Republic Day Special

'37'

PERFORMANCE OF INDIAN PETROLEUM INDUSTRY

S. Narayan*

    The petroleum industry in India stands out as an example of the strides made by the country in its march towards economic self-reliance. At the time of Independence in 1947, the industry was controlled by international companies. Indigenous expertise was scarce, if not non-existent. Today, a little over 50 years later, the industry is largely in the public domain with skills and technical know-how comparable to the highest international standards. The testimony of its vigour and success during the past five decades is the significant increase in crude oil production from 0.25 to 33 million tonnes per annum and refining capacity from 0.3 to 103 million metric tonnes per annum (MMTpa). The consumption of petroleum products has grown 30 times in the last 50 years from 3 million tonnes during 1948-49 to about 91 million tonnes in 1998-99. A vast network of over 29,000 dealerships and distributorships has been developed backed by over 400 storage points over the years to serve the people even in the remote and once-inaccessible areas.

    A major boost to the oil industry came in pursuance of the Industrial Policy Resolution, 1956 that intended to promote growth of the vital sectors such as petroleum under the state control. ONGC, which was formed as a Directorate in 1955, became a Commission in 1956. Indian Refineries Ltd., a Government company, was set up in 1958. In 1959, the Indian Oil Company (IOC), again a wholly-owned Government company, was formed for marketing of petroleum products. Indian Refineries Ltd. was merged with Indian Oil Company Ltd. to form Indian Oil Corporation Ltd. in September, 1964.

   Unlike at the time of Independence when there were no specialised petroleum bodies or institutions worth mentioning to provide developmental support to the petroleum industry in the country, there are today several such institutions such as the Indian Institute of Petroleum, Oil Coordination Committee, Petroleum Conservation Research Association, Oil Industry Safety Directorate, Centre for High Technology and Directorate General of Hydrocarbons. In addition, oil companies have set up research and development centres such as the one established by the Indian Oil Corporation in Faridabad which have done pioneering work in formulation of lubricants and greases.

    The real growth in exploration and production sector began after the discoveries by Burmah Oil Company in the fifties prompting the Government to establish Oil & Natural Gas Commission in 1956 and Oil India Ltd. in 1959.

    During the second decade of Independence (1957-67) a number of oil and gas-bearing structures were discovered by ONGC in Gujarat and Assam. Discovery of oil in large quantities in Bombay High in February, 1974 opened up a new vista of oil exploration in offshore areas.

    During the period 1977-87, exploratory efforts by ONGC and OIL India yielded discoveries of oil and gas in a number of structures in Bassein, Tapti, Krishna-Godavari-Cauvery basins, Cachar (Assam), Nagaland, and Tripura. The indigenous production reached 30 million tonnes by 1984-85, a self-sufficiency level of 70% of the country's requirements.

Natural Gas

    The Government set up the Gas Authority of India Ltd. (GAIL) in August, 1984 to deal in transportation, processing and marketing of natural gas and natural gas liquids. One of the major achievements of GAIL has been the laying of a 1700 km-long gas pipeline (HBJ pipeline) from Hazira in Gujarat to Jagdishpur in Uttar Pradesh, passing through Rajasthan and Madhya Pradesh.

    To minimise the gap between demand and availibility, in general, and to encourage domestic production, in particular, the Government has taken several measures. It has signed contracts for 23 blocks for exploration, awarded 30 small or medium-sized discovered fields to private companies for development and increased recovery factor to obtain more oil from the existing oil fields. It has also permitted downstream oil companies to invest in exploration and production in India and abroad, announced details of the New Exploration Licensing Policy (NELP) and offered for the first time some blocks in deep-water areas.

Growth

    In the 50 years since Independence India has witnessed a significant growth in the refining facilities and increase in the number of refineries from one to seventeen now . There has been an increase in the refining capacity from 0.25 tonnes MMTpa to about 103 MMTpa.

    The first decade of Independence (1947-57) saw the establishment of three coastal refineries by multinational oil companies operating in India at that time, viz. Burmah Shell, Esso Stanvac and Caltex; the first two at Mumbai and the third at Visakhapatnam.

    The second decade (1957-67) witnessed the setting up of Indian Refineries Ltd. in 1958, a wholly-owned public sector Government company. Under its banner three refineries were set up at Guwahati (Assam), Barauni (Bihar) and Koyali (Gujarat) essentially to process the indigenous crude discovered in Assam and Gujarat. In addition, one joint sector refinery was set up with the participation of an American company at Cochin, based on imported crude.

    The next ten year period (1967-77) witnessed the establishment of two refineries, one with equity participation from American and Iranian companies at Chennai and another in the public sector at Haldia by Indian Oil.

    The period 1977-87 saw the commissioning of two more refineries in the public sector. The refinery at Bongaigaon was the first experiment in having an integrated petroleum refinery-cum-petrochemicals unit. The other refinery was set up at Mathura in 1982. Major expansions of the coastal refineries at Mumbai, Cochin, Chennai and Visakhapatanam were also completed during this period. The notable feature of the capacity additions during this decade have been the extensive utilisation of the process design capabilities of M/s Engineers India Ltd. and installation of Secondary Processing Facilities to increase the production of much required kerosene, diesel and LPG.

    During the fifth decade (1987-97), a small refinery of 0.5 MMTpa at Nagapatinnam was built in Tamil Nadu. It is based on crude from adjoining fields. In 1996, a 3 MMTpa refinery was built in the joint sector at Mangalore between HPCL and Indian Rayon. This decade also saw significant expansions to the capacities of the existing refineries, thereby raising the refining capacity to about 62 MMTpa. Today, with the setting up of Panipat refinery during 1998-99 and Reliance and Numaligarh Refineries in 1999-2000, there are 17 refineries operating in the country, 15 in the public sector, one in the joint sector and one in the private sector, with an installed capacity of 103 MMTpa.

    This decade also witnessed major policy initiatives in the refining sector. In 1987, the Government decided to set up refineries in the joint sector in which the equity participation of public sector undertaking was envisaged to be 26%. Another 26% equity was meant for the private sector partner and the balance 48% was to be raised from the public.

The Government has also announced that investments in the refining sector will be encouraged by providing reasonable tariff protection and making marketing rights for transportation fuels viz. MS, HSD & ATF conditional on owning and operating refineries with an investment of at least Rs.2,000 crore or oil exploration and production companies producing at least 3 million tonnes of crude oil annually. As per the current outlook, India's refining capacity is estimated to reach a level of 129 MMTpa by the end of the IX Plan (2001-02).

*Secretary, Ministry of Petroleum and Natural Gas