(EnergyAsia, August 28 2016, Sunday) — Confident that crude prices will remain low for some time, India is pushing ahead to build another giant oil refinery that will boost the nation’s total annual capacity by more than a quarter to 290 million tonnes.
The proposed 60-million-tonne complex in the central western state of Maharashtra is aimed at increasing India’s role as an oil products exporter as well as meet its own rising domestic demand. While matching the size of the world’s largest stand-alone refinery in nearby Gujarat state, the new plant is slated to be leaner and more advanced technolocially to produce high-end fuels and petrochemicals products.
Officials have decided to proceed with the proposed one-trillion-rupee investment after studies showed it would be viable with crude oil prices unlikely to return to the US$100-a-barrel level of 2010 to 2013. (US$1=67 rupees). Combined with the existing oil-petrochemical base in northwestern Gujarat state, it will enhance India’s western corridor as a major refining and supply trading centre serving Pakistan, East Africa, and even as far as the US, Europe and Asia.
Just as important, the Maharashtra refinery will strengthen India’s domestic energy security as well as its geopolitical position against Pakistan and China in vying for the affections of the Middle Eastern oil producing states.
In a statement to Parliament in early August, Petroleum Minister Dharmendra Pradhan confirmed the project will be jointly owned by three of the country’s state energy firms, India Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum. While Pradhan has not announced details, the companies are working on a plan that could include selling a significant shardeholding to a Middle Eastern oil producer.
India raised its refining capacity to more than 230 million tonnes earlier this year with the start-up of a 15-million-tonne plant in Paradip in the northeastern state of Odisha. Despite numerous project delays and cost overruns, India has quadrupled its refining capacity over the past 20 years to become a major oil products supplier. In 1995, its refining capacity of 60-million tonnes was slightly smaller than Singapore’s, which has lost its position as Asia’s swing fuels supplier.
Despite the surge in capacity, India’s oil product exports have not grown over the last four years. It rose from 63.4 million tonnes in fiscal 2012 to a record 67.9 million tonnes in FY2013 before declining to 60.5 million tonnes in the last fiscal year.
To support the increased throughput, India increased its import of crude oil from 184.8 million tonnes in FY2012 to more than 202.8 million tonnes in FY2015.
On balance, the refining business has yet to pay off as India continues to suffer a deficit in its overall oil trade.
Thanks to the collapse in imported crude prices, India’s oil trade deficit has plunged by more than half from US$98 billion in FY2012 to US$46.9 billion last year. But its refiners have also suffered as their earnings from oil product exports have fallen from US$58.8 billion to US$27 billion over the same period.
Source: Ministry of Petroleum and Natural Gas
India’s oil trade in US$m
FY 2015 2014 2013 2012
– Crude 63,961 112,744 142,962 144,293
– Products 10,015 12,138 12,466 12,590
Total Import 73,976 124,882 155,427 156,883
– Crude 0 0 0 0
– Products 27,058 47,277 60,664 58,848
Total Export 27,058 47,277 60,664 58,848
Net Import 46,917 77,605 94,763 98,035
India’s oil trade in 000 metric tons
FY 2015 2014 2013 2012
– Crude 202,851 189,435 189,238 184,795
– Products 28,302 21,301 16,697 16,354
Export 60,536 63,932 67,864 63,408
India’s oil and gas demand
FY 2016 2015 2014 2013 2012
Products 186,209 176,972 168,635 160,436 152,937
in 000 metric tons
Natural Gas 473 446 405 371 293
In million standard cubic metres/day
FY 2017 2018 2019 2020 2021
Products 197,445 209,185 220,747 232,649 244,960
Natural Gas 494 523 552 586 606