ONGC explores refinery expansion in Gujarat state

India's state-owned Oil and Natural Gas Corporation (ONGC) is exploring the possibility of setting up a 200,000-240,000 bpd refinery in Gujarat state. The plan comes as India aims to increase its refining capacity to meet growing demand. The refinery project is expected to be the largest in the country, surpassing the existing Jamnagar refinery owned by Reliance Industries. ONGC has not yet confirmed the plan, but a source close to the matter has revealed the details.

India's oil refining capacity has been a subject of scrutiny, with a recent report highlighting significant underperformance against targeted growth. The country's refining capacity has grown by only 5% over the past seven years, falling far short of the 69% increase targeted for 2025 [1]. This shortfall has exacerbated India's reliance on imported energy, with petroleum imports rising by 43% over the same period.

Several factors have contributed to this slowdown. Uncertainty around future demand due to climate considerations, limited land availability, and disruptions from the COVID-19 pandemic have significantly slowed expansion efforts. Key projects such as the proposed 60 mtpa India-Saudi greenfield joint venture, Nayara Energy’s 25 mtpa expansion, and Reliance Industries’ planned 7.5 mtpa addition have all fallen behind schedule [1].

The sluggish pace of expansion, coupled with rising domestic fuel demand, has led to a significant increase in India’s petroleum product imports. Meanwhile, export volumes have slipped, indicating a shift in the balance of trade. Experts suggest that India should shift its focus towards petrochemical investments, given the diminishing global refining growth and net-zero concerns [1].

In a related development, India's state-owned Oil and Natural Gas Corporation (ONGC) is exploring the possibility of setting up a 200,000-240,000 bpd refinery in Gujarat state. This project, if confirmed, would be the largest in the country, surpassing the existing Jamnagar refinery owned by Reliance Industries. The refinery project aims to bolster India's refining capacity to meet growing demand [2].

The shift towards petrochemicals is also being advocated by industry leaders. Vikram Sampat, senior vice-president at Reliance Industries, has stated that India needs to increase its petrochemical production capacity to meet local and global demand and contain China's growing dominance of the sector [2]. This shift is driven by the anticipation of rising demand due to rapid urbanization and the growth of e-commerce.

The challenges faced by the Indian refining sector highlight the need for strategic planning and investment in new technologies to address environmental concerns. The uncertainty around future demand and the impact of energy transition policies has made decision-makers more cautious [1]. However, the potential for petrochemical investments offers a promising future for the sector.

References:
[1] https://timesofindia.indiatimes.com/business/india-business/from-big-plans-to-bottlenecks-refining-expansion-falters-capacity-up-just-5-import-dependence-grows/articleshow/122504285.cms
[2] https://zerodha.com/markets/stocks/NSE/RELIANCE/