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India will be World’s Refinery Hub
 

Rising demand for energy, high price of oil, lack of US & EU investments in refinery has created a space for India, much like the business process outsourcing sector, to become the world’s choice destination for refining crude oil. Tighter environmental laws have stopped the construction of new refineries in the US since 1976 even as the number of vehicles in the country continued to rise to 200 million consuming 11% of the world’s oil production.

Many large industrial houses are investing massive amounts of money to create a number of refineries by 2008. Reliance is building a USD 5-6 billion refinery  that can handle 29 million tons next to the existing 33 million ton unit in Jamnagar . Essar Oil is building a 10 million ton unit at a cost of USD 2.4 billion. Public sector units (PSU) ONGC, Indian Oil, Hindustan Petroleum are planning refinery plants at Mangalore (Karnataka), Pradip (Orissa), and Vizag (Andhra Pradesh) respectively.

Significantly, Reliance’s program will enable the processing of over 1.2 million barrels a day higher 20% higher than the current largest refinery in Venezuela at Paraguana.  Newspapers report that a Chevron-Texaco investment in this project is in the offing and use the refined fuel for its customers in the US and EU.
 

Since the new refineries are more advanced in technology, they can refine fuel USD 3 cheaper than the Asian benchmark and from cheaper (heavy) crude. 

The world consumes 81.8 million barrels of oil a day and is expected to reach 105 million barrels by 2020. While with all this investment, India will only refine 3% of world’s current consumption rate, the lower cost, higher margins, abundance of cheaper qualified labor, and proximity to West Asia is expected to tilt in favor of India . With some Government support in terms of land, infrastructure, access, incentives, educational facilities, etc., India can easily capture this newly evolving market and hold it for the next 50 years.

The benefits to India are huge—jobs, investment, access to fuel the economy, export potential, better relations with its neighbors and West Asia , and more deep rooted relationships with oil importing countries.