Mineral Resources India – Petroleum, Fibers, Natural Gas

Petroleum Refineries

• There are two stages → Production (drilling) + Refining
• For Petroleum refineries, the raw material sources were less decisive factors for industrial location
• Because industries were already setup in coalfields and did not move away due to industrial inertia.
• Petroleum refining does not lead significant weight loss, unlike aluminum/copper/sugarcane/ timber processing.
• Virtually all the by-products can be used. Therefore, refineries can be set up

• Near the raw material or
• Near the market or
• at an intermediate break of the bulk location (Ports/Coastal locations)

At raw material site: Disadvantages

• Refinery will become useless after oil is exhausted from oil well
• So whatever millions of dollars you had invested in setting up that refinery will be wasted
• Oil refining close to production site represents a weight loss of 10-11 % only
• Hence not much cost saving in transport even if located near raw material site
• Refined products have higher rate of evaporation, therefore it is better to set up the refinery near the market
• After 1970s, many of the Middle East and African countries started nationalizing their oil operations
• The ownership of refineries/oil wells were transferred from MNCs to government owned PSUs
• Hence nowadays, MNCs are reluctant to setup refineries in this region for the fear of nationalization

Unrest / Instability as a location factor

• Multinational companies do not feel confident to setup refineries inside the middle-east or South America
• During Arab-Israeli war, OPEC members stopped supplying oil to countries that had supported Israel
• There have been war/war-like situations due to Israel-Palestine conflicts, Iran-Iraq, Iraq-Kuwait
• Such instability, destruction, aerial strike → not good for business
• In South America, there have been frequent (and violent) changes in the regimes

Refineries at Market Location → Advantages

• You can use raw material (crude oil) supply from more than one oilfield of more than one country
• So even if oil well is exhausted from country X, you can shift to country Y
• After refining, the finished petroleum products can be supplied to interior areas pipeline connection and trucks/tankers
• In Europe, manufacturing industries also consume a large portion of petroleum products
• Therefore, refineries are also located in major manufacturing centers, where petroleum products are demanded

India Refineries Challenges

• Environmental activism/laws/regulations
• Fears of explosion
• Terrorism
• Hence becoming difficult to setup refineries near market location

Synthetic fibers

Location factor

Input

• The base material for most of the true synthetic fibers is benzene fraction of crude oil
• Benzene → liquid hence evaporates quickly, hazardous to transport
• Therefore, synthetic fiber factories located near/inside petrochemical industry

Output

• Synthetic fibers → Non-bulky + Non-perishable → Easily transported
• Therefore, synthetic fiber industry need not be setup near market location
• Although, with the progress in transport-cargo facilities, nowadays synthetic fiber industry is not always in close proximity with petroleum industry

India – Synthetic fiber industry

• In late 60s, Dhiru Bhai Ambani started Reliance for textile manufacturing at Naroda near Ahmedabad, Gujarat.
• But since polyester is made from petrochemicals, so he entered in Petrochemical business.
• But petrochemical is derived from Petroleum refining, so he moved into Petroleum refining as well.
• Finally, Jamnager refinery set up in Gujarat
• Thus, he achieved complete vertical integration in the supply chain from crude oil to synthetic fibers (even garments via “only vimal” brand)
• Jamnagar refinery provides intermediate raw materials to Reliance’s textile units at Dahej, Naroda, Vadodara in Gujarat
• Similarly, Oil discovery in Ankaleshwar-Sanand-Kalol led to growth of Synthetic textile industry in this region of Gujarat.

Natural Gas

International Pipeline Projects → India

• Iran-Pakistan-India
• Myanmar-Bangladesh-India
• Turkmenistan-Afghanistan-Pakistan-India (TAPI)

Transportation of Gas

• East West Gas Pipeline (EWPL) transports gas from Kakinada, the landfall point of KG-D6 gas, to Bharuch (Gujarat) and traverses through Andhra Pradesh, Karnataka, Maharashtra and Gujarat.
• From Bharuch, they use the pipeline network of Gujarat State Petronet to take the gas to end-consumers as well as connect to Hazira-Bijaipur-Jagdhishpur (HBJ) pipeline
• Through this entire Pipeline networking, gas reaches to fertilizer plants –

• Tata Chemicals (Mumbai)
• Rashtriya Chemicals & Fertilizers (Trombay)
• IFFCO’s (Phulpur – Allahabad)
• GSFC (Vadodara)
• Kribhco (Hazira & Kota)

Fertilizer Industry alongside Natural Gas

• Urea/ Nitrogen Based industries are located near Natural gas source
• Natural Gas has Methane (CH₄), which when mixed with Oxygen, Nitrogen + heat in presence of catalysts produces Ammonia (NH₃), known as Haber process
• This Ammonia (NH₃) can be used for making nitrogen-based fertilizers e.g., Urea
• Therefore availability (and price) of Natural Gas, affects the location of Fertilizer industry
• Similarly, Neptha (obtained from crude oil) is also used in production of nitrogen based fertilizers, hence proximity to oil refinery is also considered a favourable factor.
• Thanks to oil and gas from Bombay High, the Gujarat-Maharashtra region got fertilizer plants at Hazira, Mumbai, Trombay, Vadodara etc.
• Similarly, Hazira-Bijaipur-Jagdhishpur (HBJ) pipeline → fertilizer industry in Bijapur, Sawai Madhopur, Shahjahanpur etc.