Petroleum Products


 

OVERVIEW

Production

The Government of India started encouraging energy companies to invest in refineries at the end of the 1990s, thus helping the country to become a net exporter of petroleum products in 2001, despite being a significant importer of crude oil. According to the Petroleum Planning and Analysis Cell, production of petroleum products by refineries and fractionators stood at 231.3 million metric tons (MMT) during FY 2015-16, as compared to 220.7 MMT in the previous fiscal year.

Export

With substantial increase in refining capacity in India, exports of petroleum products have picked up since FY 2005-06, although the slowdown in global economy has affected the exports in recent years. Amidst an increasingly challenging environment of declining prices and rising competition, exports of petroleum products witnessed a sharp decline of (-) 46.4 per cent during FY 2015-16, to reach a level of US$ 30.4 billion from US$ 56.8 billion during the previous year. The share of petroleum product exports in total exports has witnessed a consistent increase from 15.7 per cent in FY 2009-10 to 20.1 per cent in FY 2013-14. However, this export share exhibited a decline in the fiscal year FY 2014-15 to touch 18.3 per cent and further to 11.6 per cent during FY 2015-16.

During 2015-16, UAE was the largest export destination for India’s exports of petroleum products, accounting for 12.7 per cent of the total exports, followed by Singapore (9.9 per cent), the USA (6.8 per cent), Kenya (5.1 per cent), and Saudi Arabia (4.7 per cent).

Foreign Direct Investments

Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum products' pipelines, natural gas pipelines, LNG regasification infrastructure, market study, formulation and petroleum refining in private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the government or private participation in exploration of oil and the discovered fields of natural oil companies - 100% FDI, automatic route. Petroleum refining by PSU, without disinvestment of dilution of domestic equity in existing PSUs - 49% automatic route. During April 2000-March 2016, petroleum and natural gas sector received FDI inflows of US$ 6.7 billion.

Outlook

As part of International Energy Outlook 2016, EIA projects India and China will account for about half of global energy demand growth through 2040, with India's energy demand growing at 3.2% per year. As per BP Energy Outlook 2016, India's energy consumption is projected to grow at 4.2% per annum upto 2035, faster than all major economies in the world.


 

SELECT GOVERNMENT INCENTIVES

  • Government has approved Hydrocarbon Exploration and Licensing Policy (HELP) and same has been notified on March 30, 2016. This policy provides a uniform licensing system to explore and produce all hydrocarbons such as oil, gas, coal bed methane, shale oil/gas, etc. under a single licensing framework, option to select the exploration blocks without waiting for formal bid round and also provides many incentives such as reduced royalty rates for offshore blocks, marketing & pricing freedom and easy to administer revenue sharing model.
  • Discovered Small Fields Policy announced in March, 2016 for monetization of 67 discoveries thorough international competitive bidding.
  • Under the New Domestic Gas Pricing Policy, a transparent new gas pricing formula linked to global market made effective w.e.f. November 1, 2014.
  • Marketing and pricing freedom for gas produced from geologically difficult, high risk / high cost areas with a provision of ceiling price based on landed cost of alternate fuels announced on March 10, 2016.
  • Policy Framework for relaxation, extensions and clarifications at the development and production stage under PSC regime for early monetization of hydrocarbon discoveries was approved on November 10, 2014.
  • Policy for grant of extension to the Production Sharing Contracts of 28 Small and medium sized discovered blocks was approved on March 10, 2016.
  • Policy on Testing Requirements for discoveries in NELP blocks was approved on April 29, 2015.
  • Hydrocarbon vision 2030 for North East India has been released in February, 2016
  • Pooling of gas in Fertilizer (Urea) sector was approved on March 31, 2015 for supply of gas at uniform delivered price to all fertilizer plants on the gas grid for production of urea through a pooling mechanism of domestic gas with R-LNG
  • The Petroleum and Natural Gas Regulatory Board Act, 2006 regulates refining, processing, storage, transportation, distribution, marketing and the sale of petroleum, petroleum products and natural gas.
  • The National Biofuel Policy, 2009 promotes bio-fuel usage, the Government of India has provided a 12.36% concession on excise duty on bio-ethanol and exempted bio-diesel from excise duty.
  • Government is implementing Ethanol Blending Petrol programme under which oIL marketing companies are mandated to sell Ethanol blended petrol with upto 10 % Ethanol.
  • Mechanism for procurement of ethanol by OMCs to carry out Ethanol Blended Petrol programme was approved on December 10, 2014. In order to give a stimulus to the above programme, the Government has enhanced the Ethanol Procurement Price and opened alternate route like cellulosic and ligno cellulosic materials, including Petrochemical route.
  • Direct sale of bio-diesel by private manufacturers/suppliers to bulk consumers like Railways and State Transport Corporations was allowed on August 10th, 2015.
  • The milestones set in Auto Fuel Policy 2003 have already been achieved. Ministry of Petroleum and Natural Gas has issued a communication to all the concerned stake holders including Oil Marketing Companies for implementation and expansion of Supply of BS-IV auto fuels in phases covering the entire country by April 1, 2017 as per the road map given in Auto Fuel Vision & Policy -2025
  • The Government has decided to leapfrog from BS-IV to BS-VI fuels w.e.f. April 1, 2020.
  • The Integrated Energy Policy, 2006 outlines goals for dealing with challenges faced by India's energy sector.
  • The Coal Bed Methane Policy, 1997 encourages exploration and production of Coal Bed Methane as a new eco-friendly source of energy.
  • The Policy on Shale Gas & Oil, 2013 allows companies to apply for shale gas and oil rights in their petroleum exploration licenses and petroleum mining leases.

 

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