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India as an emerging refining hub

India as an emerging refining hub

Nearly 25-30 per cent lower costs of refining than the rest of Asia, government deregulation and new discoveries make India is fast emerging as a refining hub, says Kumar Ramesh.

In 2010, India’s total primary energy consumption was 433.3 million tonne of oil equivalent (mtoe), an increase of 5.6 per cent over 2009. Of this, 135 mt of oil contributed 31 per cent of the overall energy consumption, which is in line with the world average share of oil at 35 per cent. Oil and gas contribute to around 15 per cent of India’s GDP. Petroleum exports have also emerged as the largest foreign exchange earner, accounting for 17.24 per cent of the total exports. With export markets of Europe in mind, the fuel quality is expected to conform to Euro V and Euro VI Standards.

With costs of refining almost 25-30 per cent lower than the rest of Asia, India is fast emerging as a refining hub. The country is expected to ramp up its refining capacity by over 45 per cent or to 65 stipulations by the Indian Government (currently Bharat Stage IV).

PSUs are expected to spend over $101.33 billion, over the next five years, in augmenting their manu­fa­cturing capacity and improving facilities at their exploration sites.

Deregulation of the oil sector allowing for 100 per cent FDI in petroleum products, exploration, pipelines and marketing/retail make investment in oil and gas infrastructure an attractive proposition.

While India’s recoverable gas reserves have grown significantly over the last five to seven years with sizable discoveries made in the off-shore areas on the east coast, crude oil reserves have not shown any marked growth. This implies that, even with
the heightened exploration activity over the last eight years, the pace of discovery of new oil resources has been barely adequate to sustain the current level of crude oil production. This constitutes the most potent challenge for the growth of domestic crude oil production.

Prime share of the current reserves is located in off-shore and deep water fields. Besides, generally, the development cost for offshore discoveries is substantially higher than those onshore. Consequently, the major share of future investments in the upstream sector in India is expected to be in the offshore segment.

India has 26 sedimentary basins, covering an area of 1.79 million sq km, including onshore area and off-shore area up to a depth of 200 m. Out of these, ten basins, covering 0.68 million sq km, have either commercial hydrocarbon production or proven reserves.

In addition, another 1.35 sq km of off-shore sedi­mentary area lies at a depth of more than 200 m. Currently, 1.18 million sq km is held under licences for exploration across 303 blocks. The distribution of active exploration area shows that exploration activity in India is focused largely on off-shore areas.

In view of the high initial investment, and high risk nature of the industry, formation of consortiums across domestic and international participants, to bid for and operate exploration blocks, has been the prevailing trend in the industry.

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