MUMBAI, March 1: The Planning Commission has projected a 6.9 per cent growth in the demand for petroleum products and a product deficit close to 31 million tonne (mt) in the Ninth Plan.The projected compound average annual growth in oil demand was also 6.9 per cent for the Eighth Plan period but demand had actually grown by 6.8 per cent. The consumption of petroleum products had also been lower at 79.16 mt per year, compared to the projection of 81.19 mt. The average annual imports represented a product deficit of roughly 22 mt.
The key petroleum products that would be in short supply in the Ninth Plan include cooking gas, high speed diesel (HSD) and industrial fuels like furnace oil and low sulphur heavy stock (LSHS). Motor spirit and power and fertiliser plant feedstock naphtha, are expected to be in surplus, should the proposed refining capacities go onstream.
The document recommends a firm policy on the large-scale import of naphtha and liquefied natural gas (LNG) in the light of the existingshortfall and the huge capacities being set up for short-gestation power plants. It emphasises the need to involve PSU oil companies in having ``participating interest in overseas oil and gas development for sourcing the new infrastructure.''
The Planning Commission has also called for adequate port facilities and pipeline infrastructure to cater to the demand for 78 mt crude by the terminal year of the Ninth Plan. The oil industry now imports roughly 31 mt crude and sources a little more from oilfields at home.
The Plan document has recommended total dismantling of the administered price mechanism (APM), a process that has already been set in motion last year. ``The continuance of the administered pricing regime is coming in the way of large-scale private participation,'' it says, adding that the reforms would also help contain the oil pool deficit.
The Restructuring Group for the oil sector had estimated that an investment of roughly $100 billion (roughly Rs 400,000 crore) would be necessary by 2010to ensure the security of oil and gas supplies to various sectors of the economy. Subsequently, incentives were announced to attract private participation in crude production apart from refining and marketing of petroleum products.
Yet, the cumulative production of crude in the last five years was 41.81 mt, or 21 per cent below the target of 197.3 mt set for the period. The medium sized discovered oil fields, that had been allotted to unincorporated joint ventures between the private sector and the national oil companies were expected to yield 11 mt oil.
Delays in awarding the contracts, however, prevented these ventures from maximising output in the Eighth Plan.
The Plan document says, the ``full production from these fields is now expected to materialise only in the Ninth Plan period.'' Despite the massive cutback in flaring from 10.3 per cent of the totaloutput in 1992 to 4.9 per cent last year, the production of gas too fell short of target.
Natural gas production during the last five years was101 billion cubic metres, compared to the Plan target of 125.42 billion cubic metres. Predictably, the petroleum and oil lubricants (POL) import bill was 28.5 per cent higher during the Eighth Plan than the targeted Rs 74,660 crore.
Between 1992 and 1997, the country imported Rs 95,961 crore worth of oil and petroleum products.
The augmentation of the refining capacity did not keep pace with Plan anticipations either. The actual domestic refining capacity was 61.55 mt at the end of the Eighth Plan, compared to the target of 51.85 mt. The Plan document blames the delay in the capacity addition at the Gujarat refinery for the shortfall.
The Eighth Plan accorded a high priority to the low-cost expansion of refining capacities.
Grassroots refining capacity of three mt per annum was commissioned at Mangalore and another 0.5 mt at Panangudi.
The Plan document points out that although several private sector promoters were issued letters of intent for setting up refining capacities during the period, onlytwo projects were likely to materialise by 2001.
Reliance is setting up a 15 mt per annum capacity refinery and Essar Oil is commissioning a refinery with a capacity of 9 mt per annum. The Plan paper says, ``there are no firm indications of refineries being set up by other private sector promoters.''
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
