Kedi Haralu
Just recently as I had written on natural resources in Tapping our resources Part I, II, and III, I had a lot of feedback, especially by those who have knowledge on natural resources, especially drilling of Crude Oil from the three blocks of Nagaland, which has been left untouched due to political problems and also due to the greed of some organizations, who want to benefit solely and not enhance the economy of the State. This selfish attitude has destroyed our image and also our honesty and trust, which will become a precedent of numerous multi national companies who want to invest in Nagaland. But the state of affairs has been so damaging that most of these companies have decided to invest somewhere else, especially our neighboring states. So in the long run, who stands to lose? Nagas, of course. Now there has also been an idea floating around that Nagaland should have a refinery. In this issue, all I can say is, we are “counting our chickens before they are hatched.
Yesterday as I was surfing the net, I thought of taking a look at refineries and export and import of crude oil from India plus a website that carries here year-wise data on crude oil imports, product imports and product exports during the 2002-2008 period. “According to the data, Indian crude oil imports have increased yearly, from 81.989 MMT in FY2002-03 to 111.502 MMT in FY2006-07. For the first quarter of FY2007-08, the crude oil import figure stood at 31.122 MMT, which is 18.5% higher than amount imported during the first quarter of FY2007. Notably, our product imports have gone down by 6.5% -- at 4.085 MMT -- in the first half of FY2007-08 as compared to same quarter last year. On the other hand, product exports have increased by 36.1% to 9.496 MMT in the April-June, 2007, period as compared with the same quarter last year. Notably, product imports experienced massive growth in FY2005-06, with a jump of 52.3% to 13.441 MMT as compared to the previous year's figure of 8,828 MMT. India had a net import figure of 25.712 MMT in Q1, FY2007-08, which indicates a percentage growth of 8.7% over last year's net imports during the April-June period. In terms of value, crude oil imports between April, 2007, and June, 2007, were worth Rs 59,740 Crore, which is 6.7% higher than the same period last year. Notably, there has been no growth in the import of petroleum products in terms of value during the first quarter of FY2008 as compared to the same quarter of FY2007, with the valuation of imports remaining constant at Rs 10,110 Crore in both years. Interestingly, product exports during the first quarter of FY2008 were worth Rs 23,561 Crore, which was 25.6% higher than the previous year. The net import bill for Q1, FY2007-08 -- at Rs 46,289 Crore -- was 2.2% lower than the corresponding quarter of FY2007.”
As apparent, during the 5 years period from 2002/3 to 2006/7, there has been a net import increase of 36.5 % of Crude Oil. India produces approx 27MMT of Crude domestically, which is only about 24% of our annual demand of Crude Oil. Thus, India is dependent on nearly 76% of Crude Oil by imports. If you will observe from the above table, India imports and as well as exports Petroleum products, but export is higher than import. Do you know why India exports petroleum products when it also imports the same? It is because India has to maintain a steady balance of payments position and reduce overall import deficit. Therefore, while 76% crude which is imported and refined within India , part of the imported crude and domestically produced crude is also refined to export and Foreign exchange earned to offset the huge import bill on Crude Oil and Petroleum products. What makes India import more crude against import of petroleum products is the higher cost of importing petroleum products and that is why to earn more Foreign exchange, some petroleum products are exported by India, despite being crude deficient?
In this backdrop, a Refinery set up anywhere within India has more viability only if crude oil is cheaply available to refine the same and export some quantities as well. But what if crude is not available onshore to refine the same? Obviously, setting up a Refinery nearer to a port is the most ideal location, where crude oil imported or produced from offshore would be still cheaper than either transport from onshore field or transport back any imported crude into an onshore refinery. India does not produce enough crude from onshore field anymore and the refineries already set up on onshore are already running under-capacity. On the contrary, India produces more crude from onshore field nearer to the coast (western coast) or from offshore fields (Mumbai High) and therefore refineries set up nearer the coast are more viable. This all make only enough sense that based on economic factors (Refineries below 5MMTA are not considered cost effective) no new refineries set up onshore will ever run viably unless crude produced nearest to the refinery are enough to make it viable. This is why Nagaland cannot have a refinery unless enough crude oil is produced from within the fields of Nagaland and with Changpang oilfield capable of producing less than 1MMTA is not good enough. This means only one thing-exploration and commercial discovery of larger oilfields are paramount if Nagaland is to justify setting up a Refinery. Emotional and sentimental factors will not do.
Next, nobody can predict whether a prospective oil block will produce (if and when) only crude oil. Most oilfields produce huge quantities of natural gas either as associated gas with crude oil or simply as natural gas. Therefore, setting up of refinery can solely be based only after a successful discovery and carrying out of feasibility study of the reservoir and quality of crude. If huge quantities of natural gas is found, 100s of MW of power can be produced and sold to earn revenue. Nagaland itself is deficit on power and gas plants can boost the industrial prospects in future. Fuel for cooking or heating(LPG) are other options too. At the end of the day, natural resources when profitably harnessed can only create more jobs and better quality of life. But there are refineries located where even beyond 1000km there could be no oilfields. This is because transport of crude by long distance pipelines is cheaper and products refined can be sold to the nearest market. Therefore, a refinery set up nearer to the market is more economically viable. The Iran-Pakistan-India pipeline project to import crude into India is a case in hand. India is a huge market and the refineries can profitably refine products for domestic consumption. It all boils down to the fact that India is growing at a 9% GDP, and will need more and more refineries in years to come. But economic considerations will outweigh political factors when it comes to choose a new location. Nagaland is blessed with a geology that holds great promise for oil exploration. It needs to be explored using the best of technologies which needs huge investments and technical expertise. It stands to benefit more in terms of Royalty and profit petroleum when exploration is successful. It has all the potential of transforming itself from a welfare state to a economic state of high growth thus creating more and more spin-off benefits to the Nagas. On the other hand, due to its location in a mountainous landlocked zone, it is not the ideal place to set up a refinery unless discovery of some very large oilfields proof otherwise.
In conclusion, the idea is simple. As most of the Naga patriots believe Nagaland should market only finished petroleum products and not allow its crude be refined outside of Nagaland. But we have to be realistic and see its feasibility, for as said earlier how we can decide on whether we should have a refinery of our own, before even ensuring the amount or quantity of crude oil a daily basis. There is absolutely no point in investing for a refinery just yet this is very much a feeling of patriotism (i.e. a refinery of our own) and goes down well with the renowned Naga spirit for an identity of its own. It is also backed by a strong economic sense for creating value based wealth within the state. But the one thing I can say that is, “refineries cannot be built just for sentimental reasons and emotions but Nagas need to be more practical, where this issue is concerned. We have waited a long time, literally floating on oil, so what is there, if we wait for a few more years, then decide the future aspects of our Natural resources.
