority to production and distribution of kerosine and diesel fuel. Gurupadaswamy said implementation of such projects in the oil sector had been lagging.
The concern is that India is increasing its imports of petroleum products at a faster pace than crude oil imports (OGJ, June 4, p. 21).
India's imports of petroleum products for fiscal 199091, which began last Apr. 1, are forecast to jump to 240,000 b/d from 142,800 b/d in fiscal 1989-90, the ministry estimates. That compares with crude oil imports projected roughly flat at 390,800 b/d in fiscal 1990-91 vs. 392,000 b/d in fiscal 1989-90.
Government estimates place India's total demand for petroleum products at 2 million b/d by the end of the 1990S.
Part of the needed focus, says Gurupadaswamy, is curtailing demand for oil and improving fuel efficiency. With that in mind, the government recently hiked domestic prices for some petroleum products and import duties on crude oil.
In the fiscal 1990-91 budget the government raised the retail price of gasoline, high speed diesel (HSD), jet fuel, paraffin, and lubricants. At the same time, the government increased the import duty on crude.
The petroleum ministry noted that the price of imported crude had risen to $16.44/bbl in fiscal 1989-90 from 14.25/bbl in fiscal 1988-89. During the same period, the HSD price rose to $24.93/bbl from $20.37/bbl and kerosine to $26.44/bbl from $22.33/bbl.
The ministry also noted that India's consumption of gasoline climbed 8.5-14.5%/year in the last 5 year planning period. Further, the price tag for India's petroleum imports jumped to $4.09 billion in 1989-90 from $1.717 billion in 1986-87.
BACKGROUND
The petroleum ministry has called for construction of four 120,000 b/d grassroots refineries to be on stream by 2000. That has run into a series Of Political roadblocks and changes in plans (OGJ, Nov. 27, 1989, p. 37).
The first of those two refineries, at Mangalore and Karnal, originally were scheduled to go on stream during the eighth fiscal planning period (1990-95). A refinery at Itarsi in Madhya Pradesh and another along the coast or inland in the eastern part of the country would go on stream in the ninth planning period (19952000).
Most recently, however the emphasis shifted when the ministry and India's planning commission chose to consider refinery expansions instead of grassroots construction.
Allowing capacity expansions totaling 240,000 b/d at the nation's 12 refineries would cost about $335 million and hike India's refining capacity to 1.296 million b/d by 1995 (OGJ, May 7, Newsletter).
That in turn would allow plans for the Karnal and Mangalore refineries to be placed on hold.
India's refineries currently have a nameplate capacity of about 992,000 b/d, says a report on India's oil sector by East-West Center, Honolulu. Four run exclusively crude from India's onshore northeastern province, and the others Bombay High and/or imported crudes.
All 12 are operated for maximum output of middle distillates, which currently account for about 51% of their yield, the report said.
Each refinery has resid upgrading facilities: delayed cokers in the four northeastern plants and catalytic crackers in seven of the others. Only one of the three lube oil refineries and some of the cat cracking refineries have visbreakers.
India's first hydrocracker is being installed at the Koyali refinery, which also is being debottlenecked to boost capacity to 190,000 b/d from 146,000 b/d, the report said. In addition, the refinery at Mathura is being debottlenecked to hike capacity to 150,000 b/d from 120,000 b/d.
MULTINATIONALS' DEALS
The government board selecting BP and Caltex considered others and even preferred Royal Dutch/Shell Group's technology.
However, the board deemed Shell technology too costly.
Shell may still be considered if a lower price can be negotiated, industry officials said.
The agreement with BP and Caltex hinges upon those two companies reducing their price as well.
Chevron Corp. also made the short list of companies bidding for participation in Indian refinery projects, but the company later withdrew its bid.
Meantime, two U.S. multinationals have pulled out of participation in two Indian downstream companies.
Amoco Corp. pulled out of its minority interest in Madras Refineries Ltd. and Madras Fertilizers Ltd. Phillips Petroleum Co. withdrew from its participation in Cochin Refinery Ltd.
Tying up with the multinationals is seen as providing a boost in gauging Indian refining efficiency and planning new programs.
INDIAN REFINERS HEALTHY
Indian refiners have reported high utilization rates and healthy operating efficiencies of late.
For example, Cochin's refineries achieved 102.58% utilization during 1989-90, despite a 30 day maintenance turnaround.
Cochin refineries processed 92,320 b/d in the period vs. nameplate capacity of 90,000 b/d.
Cochin also reached record average production of about 38,600 b/d of HSD, 9,400 b/d of gasoline, and 3,035 b/d of liquefied petroleum gases.
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