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Oil Refinery Infrastructure

Oil Refinery Infrastructure

Introduction

  • An oil refinery or petroleum refinery is an industrial process plant where crude oil is transformed and refined into more useful products such as petroleum naphtha, gasoline, diesel fuel, asphalt base, heating oil, kerosene, liquefied petroleum gas, jet fuel and fuel oils.
  • Petrochemicals feedstock like ethylene and propylene can also be produced directly by cracking crude oil without the need of using refined products of crude oil such as naphtha
  • An oil refinery is considered an essential part of the downstream side of the petroleum industry.
  • Jamnagar Refinery is the largest oil refinery, since 25 December 2008, with a processing capacity of 1.24 million barrels (197,000 m3). Located in Gujarat, India, it is owned by Reliance Industries.

Oil refineries in India

  • The oil and gas sector is among the eight core industries in India and plays a major role in influencing decision making for all the other important sections of the economy.
  • India has a flourishing crude oil refining industry with an annual capacity of 249.40 MMT, making it the second largest refiner in Asia (as of Apr 1, 2019).
  • India’s economic growth is closely related to energy demand; therefore the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment.
  • The Government of India has adopted several policies to fulfill the increasing demand. The government has allowed 100 per cent Foreign Direct Investment (FDI) in many segments of the sector, including natural gas, petroleum products, and refineries, among others. Today, it attracts both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.
  • Annual oil consumption stood at 69 million barrels per day (MBPD) and 54.20 billion cubic meters (bcm) of gas. By 2035, India’s energy demand is expected to double to 1,516 Mtoe from 753.7 Mtoe in 2017. According to the International Energy Agency (IEA), India is expected to account for almost one-third of the global growth in energy demand by 2040.

Sedimentary Basins of India

  • The existing 26 Sedimentary Basins have an area of approximately 3.14 million Sq. Kms. The sedimentary basins of the country have been classified into four categories as below::
  • Category-I
    • Basins with established commercial production. Cambay, Mumbai Offshore, Rajasthan, Krishna Godavari, Cauvery, Assam Shelf and Assam-Arakan Fold Belt
  • Category-II
    • Basins with known accumulation of hydrocarbons but no commercial production achieved so far
    • Kutch, Mahanadi-NEC (North East Coast) Basin,Andaman-Nicobar, Kerala-Konkan-Lakshadweep Basin.
  • Category-III
    • Basins having hydrocarbon shows that are considered geologically prospective Himalayan Foreland Basin, Ganga Basin, Vindhyan basin, Saurashtra Basin, Kerela Konkan Basin, Bengal Basin
  • Category-IV
    • Basins having uncertain potential which may be prospective by analogy with similar basins in the world. Karewa basin, Spiti-Zanskar basin, Satpura–South Rewa–Damodar basin, Chhattisgarh Basin, Narmada basin, Deccan Syneclise, Bhima-Kaladgi, Bastar Basin, PranhitaGodavari basin, Cuddapah basin.

Issues | Oil Refinery Infrastructure

  • Large crude import bills: In 2018-19, India imported more than 80% of its crude consumption and spent in excess of $110 billion.
  • Declining domestic crude production:Most of the producing fields (in Cambay, Assam-Arakan and Mumbai Offshore) are maturing or have already matured. Due to inadequate new oil and gas discoveries and subsequent development, India is witnessing a decline in crude production.
  • Technology constraints:The country needs investment in exploring and developing Category-2 and Category-3 basins. However, Indian operators do not have the requisite technology and experience in this area.
  • Inadequate transmission & distribution infrastructure: India needs to invest heavily in midstream and downstream sector to overcome infrastructure constraints in LNG, gas pipelines and CGD.
  • Environmentally friendly fuels: India continues to rely heavily on coal and petroleum products to meet its energy needs.
  • Low share of MNCs:Despite being one of the largest consumers of energy, India has a low share of MNCs in the domestic market.

Government Initiatives

Some of the major initiatives taken by the Government of India to promote oil and gas sector are:

  • The Government of India is planning to set up around 5,000 compressed bio gas (CBG) plants by 2023.
  • In September 2018, Government of India approved fiscal incentives to attract investments and technology to improve recovery from oil fields which is expected to lead to hydrocarbon production worth Rs 50 lakh crore (US$ 745.82 billion) in the next twenty years.
  • Government of India is planning to invest Rs 70,000 crore (US$ 9.97 billion) to expand the gas pipeline network across the country.
  • A gas exchange is planned in order to bring market-driven pricing in the energy market of India and the proposal for the same is ready to be taken to the Union Cabinet, according to Mr Dharmendra Pradhan, Minister of Petroleum and Natural Gas, Government of India.
  • State-run oil firms are planning investments worth Rs 723 crore (US$ 111.30 million) in Uttar Pradesh to improve the liquefied petroleum gas (LPG) infrastructure in a bid to promote clean energy and generate employment, according to Mr Dharmendra Pradhan, Minister of Petroleum and Natural Gas, Government of India.
  • The Oil Ministry plans to set up bio-CNG (compressed natural gas) plants and allied infrastructure at a cost of Rs 7,000 crore (US$ 1.10 billion) to promote the use of clean fuel.
  • Government has formed an expert panel for time-bound resolution of disputes in oil & gas sector

Auto Fuel Vision and Policy-2025  | Oil Refinery Infrastructure

  • Ministry of Petroleum and Natural Gas vide order dated 19.12.2012 has constituted an Expert Committee for drafting Auto Fuel Vision and Policy- 2025 under the Chairmanship of Shri Saumitra Chaudhuri, Member, Planning Commission, with the following terms of reference:-
  • Recommend suitable roadmap for auto fuel quality till 2025 for the country, taking into account achievement under the last Auto Fuel Policy, emission reduction of in-use vehicles, growth of vehicles and supply and availability of fuels
  • Recommend suitable mix of auto fuels including gas and its specifications considering:
    • Availability of infrastructure and logistics of fuel supplies.
    • Processing economics of auto fuels
  • Improvement in quality of fuel vis-a-vis improvement in vehicle engine technology
  • Recommend vehicular emission norms for various categories of vehicles and roadmap for their implementation
  • Recommend use of alternate fuels to minimize impact on environment
  • Recommend fiscal measures for funding requisite upgradation of oil refineries, logistics and removal of inter fuel pricing Distortions
  • The Committee has submitted its report in May, 2014.

Propositions

  • Provide impetus to renewable energy production to reduce crude import dependence.
  • Reduce oil cess on nomination era blocks and rationalisation of royalty rates to boost domestic production.
  • Development of pipeline infrastructure by the government for a gas trading hub to be functional in India.
  • Build road map for a gas-based economy in order to achieve the vision of increasing the share of gas in the energy mix to 15% by 2030
  • Bring gas, diesel and petrol under the GST.

Conclusion | Oil Refinery Infrastructure

  • Energy demand of India is anticipated to grow faster than energy demand of all major economies, on the back of continuous robust economic growth. Consequently, India’s energy demand as a percentage of global energy demand is expected to rise to 11 per cent in 2040 from 5.58 per cent in 2017.
  • Natural Gas consumption is forecasted to increase at a CAGR of 4.31 per cent to 143.08 million tonnes by 2040 from 54.20 million tonnes in 2017.
  • Crude oil consumption is expected to grow at a CAGR of 3.60 per cent to 500 million tonnes by 2040 from 221.76 million tonnes in 2017.
  • Therefore, India must act to set the oil and gas sector in order in the form of policy support for the sector to solve the problems and incentivize the private players to set up R&D facilities to solve technical problems.

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