Gujarat to remain a hot-spot for oil & gas sector

The vibrant state of Gujarat has been emerging as a major investment destination for the oil and gas sector due to the state governmentÂ’s sound economic policies.

Over the years, various industries such as power, automobiles, healthcare, gems, jewellery and ports have seen sharp acceleration in their businesses, boosting the stateÂ’s growth at a time when the countryÂ’s economic growth run-rate has been showing a downward curve over the past couple of years.

Progress chart

According to industry body AssochamÂ’s report released early this year, Gujarat had attracted investment proposals to the tune of Rs 16.28 lakh crore, higher than the states of Maharashtra, Andhra Pradesh and Karnataka. The higher investment proposal signifies how the state has transformed itself into a major power house for attracting varied businesses.

While the state has been proactive in attracting new businesses, the hydro-carbon space, too, has made sharp inroads in the past few years, with several big names from the private firms making billion-dollar investments in this high-potential and capital-intensive sector. Some of the big names in the private sector space such as Reliance Industries and Essar Oil are already operating huge oil refineries in Gujarat, under-scoring the stateÂ’s growing clout as a major oil and gas destination.
 India, the worldÂ’s fourth-biggest oil importer, relies mainly on outside supplies for 80 per cent of its oil needs, or about 3.5 million barrels per day (bpd). Such high dependence on imports has its own adverse economic consequences with the nation last year spending more than $400 million on crude oil imports per day. The countryÂ’s proven, probable and possible oil reserves is estimated to be around 11 billion barrels which is far from adequate for IndiaÂ’s growing oil demand. To add to it, IndiaÂ’s oil consumption is estimated to rise to 5 million bpd over the next five-seven years.

Although, new gas field discoveries along the eastern coast of India could mark a significant increase in gas production and distribution in the coming years, the state of Gujarat continues to remain a hot-bed for private companies in the oil and gas space.

Gujarat a force to reckon in oil and gas biz

 The state of Gujarat is rich in hydrocarbon resources and is the largest on land producer of oil and gas in country. The state accounts for 54 per cent of IndiaÂ’s onshore crude and 39 per cent of onshore natural gas production. It has about 46 per cent of IndiaÂ’s installed refining capacity and 60 per cent of IndiaÂ’s total crude oil import facility.

Gujarat has been one of the earliest oil and gas producing states in the country, with Ankleshwar and Mehsana being amongst the earliest gas field discoveries in the country. The Gujarat region is the second largest gas-producing region in the country with a share of 10 per cent of the overall gas production. ONGC has onshore fields located near Ahmedabad region and Ankleshwar with volume of 20 mmscmd, while GSPC, in association with Niko Resources operates Hazira Gas field while Cairn India operates gas field in the Cambay basin. The state government owned Gujarat State Petroleum Corporation (GSPC). It is an oil and gas exploration, development and production company that owns 64 oil and gas blocks – 53 in India and 11 internationally 18. Within India, the GSPC is not only present in the state but also in the KG Basin, Andhra Pradesh. Essar has a 70 per cent interest in an oil block in Mehsana, with reserves of 2mmbbl of oil and potentially significant CBM reserves.

On the refinery side, Gujarat plays a significant role in meeting the countryÂ’s finished product needs. Reliance Industries operates a 33 million tonne per annum (MMTPA) Domestic-Tariff Area (DTA) refinery that sells most of its products to the domestic market, and a 29 MMTPA only-for-export units. Essar Oil, post completion of its expansion and optimisation projects in June 2012, now operates a 20 MMTPA facility, which accounts for about 10 per cent of the countryÂ’s refining capacity. Both these refineries are located in the coastal district of Jamnagar. Indian Oil also has a 13.7 MMTPA refinery at Koyali in Gujarat, which is being expanded to 18 MMTPA tons by 2014. Hence, of the countryÂ’s refining capacity of about 215 MMTPA, Gujarat alone accounts for over 96 MMTPA.

Over half of IndiaÂ’s refining capacity is dependent on crude imported through Kandla, Mundra and Vadinar. These are all weather ports with relatively deep drafts, allowing large crude carriers to dock in the ports. No dredging is required in these ports, which keeps cost low. While it does represent heavy concentration of risk in a smaller geographical area, it also underscores the importance of the region in the national energy map. Any emergency that affects crude intake at these places will create a huge crisis of petroleum products in the country. It is therefore essential to develop additional pipeline and storage infrastructure to deliver products into the supply envelopes of the coastal and inland refineries that transport crude from the Kandla-Mundra-Vadinar region.