The reluctance on part of the US refiners to build new refineries due to the stringent environment laws and prevailing high margins is paving the way for Middle East and Asian regions. This is proving to be some sort of boon as developing economies across the world are busy creating surplus refining capacity to capitalize on current shortage of refining capacity in the US and Europe.
India, with a 127.27 million tons per annum (mtpa) refining capacity, consumes 111.7 mt and exports another 17.5 mt of petro-products. Once the expansion plans at existing refineries are put into effect, the refining capacity, it is estimated, would touch 141.7 mt by 2006-2007. Riding high on the back of a booming oil business, Reliance is leading the way with the expansion of its Jamnagar unit by 27 mt followed by Essar oil's 12.5 mt new refinery at Vadinar, Gujarat. PSU oil majors like IOC, HPCL, ONGC and BPCL have proposed to set up four new oil refineries and petrochemical hubs, apart from the proposed expansions. With the investment surge in refining sector, India is likely to have additional refining capacity of 30-60 mt for exports by 2010. Though India is net importer of crude oil, the country has become a net exporter of petro-products after the commissioning of Reliance's Jamnagar plant. The country earned Rs. 28,000 cr in 2004-05 by exporting petro-products.
Globally, during the past three decades, there has been very little capacity additions and these have been almost negligent in the US and Europe. Due to stricter environmental regulations, high tax rates and lower margins, refiners are reluctant to add capacity. Besides, refining has been a cyclical business for a long time, the industry is wary of creating the glut of capacity that would shrink the margins.
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