Petroleum Products

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OVERVIEW

The energy chain vitally depends upon the petroleum industry, hence petroleum is fundamental to economic and everyday lives. Petrochemical products cover the entire spectrum of daily use items ranging from clothing, housing, construction, furniture, automobiles, household items, toys, agriculture, horticulture, irrigation, and packaging to medical appliances. India’s refining sector is the 2nd largest in Asia with a total of 23 refineries.

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 2011, despite being a significant importer of crude oil. According to the Petroleum Planning and Analysis Cell, Crude Oil Processed by Refineries saw growth of 2.5% during April-December 2018 vis-a’- vis previous year. The production of petroleum products has substantially reduced to 188.86 MMT (Million Metric Tonnes) during April to December 2018 as compared to nearly 196.7 MMT in the corresponding period of 2017-18. The production trend from FY2011- FY2018 is given below:

Year Production of Petro-Products* Growth(%)
2010-2011 194.82 5.53
2011-2012 203.20 4.30
2012-2013 217.74 7.15
2013-2014 220.76 1.39
2014-2015 221.14 0.17
2015-2016 231.92 4.88
2016-2017 243.55 5.01
2017-2018 254.30 4.40

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 (-) 73.13% during April-December 2018 to reach 46.8 MMT from 162.41 MMT in the corresponding period of FY18. However, the exports show positive growth from US$ 25155 million during April- December 2017 to US$ 30194 million in the corresponding period of FY19. During 2016-17, the exports recorded were 3.66% valuing US$ 31.70 billion, an increase from previous year’s decline of -46.15% at US$30.58 billion. The share of petroleum product exports in total exports has witnessed a consistent increase from 14.56% in FY 2010-11 to 20.09 % in FY 2013-14. However, this export share exhibited a decline in the fiscal year FY 2014- 15 to touch 18.3%and further to 11.66% and 11.48% during FY 2015-16 and FY 2016- 17 respectively.

Export of Crude Oil and Petroleum Products (Quantity) by India
In 000’Million Tonnes
Year 2010 - 2011 2011 - 2012 2012 - 2013 2013 - 2014 2014 - 2015 2015 - 2016 2016 - 2017 2017 - 2018
Liquefied Petroleum Gas 154 174 200 227 254 195 317 359
Motor Spirit* 13578 14524 16657 15247 16048 16817 15417 14036
Naphtha 10655 10139 8647 8322 7008 7116 8727 8951
Aviation Turbine Fuel(ATF)# 4478 4561 4664 5745 5520 5686 7271 7183
Superior Kerosene Oil 33 34 23 15 15 10 15 17
High Speed Diesel 20335 20407 22464 26469 25559 24037 27302 29717
Light Diesel Oil 98 84 9 30 6 0 151 18
LOBS/Lube Oil 29 27 59 20 11 17 13 13
Fuel Oil 6734 7895 5922 6159 4762 2806 2248 2525
Bitumen 56 5 87 95 94 101 38 64
Petcoke/ Carbon Black Feed Stock - - - - - - - -
Others 2927 2988 4675 5535 4653 3753 4017 3949
Total Export 59077 60837 63408 67864 63932 60539 65513 66833
Net Product Export 41698 44988 47054 51167 42631 31083 29226 31372
#Exports by Reliance Industries Ltd (RIL) does not include ATF to foreign going airlines, *RIL SEZ's MS export includes export of Alkylate Source: Ministry of Petroleum & Natural Gas

Foreign Direct Investments

As per guidelines, 100% FDI is allowed through the automatic route in exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, 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.

FDI up to 49% is allowed through the automatic route in petroleum refining by PSU, without disinvestment of dilution of domestic equity in existing PSUs. During April 2000 - December 2018, petroleum and natural gas sector received FDI inflows of US$ 7003.67 million.

Outlook

As per the BP Energy Outlook 2017, growth in energy consumption in 2016 was driven by the developing economies. China (1.3%, 47 mtoe (million tonnes of oil equivalent)) and India (5.4%, 39 mtoe) led the way, contributing almost identical increments, and together accounting for around half of the increase in global demand. India’s energy consumption grew at a similar rate to the recent past, underpinned by solid economic growth. Petrochemical industry contributes about 30 percent to India's chemical industry which is likely to become $250 billion by 2020 according to Dow Jones & Company.


 

SELECT GOVERNMENT INCENTIVES

  • ‘Saksham’ (Sanrakshan Kshamta Mahotsav), is an annual high intensity one-month long people-centric mega campaign of Petroleum Conservation Research Association (PCRA) under the aegis of Ministry of Petroleum and Natural Gas. The purpose of the Saksham is to sensitize the masses about conservation and efficient use of petroleum products which will lead towards better health and environment. The campaign seeks to promote effective utilization of petroleum products that will lead to environmental protection.
  • Connection under Ujjwala Yojana- In order to transform the quality of life of women in rural areas, government has launched this scheme to provide cleaner fuel. More than 6 crore connections are successfully placed according to the Interim budget 2019-20.
  • Petroleum subsidies- The Interim Budget has provided Rs. 37,478 crores as Petroleum subsidy in 2019-20 Budget estimates compared to Rs. 24,933 crore provided in the Budget estimates of 2018-19.
  • In order to develop the national gas grid, Government has taken a decision to provide a capital grant of Rs.5176 crores (i.e. 40% of the estimated capital cost of Rs. 12,940 Crore) to GAIL for development of a 2655 Km long Jagdishpur-Haldia/Bokaro-Dhamra Gas Pipeline (JHBDPL) project. This pipeline will transport Natural Gas to the industrial, commercial, domestic and transport sectors in the States of Bihar, Jharkhand, Odisha, West Bengal and Uttar Pradesh.
  • The prices of petroleum products in the country are benchmarked to international product prices. Generally, the prices of sensitive petroleum products in the country are higher/lower than other countries due to various factors, including prevailing tax regime and subsidy compensations by the respective Governments. The details of prices of petrol and diesel at Delhi and Mumbai are available at Petroleum Planning and Analysis Cell (PPAC) website i.e. www.ppac.org.in
  • Government has taken steps for development of gas based economy in the country which include plan for expansion in natural gas supply with the help of additional domestic gas production, expansion of Re- gasified Liquefied Natural Gas (RLNG) terminals in East and West coast of the country, nationwide gas grid including North Eastern States and policy initiatives for the promotion of use of natural gas, i.e., clean fuel by all sectors of the economy.
  • The Government has approved the project for capacity expansion of Numaligarh Refinery from 3 MMTPA (Million Metric Tonne Per Annum) to 9 MMTPA.  It involves setting up of crude oil pipeline from Paradip to Numaligarh and product pipeline from Numaligarh to Siliguri at a cost of Rs.22594 crores. The project is to be completed within a period of 48 months, after approval and receipt of statutory clearances. The expansion of the refinery will meet the deficit of petroleum products in the North East.   It will also sustain the operations of all North East refineries by augmenting their crude availability. It will generate direct and indirect employment in Assam and is a part of the Government's Hydrocarbon Vision 2030 for the North East.

 

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