4th September, 2002
Ministry of Petroleum & Natural Gas  


RAM NAIK OUTLINES DEVELOPMENTS IN THE INDIAN PETROLEUM SECTOR


Shri Ram Naik, Minister of Petroleum & Natural Gas, while addressing a Press Conference at Rio de Janeiro, Brazil on the occasion of the 17th World Petroleum Congress, highlighted the recent developments and investment opportunities in the Indian Petroleum Industry. India with a population of over 1 billion is one of the largest consumers of petroleum products. The consumption of crude oil was about 110 million metric tonne (MMT) (800 million barrels) in the year 2001-2002. The demand is growing at a rate of 5% per year. India imports about 70% of her crude requirements, the Minister said.

In order to foster competition, increase production and improve self-reliance, following steps have been taken:

Dismantling of administered price mechanism (APM)

The price of controlled petroleum products i.e. petrol, diesel, LPG, SKO and aviation turbine fuel (ATF) was fixed by Government under the administered price mechanism (APM) which was in existence since 1975. In order to boost competition so as to benefit the consumers, the Government has dismantled the administered price mechanism from 1.4.2002. Now, the price of controlled petroleum products would reflect the changes in international price of the commodities. However, a fixed amount of subsidy would continue on LPG for domestic use and SKO for public distribution system, which would be phased out over a period of three to five years. The present subsidy is about 35% on LPG and 40% on Kerosene.

With the dismantling of APM, the Government has allowed new parties which have invested or propose to invest USD 400 Million over a period of ten years in setting up infrastructure projects in the hydrocarbon sector to market transportation fuels i.e. petrol, diesel and aviation turbine fuel. The Government has already granted marketing rights to two private companies -- Reliance Industries and Essar Oil in addition to two Public Sector Undertakings Oil & Natural Gas Corporation (ONGC) and Numaligarh Refinery Limited (NRL) in May, 2002. These companies have been allowed to set up 8,659 retail outlets. This marks a 40% increase over the existing retail outlet strength of 18,848 operated by the existing four state oil marketing companies i.e. Indian Oil Corporation Limited (IOCL), Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL) and IBP Company Limited.

Efforts in exploration

The demand for petroleum products is increasing at an annual rate of 5% while there have been no major discoveries of crude oil after the giant Mumbai High fields in the 1970s. In an effort to promote exploration for oil and gas the government has formulated a New Exploration Licensing Policy (NELP). Under the NELP, so far 47 blocks for exploration of oil and gas have been awarded under two rounds since the year 2000. In the third round of NELP bids have been received on 28.8.2002 for another 23 blocks. Efforts are on to explore the deepwater basins for the first time. 24 blocks have been awarded for deepwater exploration. About 30% of the sedimentary area of the country is now covered by exploration under NELP. Geological Data indicates very strongly the presence of large areas of oil and gas.

Acquisition of Equity Oil Abroad

Apart from exploration of oil and gas within the country, efforts are on to enhance oil security by acquiring equity oil abroad. ONGC Videsh Limited (OL) has acquired 20% stake in the Sakhalin oil field in Russia with an investment of USD 1.6 Billion. The country will receive about 4 to 6 million tonnes of oil as its share in the Sakhalin field from the year 2005 onwards. The Government has recently approved acquisition of 25% stake in the Greater Nile Oil Project in Sudan. This is a producing field and the country will receive 3 million tonnes of oil per year as soon as the final agreement is reached. OVL has also got a 45% stake in a gas field in Vietnam. Natural Gas from the project is likely to be available from the end of this year. OVL is actively scouting for opportunities in other parts of the world including Kazakhstan, Venezuela, Iran and Egypt.

Sustainable Development and the Hydrocarbon Industry in India

Liquefied Petroleum Gas

To protect the environment and promote sustainable development, the Government is expanding the reach of Liquefied Petroleum Gas (LPG). There are a total of 63.5 million LPG consumers in the country at present covering about 30% of the population. Of these 32 million connections have been added since 1998. It is the endeavour of the Government to make kitchens smoke-free and protect the environment by reducing the use of firewood. Smaller LPG cylinders with a capacity of 5 kg have been specially introduced for remote and far flung rural markets and to make LPG affordable to the poor.

Ethanol Blended Fuel

The Government has also mandated the use of ethanol in petrol in 13 states as ethanol from sugarcane is a renewable source of energy and its use will enhance the income of sugarcane farmers. Government has taken a decision to blend 5% ethanol in petrol throughout the country. In the first phase, this programme will be taken up in 9 States, from 1.1.2003 when 5% blending with ethanol will become compulsory. This program would require 320 million litres of ethanol annually in the first phase.

At present the Bureau of Indian Standards (BIS) permits 5% blending in petrol. However, blending up to 10% can be done without any modification in the engines and efforts are on to get the BIS standards modified to allow 10% blending in petrol. Research is also continuing to study the feasibility of blending of ethanol in High Speed Diesel (HSD).

An MOU has been signed between the Governments of Brazil and India for cooperation in this field as Brazil is the world leader and has been practising this technology for over 70 years.

Coal Bed Methane

The Government has also embarked on a program for exploiting Coal Bed Methane (CBM), which is a new and environment-friendly source of energy by tapping natural gas trapped in coal seams, and which would lead to safer coal mining. For commercial exploitation of CBM, 8 blocks have been awarded in the last one year.

Production of Food Grade hexane

Hindustan Petroleum Corporation Ltd., has successfully developed and commercialised environment-friendly extraction technology for producing food grade Hexane meeting WHO standards using NMP (N-Methyl Pyrrolidone). This technology has won the Council for Scientific & Industrial Research (CSIR) technology award in India. This technology has also been selected as one of the 30 best submissions for the WPC Excellence Awards.