Karandikars & Associates

Oil Sector in India

Petroleum seepages in the North-East part of India were known well before Edwin L. Drake drilled the world`s first oil well in 1859 at Titusville, Pennsylvania, USA

However, the first well dug at Digboi field in Assam in September 1889 and completed in November 1890 at depth of 662 feet by Assam Railways and Trading Company Limited (AR&T Co. Ltd.) is regarded as the first commercially successful oil discovery in India

In fact, the small town in the north-eastern corner of India, Digboi, is believed to have got this name when a Canadian Engineer shouted at his men “Dig Boy Dig” as they watched elephants emerging out of the dense forest with oil stains on their feet

Digboi went on to become India’s and Asia’s first petroleum refinery and perhaps world’s second, in 1901. It is still functional and is the oldest operating refinery in the world

From then, till 1956, exploration efforts were limited to the Assam Arakan region. During this year, Oil and Natural Gas Commission (ONGC) was set up by an Act of Parliament to explore and exploit hydrocarbon reserves in India’s sedimentary basins

In 1958, Burma Oil transferred bulk of its share to the Government of India, and accordingly a Joint Venture company was formed, named Oil India Limited (OIL)

The discovery of onshore Ankleshwar and North Gujarat oil fields and offshore Bombay High Basin in the late 1960s / 1970s respectively boosted country’s production significantly, to over 30 MMTPA by 1985-86

The offshore Bombay High started production in 1976-77, and continues to be the workehorse of India`s oil and gas production

The onshore production in Rajasthan began in 2009-10

Domestic crude oil production has not keep pace with rapidly increasing petroleum products demand, and today India imports ~80% of its crude oil requirement, making it the biggest contributor to the country's import bill

A "barrel" is the most important unit in the crude oil / refining industry. It refers to volume equal to 42 U.S. gallons (about 159 liters or 35 imperial gallons). This historical standard originated in the 1880s and is still widely used today, for pricing and reporting production figures in the oil / refinig industry

Another very commonly used term in the oil industry is API gravity (American Petroleum Institute). The higher the API gravity, the lighter is the crude. Usually measured at 60^o F, the API gravity is expressed as
API = 141.5/specific gravity – 131.5
According to the above expression, for a specific gravity of 1 (equivalent to water specific gravity) API gravity is 10^o API

Crude oils are complex mixtures containing many different hydrocarbon compounds that vary in appearance and composition from one oil field to another.
Read: Crude Oil Characteristics

Oil Refining

Crude oil by itself has very limited usage, except in relatively small direct-burning applications. So it is the Refining industry that is the key link between Crude Oil and the product markets

Refining industry has evolved from a simple process of a batch distillation of early years to highly complex modern facilities of today

At the time of independence, there was only one refinery in India, located at Digboi, with a capacity of just 0.25 MMTPA

In the late 1950s and early 1960s, refineries were set up with the assistance of international oil companies such as Shell, Caltex and Esso, which after nationalisation became BPCL, HPCL Vizag and HPCL Mumbai respectively

Indian Oil was formed in 1964 with 100% government ownership as a result of merger of two government owned companies that were set up in the late 1950s

Cochin Refinery and Madras Refinery were set up in the 1960s by the Indian government in association with Philips Petroleum and Amoco, and National Iranian Oil Company respectively

At the time of nationalisation, in 1974-75, India’s refining capacity was about 28 MMTPA. It grew to 52 MMTPA by the early 1990s, with only one grassroots refinery addition and the rest through capacity expansions

However India's petroleum products consumption outpaced the refining capacity addition. From a negligible quantum during the 1970s, the product imports grew to around 8 million tons per annum in the early 1990s, and peaked at 26 million tons per annum in the mid / late 1990s

It was during this decade of 1990s that the refining sector was progressively decontrolled, by opening it up to private sector

This was the defining moment for Indian refining industry, as not only India has become self-sufficient in production of petroleum products since then, but has witnessed a sizeable exportable surplus, becoming one of the largest contributors to India’s export basket

In 1998-1999, India’s refining capacity was 67.5 MMTPA, which jumped by 65% to 112 MMTPA in the next year. This was the year when India’s first private sector refinery after the opening of the sector, the 27 MMTPA of Reliance Industries at Jamnagar, went on stream

This was one of the largest and most complex refineries in the world. Besides increasing its capacity to 33 MMTPA, Reliance came up with another giant refinery of similar size, but this time with even higher complexity at the same location

This has made Jamnagar the world’s largest single site refining complex

The benefits of privatisation are most pronounced in India’s refining sector, and this sector is expected to continue to set new global standards, not just in crude oil processing, but also in petrochemical integration, energy conservation, and associated downstream segments like logistics, distribution and retailing

India's Refining sector is also best placed to facilitate smoother long-term energy transition, through several integration possibilities with New Energy

Explore Crude Oil indicators:

Crude Oil Production
Refining Capacity