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

Cellulose Fiber

  • Rayon from natural cellulose & from wood pulp
  • Found near pulp mills
True Synthetics

  • Nylon and Polyester
  • Produced chemically from coal or petroleum by products
  • Found near petrochemical refineries

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, Dhirubhai 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

Natural Gas Compared to Petroleum

Advantages 

  • Cheaper
  • Does not require extensive refining
  • Burns clean

 

Disadvantages

  • Storage and distribution is difficult
  • With the help of pipelines, the gas can be transported to the consuming centers, but the construction of pipeline and its security and maintenance is expensive. Hence export is problematic
  • Once the pipeline is laid- its size/capacity cannot be increased
  • Leakage detection is difficult in case of underground pipelines
  • If market/buyers are not found, then gas is wasted by burning (flaring)
  • Therefore it is economical only to mine gas near market areas/ only if pipeline is established

International Pipeline Projects → India

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

ONGC Hazira, Gujarat

Input Natural gas from Bombay High
Process
  • They remove sulfur impurity from the (sour) natural gas, and send it to other regions via pipeline
  • Process is known as “Sweetening the gas”
Output “Sweet” natural gas is used in

  • LPG cylinders
  • Nitrogen based fertilizers
  • Household via pipelines as cooking gas
Labour
  • Not the deciding factor
  • Because skilled labour is mobile and Hazira has township for them
Transport
  • Hazira – Bijapur – Jagdhishpur (HBJ) pipeline passes through Gujarat, Madhya Pradesh, Rajasthan, UP, Delhi and Haryana
  • Hence all big markets are connected through pipeline

Gail Pipelines

Jamnagar Loni Pipeline  Vizag Secunderabad Pipeline
Input
  • Reliance refinery Jamnagar
  • Essar refinery Vadinar
  • Imported LNG from Kandla port
  • Vizag – HPC Refinery
  • Imports from Vishakhapatnam port
Market
  • Ajmer & Jaipur in Rajasthan,
  • Gurgaon in Haryana
  • Delhi
  • Loni-Gaziabad (UP)
  • Vijayawada
  • Secunderabad, Near Hyderabad

 

Length
  • 1300 Kms
  • 600 Kms

Reliance KG Basin – Refining done at Kakinada in Andhra Pradesh

Input Gas from offshore block in Krishna – Godavari Basin
Refining Onshore Gas Terminal at Gadimoga, about 30 Km south of Kakinada in the state of Andhra Pradesh

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-Maharahstra region got fertilizer plants at Hazira, Mumbai, Trombay, Vadodara etc.
  • Similarly, Hazira-Bijaipur-Jagdhishpur(HBJ) pipeline fertilizer industry in Bijapur, Sawai Madhopur, Shahjahanpur etc.
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