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4.0 COMMODITY ANALYSIS
Commodities analysed for estimating their future movements are shown below. The later
part of this chapter deals with a status quo situation of following commodities and the
estimates for future years:
(a) Crude Oil
(b) Petroleum Oil and Lubricant Products (POL)
(c) LNG (Liquefied Natural Gas)
(d) Coal
(e) Iron Ore
(f) Iron & Steel
(g) Cement
(h) Fertilisers and Fertiliser Raw Material (FRM)
(i) Food Grains and
(j) Containers
4.1 CRUDE OIL
It is the second most important source of energy in India after coal. Crude oil and its
products account for about 35 percent of energy supply as against nearly 50 percent by
coal. The production of India’s industrial sectors compared to that of multi national
companies is very small. The country has less than one- percent share in the global
production of crude oil, 1.1 percent in natural gas, 2.8 percent in crude oil consumption
and one percent in natural gas.
Oil and Natural Gas Corporation Limited (ONGC), ONGC-Videsh Limited (a subsidiary
company of ONGC Limited), Oil India Limited (OIL) are the main public sector
companies engaged in exploration, production and transportation of crude oil and natural
gas.
Both the upstream (exploration and production) and downstream (refining, marketing and
distribution) sectors were till late dominated by public sector companies. Lately however
the private sector has also been allowed to enter this field for exploration and production
of crude oil. The prominent private players include Reliance Petroleum Limited, Essar Oil
Limited, Cairn Engineering India Pty. Limited and British Gas. PSUs like ONGC & Oil
India Limited account for 90 percent of domestic production of crude oil & natural gas.
However India depends on imports for nearly 70 percent of its crude requirements.
a) Production
India has thirty-five major fields onshore (primarily in Assam and Gujarat) and four
major offshore oil fields (Bombay High, south of Pondicherry, and in the Palk Strait).
Cambay, Upper Assam, Bombay Offshore, Krishna-Godavari, Cauvery and Assam-
Aranka are few active basins with commercial production.
Quiet recently, the ONGC Videsh Limited has shown keen interest in acquisition of
equity oil in countries like Russia, Vietnam, Iran, Iraq, Venezuela, Algeria and some of
the African countries.
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Figure 4.1 Domestic Production, Consumption and Import of Crude Oil
Figure 4.1 depicts domestic production, consumption and import of crude oil during last
eight years.
Domestic production of crude oil from on-shore and off-shore oil fields has remained
around 32 MTPA for several years passed, clearly seen from flat line graph in the above
figure and this trend is likely to continue for coming years unless there is a major
breakthrough in exploration in the country. However demand of crude oil is increasing
phenomenally. The widening gap between the demand and supply is met through imports.
b) Crude Consumption
Crude oil produced in India and imported is fed for processing to refineries at various
locations for production of petroleum products. The Figure 4.1 indicates the consumption
of Crude Oil. The refinery throughput is seen increasing consistently which can be
attributed to increase in domestic consumption petroleum products. The compound
annual rate of growth for refinery crude throughput was 8.88 percent during the period of
1994-95 to 2001-02.
If the same growth rate continues, the future consumption of crude oil (in terms of
refinery throughput) will be 163 and 250 million tonnes by 2006-07 and 2011-12
respectively.
c) Movement Pattern and Modal Share in Transport
Out of the 15 refineries belonging to Public Sector those at Digboi, Guwahati,
Numaligarh and Bonaingaon process indigenous Assam crude oil only. Cauvery Basin
Refinery also processes indigenous crude produced from Cauvery basin and PY-3 fields.
The refineries such as BPCL-Mumbai, HPC-Mumbai, CRL-Cochin, HPC-Vizag, IOCGujarat,
IOC-Mathura, MRL-Chennai process indigenous as well as imported crude.
IOC-Haldia, IOC-Panipat and IOC-Barauni refineries process only imported crude.
0
20
40
60
80
100
120
94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02
Year
Million Metric Tonnes
Consumption of Crude Oil (in terms of Refinery Crude Throughput)
Import of Crude Oil
Domestic Production of Crude Oil
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Crude from onshore oil fields is mainly transported through pipelines and in case of
offshore oil fields, sea-route is also used. Imported crude coming via sea route is directly
supplied to refineries taking advantage of their coastal locations. Road and rail are not
playing any role in transporting the crude oil.
At present, there are three offshore oil fields operating in India producing crude oil
namely Bombay High (Maharashtra), Rawa (Andhra Pradesh) and PY-03.
Domestic crude extracted from offshore oil fields is transported by sea (Table 4.1) from
Mumbai, Rawa and Cuddalore (PY03) to coast based refineries at Mangalore, Cochin,
Chennai, Vizag as per variations in supply, demand and imports.
Table 4.1 Origin - Destination Pairs of Crude Oil Coastal Movement
Origin Port Destination Port
Mumbai Kandla / Chennai / Cochin / Mangalore
Rawa Vizag / Chennai
PY-03 (Cuddalore) Nagapattinam
Source: Data Collected by the Consultants during their Visits to various Ports
Out of total annual production of crude oil of around 32 million tonnes, coastal shipping
moves about 16 million tonnes. As the domestic production of crude is likely to remain
around 32 million tonnes in the coming years (based on the Ministry of Petroleum and
Natural Gas estimates) the Consultants do not foresee any significant change in the
pattern of coastal movement offshore.
The only competing mode of transport with coastal shipping for crude movement is
pipelines, which directly transport crude from oil fields to refineries. Table 4.2 gives the
details of operating crude oil pipelines in India.
Table 4.2 Details of Crude Oil Pipelines Operating in India
Pipeline Length
(km)
Capacity (MTPA) Owner
Nahorkatiya – Bauroni 1156 5.5 OIL
Salaya – Mathura 1881 21.0 IOCL
Ankleshwar – Koyali 95 2.0 ONGC
Kalol – Navagam – Koyali 127 2.0 ONGC
Bombay High – Uran 203 15.0 ONGC
Haldia – Barauni 506 4.2 IOCL
Total 3968 49.7
Source: India Infrastructure Report, 2001, Chapter on Integrated Transport pp. 174
4.2 PETROLEUM OIL (POL PRODUCTS)
Petroleum products comprise petrol, diesel, ethane, LPG, aviation gasoline, motor
gasoline, jet fuels, kerosene, heavy fuel oil, naptha, white spirit, lubricants, bitumen,
paraffin waxes, petroleum coke and other products like coal tar etc. While usage of oil
and gas as primary sources of energy is well below the world percentages in India, it is
second primary energy source after coal however.
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The lead players in the crude oil refining are Indian Oil Corporation (IOC - 32 percent),
Reliance Petroleum Limited (RPL - 25 percent), Hindusthan Petroleum Corporation
Limited (HPCL - 12 percent) and Bharat Petroleum Corporation Limited (BPCL - 8
percent) with combined share of 77 percent. Other refineries are located at Kochi,
Mangalore, Chennai, Bongaigaon and Numaligarh. Recently ONGC also entered into
refining sector by acquiring the Mangalore Refinery (MRPL).
a) Refineries in India
Increased demand for petroleum products with recent economic reforms and the private
sector participation (Reliance Petroleum, Essar etc.) has led to increase in refining
capacities in India. Refining capacity throughput in 2001-02 has reached a mark of
around 110 million tonnes per annum (MTPA). This phenomenal growth can be
attributed to capacity additions provided by Reliance Petroleum and the expansion of
PSUs in refining sector.
Till late, domestic production of POL was well below the domestic requirements. But as
can it be seen from the Figure 4.2, after 1999-00 due to significant addition in refining
capacity, the POL production has overtaken the consumption for the first time with some
surplus.
India produces about 100 million tonnes of petroleum products. The consumption is in the
region of 98.5 million tonnes including imports of 9.5 million tonnes by private parties.
Out of the total production, the light distillates like LPG, Naptha constitute 27 percent the
middle distillates like SKO, ATF, HSD, LDO etc. constitute 54 percent and the heavy
distillates like FO, Lubeoils, Bitumen etc make up 19 percent.
b) Consumption
Consumption of petroleum products is growing continuously, in recent years. The
consumption seems to have become stagnated and it is around 97 to100 MTPA. During
1994-95 to 2001-02 domestic production of petroleum products other than LPG has
registered compound annual growth rate (CAGR) of 8.2 percent as against 4.86 percent
growth in consumption of POL products. Indian refinery industry has grown impressively
during the same time period with 9.94 percent of CAGR.
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Figure 4.2 Domestic Production, Consumption of Petroleum Products and Refining
Capacity
c) Movement Pattern and Modal Share in Transport
Transportation of petroleum products from refinery location to distribution centers is
carried out by road, rail, sea and pipelines with or without combination of these modes as
per the ground situation. Bulk movement of petroleum products is done mainly through
shipping, rail and pipelines.
In case of white oils like SKO, MS and HSD the demand projected by oil makeup
companies are analysed, which takes into account cost & time parameters – product wise,
region wise, origin/destination wise, cost wise, mode wise etc. The least cost movement
between O-D pairs is identified and the oil companies move the products accordingly.
This exercise is done every month for the forthcoming months. Since sea movements
involve chartering of ships, annual projections for upto 3 years are taken into account to
determine the routes and vessel size, parcel sizes etc. and vessels are hired on time charter
basis. Of the three white oils HSD is the most in demand and the consumption of the
product is about 37 million tonnes (accounting for 35 percent of around 104 million
tonnes of all products consumed in 2002-2003), which is followed by 10.5 million tonnes
of SKO and 7.5 million tonnes of MS (petrol).
These products are also distributed by road through vast network of retailers, who receive
them by pipelines or by rail. The quantity moved by sea in terms of actual loadings at
ports (coastal shipping) in respect of these products in 2002-03 was 6.7 million tonnes (4
million tonnes HSD, 2.2 million tonnes SKO and 0.5 million tonnes MS). The Black oils
like FO and other products like Naptha are used as fuel in fertiliser plants, power plants
etc. Since these oils are required by such industries to meet their specific needs, the oil
companies supply them by souring the same from whichever refinery has a surplus at that
moment. Therefore, a lot of criss-cross movement of these products takes place. In
addition to these sea movements by the oil industry, the concerned sector/industry may
directly import them from outside the country also as the products are deregulated. Table
40.00
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02
Year
Million Metric Tonnes
Refining Capacity
Domestic Production POL other than LPG
Consumption of POL Products
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4.3 given below shows share of various modes of transportation in movement of
petroleum products in India.
Table 4.3 Modal Share (percent) in Movement of Petroleum Products
Mode 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
Road* 25.2 27.3 30.6 29.9 26.4 28.0
Rail 42.9 42.9 40.4 37.7 37.6 36.5
Pipelines 23.8 22.8 21.4 24.9 25.1 26.3
Coastal
Shipping
8.1 7.0 7.6 7.5 10.9 9.2
Total 100.0 100.0 100.0 100.0 100.0 100.0
* Movement by road is arrived at by difference
Source: Presentation document, IOCL October 18,2001
From the available data of movement by different modes (pertaining to 2001-02) it is seen
that the share of the coastal shipping is 17 percent, Rail 37 percent, Pipelines 23 percent
and Road 20 percent (as shown in Table 4.4).
Table 4.4 Derived Modal Share (percent) in Movement of Petroleum Products, 2001-02
Mode Movement
(million tonnes)
% Shares
Coastal Shipping * 16.37 17%
Rail $ 36.09 36%
Pipelines @ 26.38 27%
Road # 19.71 20%
Total 98.55 100%
Based on Total domestic Consumption 98.55 million tonnes
* Basic Ports Statistics 2001-02 $ Railways Data from Indiastat.com
@ Based on trend observed # Arrived from difference
The Consultants during their visits to various ports collected and tabulated the following
information (Table 4.5) on movement pattern of petroleum products by coastal shipping.
Table 4.5 Origin - Destination Pairs of POL Products Coastal Movement
Origin Destination Origin Destination
Kandla Vizag Bedi Tuticorin
Chennai Chennai
Cochin Vizag
Mormugao Hazira Sikka
Mangalore Ranpar
Sikka Kandla Mumbai Kandla
Chennai Sikka
Mormugao NMPT Kandla
Haldia Cochin Kandla
Mumbai Mormugao
Paradip Haldia Chennai
Vizag Paradip
Dahej Vizag
Kakinada Port Blair
Chennai Haldia Mumbai
Vizag Haldia Kolkata
Paradip Haldia Tuticorin
Source: Data Collected by the Consultants during their Visits to various Ports
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Figure 4.3 below gives the picture of pipelines across the country that is already in
existence and proposed.
The movement of LPG from refineries is carried out through several distributors by road,
except where the product is conveyed by pipelines to inland distribution nodes.
Figure 4.3 Pipeline Network in India
Source: Indian Oil Corporation Limited Website
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POL traffic constitutes nearly 30 percent (32 million tonnes) of the total coastal traffic
handled both by major and minor ports during 2001-02. It is seen from the Figure 4.4 that
the quantity of POL coastal traffic handled at minor ports has steeply increased in last
four years (1998-99 to 2001-02). There is a marginal change (although slight decline after
2000-01) in the coastal traffic handled at major ports during these years. The increment in
the minor ports’ traffic can be attributed to commissioning of SBM facility at Sikka.
Figure 4.4 Coastal POL Products Traffic Handled at Major and Minor Ports
In case of major ports while Kolkata’s POL traffic has decreased sharply, that of Paradip
port’s traffic has increased. Visakhapatnam, Chennai, New Mangalore (with maximum
quantity handled among the major ports), JN Port, Mumbai Ports are showing an
increasing trend in POL traffic handled, whereas Kandla has lost its premier position to
the upcoming minor ports in Gujarat.
Among the minor ports, Sikka handled the maximum coastal traffic followed by
Magdalla. POL handled at Sikka is more than that of any major port during 2002-03.
Pipelines are emerging as an important mode of transport in case of liquid petroleum
products namely HSD, SKO etc. The Consultants have carried out an analysis of nature of
competition offered by existing / proposed pipelines to coastal shipping. From analysis it
was observed that most of pipelines are aligned either coast to inland (from coast based
refineries) or located inland. In most cases their role is complementary to coastal
shipping.
The existing pipeline from Vadinar to Kandla having capacity of 11.5 MTPA (currently
operating at 7.5 MTPA) may offer competition to coastal shipping with a reserve capacity
of 4 MTPA.
d) Estimations for Production and Consumption
The Centre for Industrial and Economic Research (CIER) has carried out a detailed
demand, consumption analysis based on market trends and estimated the future demand.
0
5000
10000
15000
20000
25000
30000
35000
40000
1998-99 1999-00 2000-01 2001-02
Years
Thousand Tonnes
Major Ports Minor Ports Total
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The Consultants have adopted these forecast figures (Table 4.6) for POL products for the
years 2006-07 and 2011-12.
Table 4.6 Estimated Demand for POL Products
Year Demand (MTPA)
2006-07 147
2011-12 190
* CIER Market Forecast from indiastat.com
