CAPITAL: New Delhi

MONETARY UNIT: Rupee

REFINING CAPACITY: 1.141 million b/cd

OIL PRODUCTION: 659,300 b/d

OIL RESERVES: 3.97 billion bbl

GAS RESERVES: 18.9 tcf

India`s crude oil production was continuing to slip, removing doubts about the necessity of imports to meet domestic energy needs.

Imported oil met most of India`s petroleum requirements in 1998, and its former hopes for energy self-sufficiency faded as new offshore oil fields like Neelam encountered reservoir problems.

India`s Oil & Natural Gas Corp. (ONGC) surrendered some fields to private companies for development, but those projects had not made a substantial contribution to domestic crude oil production.

Low oil prices in 1998 eased the effect of oil imports on India`s trade imbalance.

During the 1997-98 fiscal year, oil imports remained at around the same level as in the previous year, just over 54 million tons, but the import bill was 20% lower at $7.6 billion.

Low demand growth also was providing a cushion. Demand for refined products, especially diesel, grew only about 6% in 1998, compared with 8-9% in prior years.

Demand for oil in India was expected to rise to 115 million tons in the year ending Mar. 31, 2002, from 64.63 million tons in 1997-98, the government said.

India decontrolled crude oil imports, allowing private and joint sector refineries to go directly to the market to meet their feedstock needs.

Prior to this new policy, state-run Indian Oil Corp. (IOC) was responsible for oil imports and was sole distributor to refineries.

Upstream

India signed oil exploration contracts with nine groups of private companies covering 13 blocks around the country.

The government had planned to tender 18 blocks for contracts, but awards were delayed by issues including taxation and the availability of government data on the blocks.

ONGC began a midlife review of Bombay High field, which at 245,000 b/d was the largest oil field complex in the country.

The review of the offshore complex, aided by a 3D seismic survey, would determine the best method for producing the remaining reserves.

ONGC would use the study as the basis of a pilot project that could be followed by a $2 billion expansion program.

Cairn Energy plc had a gas find in the Ravva field contract area off the east coast.

Cairn, which held a 22.5% interest, said the RX-3 well, northeast of Ravva field, flowed 45 MMcfd of gas and 400 b/d of liquids through a 1-in. choke.

Cairn had to shut in Ravva field for an extended period after the failure of a mooring that allowed tankers to load oil.

ONGC planned to conduct geophysical studies and drilling in the Bengal basin and reprocess 20 year old seismic data. It decided to retest the Ichapur sand at one hole.

Pipelines

GAS Authority of India Ltd. (GAIL) planned to lay a gas trunk pipeline from Hazira in Gujarat to Bijapur, central India.

The $825 million project would mainly serve major gas buyers in western India.

It would move imports, plus up to 700 MMcfd an Enron group would produce from the offshore Tapti gas fields.

GAIL completed expansion of the HBJ pipeline system capacity to 1.17 bcfd from 637 MMcfd, with the construction of a pipeline from Vijaipur to Dadri.

GAIL, already producing 600,000 tons/year of LPG, planned to increase production by adding four more gas processing plants with a combined capacity of 480,000 tons/year.

IOC and GAIL formed a joint venture to lay an LPG pipeline from Jamnagar in Gujarat to Loni, near New Delhi.

GAIL would provide capital to construct the 1,246-km pipeline. IOC would finance LPG storage and handling facilities. The pipeline would have a capacity of 1.7 million tons/year when on stream in April 2001 but would later be expanded to 2.5 million tons/year.

India Gas Corp., Brown & Root International Inc., Shell Co. of India Ltd., and Cairn Energy planned to build a $2.5 billion pipeline to transport 28 million cu m/year of gas from Myanmar to the southern part of India.

Reliance Petroleum Ltd. planned a 3,000-km refined products pipeline to move gasoline, diesel, kerosine, naphtha, and LPG from its refinery at Jamnagar, Gujarat state, to Hyderabad, Andhra Pradesh state. The first 550-km section would be laid from Jamnagar to Indore via Ahmedabad and take 36 months.

SHV Energy Ltd. planned a $15.2 million LPG terminal in Kochi. Kerala State Industrial Development Corp. (Ksidc) would have an 11% equity stake and would build an LPG bottling plant on the property.

Processing activity

IOC started a new refinery at Haryana.

The Panipat refinery was designed for both indigenous and imported crude. It could produce 19,500 b/d of unleaded gasoline, 17,200 b/d of jet fuel, 11,500 b/d of kerosine, and 550 metric tons/day of fuel gas.

The 38.68 billion rupee Panipat refinery, 100 km from New Delhi, had installed capacity of 120,000 b/d. IOC had plans to expand the plant to 180,000 b/d later.

IOC planned to more than double its refining capacity.

Its goal was to increase capacity to 1.123 million b/d from 514,000 b/d by 2004-05. That did not include the 180,000 b/d Paradip refinery the company planned in a joint venture with other companies.

In addition to the new 120,000 b/d Panipat refinery, which would take IOC`s capacity to 634,000 b/d, IOC was increasing capacity of its Gujarat refinery by 60,000 b/d to 250,000 b/d. Another 24,000 b/d might be added later at Gujarar.

In incremental expansions, IOC planned to hike capacity of its Barauni refinery by 18,000 b/d to 84,0000 b/d, Mathura refinery by 10,000 b/d to 160,000 b/d, and Haldia refinery by 25,000 b/d to 100,000 b/d.

The projects would take IOC`s refining capacity to 771,000 b/d by 2001-02.

Several other refinery expansions were awaiting government approval: the Barauni refinery to 120,000 b/d from 84,000 b/d, Panipat refinery to 180,000 b/d from 120,000 b/d, and Gujarat refinery to 320,000 b/d from 274,000 b/d.

They would add 142,000 b/d to IOC capacity by 2002-03 for a total of 913,000 b/d.

IOC was studying the feasibility of other debottlenecking and capacity addition projects totaling 210,000 b/d by 2004-05, taking its total capacity to 1.123 million b/d.

Meanwhile, India was considering changes that would help its refining sector.

The government was considering allowing foreign investors to hold up to 50% of joint-venture refining projects and allowing more than one foreign investor to participate in a refinery.

The government had allowed only one foreign partner, with a maximum 26% equity share. The Indian partner must also hold 26%. The remaining 48% was sold to banks, institutional investors, or the public.

LNG projects

India planned to establish a regulatory body for the liquefied natural gas industry to attract more investments, both domestic and foreign. It would set tariffs and advise the government on policy.

The nation would import about 50 million tons/year of LNG if all proposed projects were approved and constructed.

LNG projects were to be owned 26% by the Indian JV, 26% by the LNG supplier, and 48% by the local government.

Metropolis Gas Corp. Ltd. (Metgas), a joint venture of Enron Corp. and Qatar Gas Co., planned to develop a $700 million LNG receiving and regasification facility at Ratnagiri, Maharashtra state.

It would import LNG from Qatar to feed Enron`s huge Dabhol power project. The LNG project was to be completed within 3 years.

The regasification plant and LNG carrier jetty were expected to start operations when the 1,444-MW second phase of the 2,184-MW Dabhol power project went on stream.

Enron secured Qatari LNG supplies totaling 2 million metric tons/year for both phases of the Dabhol power plant. The first phase would use naphtha or high-speed diesel and would switch to LNG around 2001, when the second phase went on line after commissioning of the regasification plant.