India currently has 19 refineries, with a total capacity of 3.76 million bpd, of which public sector units account for 2.10 million bpd and the private sector 1.66 million bpd. These refineries vary considerably in terms of capacity and sophistication. The Digboi refinery (0.0013 million bpd), established in 1901, is the oldest continuously operating refinery in the world, whereas Jamnagar is the largest single location refinery in the world, hosting Reliance’s most modern twin refineries with a total capacity of 1.24 million bpd, of which 0.58 million bpd was commissioned in December 2008.
During the Financial Year 2008/09 (FY 2008/09) the capacity utilisation of Indian refineries was 105%, excluding the newly commissioned additional refinery capacity of Reliance. Over the year, exports accounted for 36.3 million t of products, mainly from Reliance’s export oriented refinery. Europe and USA were the main markets for automotive diesel, naphtha, gasoline, etc. During the same period, India imported 18.3 million t of products.
In 2007 the average gross margin earned by Indian refineries was US$ 10.6/bbl. This reduced to US$ 6.5/bbl in 2008 with the global economic downturn. These relatively high margins by Indian refineries arose from a deliberate switch to heavy crude some years back with attendant changes in refinery processing units, proximity to Middle East sources of crude oil, capacity to receive crude cargoes in VLCCs, ability to meet tighter product specifications of automotive fuels in the importing countries, etc. The Indian government has been very supportive of the refining industry, which has not only been able to meet domestic demand but has also become an important export hub with an excellent safety record. A seven year tax holiday, which has been extended to 2012, and freedom to sell products to domestic marketing companies at international prices, have helped to shore up their profitability.
The existing refineries plan to expand capacity by about 0.54 million bpd and four new refineries are planned with an aggregate capacity of 0.72 million bpd. However, there are several factors which would delay, at least, new grassroots refineries. These include the weak global market, the narrowing of sweet and sour crude oil differentials, as well as finding the necessary finances as integrated oil companies in India are facing problems arising from losses in marketing, which are discussed later. The existing refineries also face project implementation challenges in meeting the government’s mandate to supply, by April 2010, Euro IV quality automotive fuels i.e. gasoline and diesel to 13 highly polluted large cities in India and Euro III fuels to the rest of India, as against Euro III and II respectively.
Transportation and domestic fuels
At 133 million tpy, India is the fifth biggest consumer of petroleum products in the world. In FY 2008/09 consumption registered a growth of around 3.5% compared to earlier years of around 6%. Currently, the single largest product sold is diesel oil (40% of the total) followed by naphtha, LPG, gasoline and kerosene, whose shares vary between 7 and 11%, while the remaining products account for approximately 15%.
Author, R K Batra, The Energy & Resources Institute, India
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