India's hydrocarbons market growing

India's need to import crude oil and products could double during the next 5-10 years despite the country's plans to increase refining capacity.

Growth also lies ahead for liquid petroleum gas (LPG) imports.

Those are the findings of Drewry Shipping Consultants Ltd., London, which said India's decision to open its oil industry to outsiders is the main influence on the country's petroleum business.

India's refineries once relied on crude oil from the former Soviet Union. F.S.U.'s oil industry problems have forced India to trade in world markets.

India's intake of crude oil and refined products is currently about 50 million metric tons/year, Drewry said.

"Despite plans to bring significant new refining capacity on stream, this is an import growth area, with 'India trade optimists' seeing volumes double over the next 5-10 years."

Imports at present are mainly from the Middle East.

India has 12 refineries with total crude distillation capacity of almost 1.1 million b/d. Since liberalization of the refining sector in 1992, a further 13 plants are planned or under construction (Table 1 [18334 bytes]).

Oil supply/demand

India's proved oil reserves were estimated at 5.8 billion bbl at the end of 1994, Drewry said, with exploration adding a further 465.4 million bbl to the reserves total in fiscal 1994-95.

Oil demand has surged of late, with the increasingly liberalized economy encouraging energy use. Gross domestic product increased 4-5%/year in the first 4 years of the 1990s, when oil consumption grew 6%/year.

Products demand is anticipated to average 1.6 million b/d in 1995-96, Drewry said. This upward trend is likely to continue, reaching 1.9 million b/d in 2000 and a "daunting" 2.35 million b/d in 2005.

India's Ministry of Petroleum & Natural Gas predicts demand for commercial energy will double between now and 2010, making India one of the world's fastest growing oil consumers.

After 3 years of decline, domestic crude production is making gains, reaching 665,000 b/d in 1994, Drewry said.

"This upturn in production may be attributed to restored oil flow in Bombay High field. This field alone accounts for nearly two thirds of domestic production.

"It is anticipated that crude output will rise to 880,000 b/d by 1997, after which it will stagnate at that level."

Oil imports

Drewry data show India is the world's 13th greatest importer of crude oil, taking in an average 535,000 b/d in 1993, of which 485,000 b/d came from the Middle East and 50,000 b/d from Africa.

Drewry said, "Imports from the Middle East will undoubtedly rise when, among others, the joint venture refinery at Mangalore in southern India comes on stream in 1996.

"Imports will be supplied from Oman Oil Co. to the refinery, which will initially utilize 60,000 b/d, increasing to 180,000 b/d."

Further growth in consumption, coupled with depleting reserves and sporadic exploration, is expected to require India to continue to import a significant portion of its crude oil.

India's refining capacity is expected to rise to 1.3 million b/d by 1998 and 1.6 million b/d by 2000, but this is expected to be insufficient to meet projected demand, making India increasingly reliant on products imports.

Imports of gas oil/diesel in 1993 averaged 240,000 b/d, Drewry said, which was almost half of domestic demand of 530,000 b/d. Kerosine imports met more than half of the total requirement of 230,000 b/d that year.

More recently, India has become a regular importer of gasoline, with consumption estimated to stand at more than 8,000 b/d above average domestic production of 100,000 b/d.

Because domestic supply is projected to continue to fall short of demand in the foreseeable future, Indian Oil Corp. suggests an increase in import demand for petroleum products of more than one third by 1997.

Gas market

Drewry pegs India's gas reserves at 706.98 billion cu m in 1994. Reserves are not expected to grow much further short term because of the link to relatively unsuccessful oil exploration by state owned companies.

Gas production amounted to 17.3 billion cu m in 1994, while gas consumption amounted to 17.42 billion cu m.

The potential for gas is hampered by lack of a national grid, which is expected to become feasible in 1996-97.

"With indigenous gas availability not expected to show growth in either the short or medium term," Drewry said, "the current situation of demand being supply constrained may be expected to continue.

"The director general of hydrocarbons anticipates that demand could be up to 15 times that which can be supplied by local sources."

India's privatized power generation industry is increasing its use of gas fuel. Essar Group is preparing to import liquefied natural gas to fuel a proposed power plant in Gujarat, while another plant in Maharashtra was said to be going ahead.

Qatar will supply 2.5 million metric tons/year of LNG for the latter project, while negotiations with Qatar for supply of a further 2 million metric tons/year of LNG for the Gujarat plant are at "an advanced stage."

The proposed Oman to India gas pipeline is a potential curb for imports of LNG to India. The twin pipeline project is expected to supply 57 cu m/day of gas if it goes ahead.

Meanwhile, India's LPG production has been growing steadily. Demand is estimated at 3.5 million metric tons in 1995, of which about 500,000 metric tons was imported. LPG demand has been projected to double by 2000.

Drewry said LPG imports are expected to reach 700,000 metric tons this year and 2.25 million metric tons by 2000. However, the LPG import market is hampered at present by lack of a transportation system.

A proposed 1,500 km LPG pipeline is to run from Kandla on the northwest coast to New Delhi, with capacity to ship 3 million metric tons/year of imported LPG.

Private sector companies plan to build more than 1.4 million metric tons of LPG import capacity by 2000, although progress on some of the projects is unclear and only three are known to have been completed (Table 2 [20196 bytes]).

"If the various projects are completed successfully," Drewry said, "India's LPG import capacity will reach more than 4 million metric tons/year by the end of the decade.

"In the same period, India's LPG demand has been predicted to nearly double to more than 6 million metric tons/year, considerably in excess of projected capacity."

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