CAPITAL: New Delhi

MONETARY UNIT: Rupee

REFINING CAPACITY: 1,857,742 b/cd

OIL PRODUCTION: 658,200 b/d

OIL RESERVES: 4.8 billion bbl

GAS RESERVES: 22.8 tcf

Gas pipeline and import projects were booming in India, driven by the government`s policy of building gas-fired power plants.

In many cases, the gas would be imported LNG since India`s exploration and production sector could not meet rapidly growing gas demand.

Qatar was the major potential supply source for LNG. Qatar had 380 tcf of gas reserves and the goal of becoming the world`s premier LNG supplier.

Including agreements for exports to India, Qatar had confirmed long-term LNG sales contracts for more than 18 million tonnes/year, placing it among the top three LNG exporters worldwide, alongside Indonesia and Algeria. Iran wanted to export gas to India and had proposed a marine pipeline in 1997, a survey for which was blocked by Pakistan. Iran later examined the possibility of laying pipelines in 1,000 m of water to avoid Pakistani waters.

Western India`s Maharashtra state was a prime target for LNG imports. The state government was sponsoring six power projects with fast-track development.

Petronet

The Indian government created Petronet LNG, a consortium of four Indian petroleum companies, to develop LNG imports to meet the requirements of the power and fertilizer sectors.

Petronet signed an agreement with Qatar`s Rasgas to buy 7.5 million tonnes/year of LNG, of which 5 million tonnes/year would go to Petronet`s planned terminal at Dahej, Gujarat, and 2.5 million tonnes/year would be imported at Kochi (formerly Cochin), in southern India`s Kerala state. Deliveries were slated to begin in July 2003, increasing in stages to a combined 7.5 million tonnes/year in January 2005. The price of the LNG would be linked to a basket of crudes. Next Petronet planned to build import terminals, regasification units, and LNG carriers.

To facilitate the shipment of gas from Dahej, Petronet planned to upgrade its gas pipeline system and increase the capacity of the Hazira-Bijaipur-Jagdishpur (HBJ) trunkline to 60 million cu m/day from 34 million cu m/day. The other major Indian LNG import project buying gas from Rasgas was the Dakshin Bharat Energy Consortium (DBEC). The deal involved 2.6 million tonnes/year for 20 years, beginning in July 2003.

DBEC consisted of Unocal Bharat Ltd., CMS Energy Asia Pte. Ltd., Grasim Industries Ltd., Siemens Project Ventures GMBH, and Woodside Development Asia Pty. Ltd.

Gas Authority of India Ltd. planned a 550-km gas line in Gujarat state from the Dahej terminal. The line would be parallel to the Hazira-Bijapur-Jagdishpur (HBJ) pipeline. Cost would be about $350 million. The 20 million cu m/day gas pipeline would be completed by 2003 and would compete with a similar Enron project.

GAIL, which had a 12.5% stake in Petronet, already had the right of way for the Gujarat line and had power, fertilizer, and petrochemical companies as potential customers.

Petronet LNG`s Dahej terminal could process 5 million tonnes/year of LNG. GAIL also was involved in an import project at Trombay, near Mumbai. The project had two phases, each involving importing 3 million tonnes/year of LNG. The first phase would cost $400 million, with deliveries slated to begin in 2003. The main promoters of the project, India`s Tata Electric Cos. and France`s TotalFina SA, brought GAIL in as a 33.3% partner.

Most of the gas would go to Tata`s 1,350 Mw power plant. GAIL would market the surplus to industrial customers in the Mumbai area. Gas would be supplied by TotalFina, which had interests in LNG plants in Qatar, Indonesia, Abu Dhabi, Oman, and Yemen.Royal Dutch/Shell and the Essar Group were awarded a contract to build an LNG terminal at Hazira.

Dabhol

India`s watershed Dabhol power project began operations in 1999. The plant was near the city of Dabhol on India`s western coast.

Phase 1 of the Dabhol project had variable fuel capability but was to be fired on naphtha until Phase 2 started up. Phase 1 was owned by a joint venture comprising Enron Corp. 50%, Maharashtra State Electricity Board (MSEB) 30%, and Bechtel Enterprises Holdings Inc. and GE Capital Structured Finance Group 10% each. Phase 2, costing $1.87 billion, would more than triple the plant`s capacity to 2,450 Mw from 826 Mw. It would be fired on regasified LNG delivered from a terminal to be built near the power plant. Phase 2 was owned by Enron 80%, and Bechtel and GE 10% each. MSEB had the option to acquire a 30% stake in Phase 2 from Enron. Electricity produced by Dabhol Power would be sold to MSEB.

Phase 1 started in June 1999. At Phase 2 start-up in late 2001, the entire plant was to be fired by gas from imported LNG.

The partners signed a long-term supply agreement with Oman Liquefied Natural Gas for 1.8 million tonnes/year of LNG. And Abu Dhabi Gas Liquefaction Co. Ltd. was to supply 400,000-500,000 tonnes/year to Dabhol. In a separate project, an international group planned to build an LNG terminal, regasification unit, and storage facility at Ennore, Tamil Nadu. The $1.6 billion project would include a 1,886-Mw, gas-fired power plant and the capacity to regasify 2.5 million tonnes/year of LNG.

Interests in the group were CMS Energy 20.75%; Grasim Industries Ltd., a unit of India`s Birla Group, 20.75%; Siemens 20.75%; Woodside Petroleum Ltd. 20.75%; and Unocal Bharat Ltd. 17%.

Construction was due to begin by April 2001, with start-up slated for mid-2003. The LNG would come from Qatar.

Pipelines

Petronet India Ltd., a nongovernment holding company set up to implement pipeline projects, was planning to lay four multiple-product pipelines in India during 2000-03 through joint ventures and subsidiaries.

The pipelines would transport gasoline, kerosine, high-speed diesel, aviation turbine fuel, and naphtha from refineries and import terminals to demand centers.

The new pipelines were Bina-Jhansi-Kanpur, 350 km and 2.4 million tonnes/year; Chennai-Trichi-Madurai, 500 km and 1.4 million tonnes/year; Paradip-Rourkela-Ranchi-Allahabad, 550 km and 2.6 million tonnes/year; and Bhatinda-Jalandhar-Jammu, 400 km and 3 million tonnes/year. Construction was expected to take 36 months. Petronet was planning to increase the capacity of two of its existing pipelines: Haldia-Mourigan to 1.10 million tonnes/year; and Kandla-Bhatinda to 5.5 million tonnes/year.

And it planned a central pipeline from Jamnagar, Gujarat, for transporting the products from the private-sector refineries being built by Reliance Petroleum Ltd. and Essar Oil Ltd. and from the Koyali refinery of Indian Oil Corp. (IOC). IOC said it would acquire a 26% equity stake in the Mangalore-Bangalore crude oil and refined products pipeline project.

Other partners were Hindustan Petroleum Corp. Ltd., Mangalore Refinery & Petrochemicals, and Petronet. The $254 million project was due to be commissioned by 2003.

Exploration

While gas import projects were getting most of the attention, India does have promising gas resources. The government asked Unocal to study prospects for exploration in the tiny northeastern state of Tripura. The firm concluded the area was highly prospective for gas. Unocal said gas fields found in neighboring Bangladesh could extend into Tripura, where India`s Oil & Natural Gas Corp. (ONGC) had a project to triple gas production from the current capacity of 1 million cu m/day. Cairn Energy PLC proposed to ONGC that gas found in Tripura be marketed jointly. Only GAIL had marketed India`s gas production. Cairn was operator of the Ravva offshore oil and gas field in the Krishna-Godavari basin off eastern India. The firm was planning to extend its Indian exploration activities south of Ravva to the Gulf of Cainbay off Gujarat and to Rajasthan state.

Since it would be very expensive to build pipelines through Indian territory to move Tripura gas to other parts of India, circumventing Bangladesh, both Cairn and Unocal proposed to swap any gas they found in Tripura with production from Bangladesh. The latter nation did not react positively to the idea.

Deepwater offshore blocks attracted the strongest interest from foreign companies responding to India`s revised exploration policy. Overall, international oil firms reacted moderately to the new policy. Of the 48 blocks offered under the policy in 1999, the 12 deepwater blocks drew the greatest response, with five companies purchasing data.

Under the policy, in the licensing round companies can bid for one or more blocks, either alone or in association with other companies. The successful company or group may then form an incorporated or unincorporated venture. The winners would be required to enter into a production-sharing contract (PSC), which would be negotiated based on India`s new PSC model.

Under the policy, there were no signature, discovery, or production bonuses; no mandatory participation by India`s national oil companies; royalty rates pegged to international market prices; no customs duty on goods imported for petroleum operations; no minimum expenditure commitment; and complete freedom to market production in India.

Separately, ONGC was establishing major oil spill response centers at Mumbai and Kakinada, along coastal Andhra Pradesh state. Completion was due by mid-2000. In mid-1999, ONGC suffered a blowout and fire that destroyed its B-121 platform in Bombay High field off India`s west coast.

ONGC reported a discovery off southern Andhra Pradesh state. The well flowed 3,000 b/d of oil and 1.4 MMcfd of gas on test. ONGC said the discovery was the first major one since Bombay High field.

Refinery growth

India`s crude oil imports were rising substantially as massive refining capacity came on stream. About 41 million tonnes/year of capacity was added in 1999. That was more than 60% of the 67.55 million tonnes/year of capacity previously established.

It was estimated India would have to import 78 million tonnes/year of crude by 2001-02, double oil imports in fiscal 1998-99. The country`s refining capacity was to almost double by 2002, reaching 113.95 million tonnes/year.

In late 1999 the first refinery to be fully owned by a private-sector company was commissioned at Jamnagar in Gujarat.

Developer Reliance Petroleum Ltd. (RPL) planned to boost the capacity of the refinery from the initial 18 million tonnes/year to 27 million tonnes/year, making it one of the 10 largest refineries in the world. Also at Gujarat, Essar Oil Ltd. expanded plans for its proposed 10.5 million tonne/year refinery to 24 million tonnes/year.

Numaligarh Refinery Ltd.`s plant in Assam state was brought on stream in 1999. Production from the 3-million-tonne/year plant focused on the production of kerosine and diesel.

IOC planned to revamp its Mathura refinery in Uttar Pradesh state in an effort to improve the quality of its products. It would reduce the benzene content of some fuels to less than 1 vol % and reduce sulfur content of certain fuels to 50 ppm.

Pennar Refineries Ltd., a unit of privately owned Indian industrial firm Nagarjuna Group, planned to move the idle Mobil refinery at Woerth, Germany, to Cuddalore.

Work included the engineering of new and existing process units and equipment. The 125,000-b/d refinery was due completion in late 2001. IOC and Abu Dhabi National Oil Co. were negotiating to build a $1.8 billion grassroots refinery at Nagapatnam, Tamil Nadu, in southern India.

Each company would hold a 26% share in the 9 million tonne/year plant. The rest would be offered to financial institutions.

Other projects

El Paso Energy International Co. acquired from Energy Equity Corp. Ltd. a 26% interest in the $295 million power project at Pillaiperumanallur in Tamil Nadu state.

The 346-Mw combined-cycle power plant was due completion in April 2001. Partners included Reddy Group, Marubeni Corp., and Public Service Enterprise Group unit PSEG Global. The plant would operate initially on tanker-delivered naphtha. When gas became available from two offshore wells, a 30% gas/70% naphtha mix would be used. Malaysian`s Petronas planned to join IOC`s proposed $1 billion petrochemical project. Both firms would have 26% of the project, and the rest would be sold to banks.

The plant, to be built near IOC`s Panipat refinery, could produce 350,000 tonnes/year of paraxylene and 525,000 tonnes/year of purified terephthalic acid (PTA).

Naphtha feed would be supplied by IOC`s Panipat and Mathura refineries. The plant would enable IOC to compete with Reliance Industries Ltd., India`s only PTA producer.

IOC also planned to expand its refining capacity in India. It had 26% of a joint venture to build a 9 million-tonne/year refinery at Paradeep in Orissa, East India, which would start up in 2003.

It also planned to assume a 26% stake in a project to expand the capacity of a refinery in Nagapattanam in Tamil Nadu, South India, from 500,000 tonnes/year to 9 million tonnes/year.

Indian Petrochemicals Corp. proposed to build a $350 million, 250,000-tonne/year polypropylene plant at Qatar`s Mesaieed industrial area.

Total Gas & Power India, a unit of TotalFina SA and Hindustan Petroleum Co. Ltd., proposed a 50-50 deal to develop an LPG terminal at Andhra Pradesh state on India`s East Coast.

With 60,000 tonnes of storage capacity, the terminal would be the largest in the region. Completion would be in 2003. The facility would help meet India`s rising demand for LPG, which was expected to increase from 4.5 million tonnes in 1998 to more than 10 million tonnes in 2005. LPG was widely used for cooking in India.