Analyze the trends towards growth in refining capacity of crude oil in the world.

Evaluate its exploration and development stages.

Over the course of 2012-2025, global oil product consumption will grow by an average
annual rate of 1.2%. In the medium term, the transportation sector in developing countries
will remain the main driver of oil product demand growth. China is already the worlds largest
market for new passenger cars. Analysts expect high growth rates in Chinese car ownership
and forecast that by 2025 the total number of cars in China will reach 266 mln. The growth of
the Asian car fleet will spur growth in demand for gasoline, while the commercial transport
sector will contribute to the growth in demand for distilled products. An increase in
consumption both in light and fuel oil products will be registered in Middle East countries that
have traditionally been big consumers of fuel oil. Persian Gulf countries use fuel oil in
electricity generation, industrial production, water desalination and as a fuel for refineries.
Developed countries have reached their peak in oil product consumption. Both Europe and
North America are at the stage where their car market is nearing saturation. Improvements in
fuel economy will limit growth in oil product consumption. Consumption of gasoline in
developed countries will continue to fall, while demand for distillates will increase due to
stricter environmental requirements for bunker fuel and an increase in demand from the
commercial transport sector. Global demand for diesel fuel will grow fastest among all the oil
products. By 2025 the share of diesel fuel in the global oil product consumption will increase
from the current 32% to 37%. This will require changes in the configuration of existing
refineries.
Crude oils and natural gases are mixtures of hydrocarbon molecules (organic compounds of
carbon and hydrogen atoms) containing from 1 to 60 carbon atoms. The properties of these
hydrocarbons depend on the number and arrangement of the carbon and hydrogen atoms in
their molecules. The basic hydrocarbon molecule is 1 carbon atom linked with 4 hydrogen
atoms (methane). All other variations of petroleum hydrocarbons evolve from this molecule.
Hydrocarbons containing up to 4 carbon atoms are usually gases; those with 5 to 19 carbon
atoms are usually liquids; and those with 20 or more are solids. In addition to hydrocarbons,
crude oils and natural gases contain sulphur, nitrogen and oxygen compounds together with
trace quantities of metals and other elements.

Crude oil and natural gas are believed to have been formed over millions of years by the
decay of vegetation and marine organisms, compressed under the weight of sedimentation.
Because oil and gas are lighter than water, they rose up to fill the voids in these overlying
formations. This upward movement stopped when the oil and gas reached dense, overlying,
impervious strata or nonporous rock. The oil and gas filled the spaces in porous rock seams
and natural underground reservoirs, such as saturated sands, with the lighter gas on top of
the heavier oil. These spaces were originally horizontal, but shifting of the earths crust
created pockets, called faults, anticlines, salt domes and stratigraphic traps, where the oil
and gas collected in reservoirs.
7. Critically examine the issue for payment of outstanding oil debt between India and Iran.
How it has been resolved?
What steps have been undertaken?

India's ties with Iran need urgent attention as an unresolved row over oil payments threatens to
drag the relationship, once described as strategic, to a new low.
The problem arose in December 2010 when the Reserve Bank of India, under U.S. pressure,
decided to no longer use a clearing mechanism to pay Iran for its crude. Washington and its
western allies had exhorted India not to use the Asian Clearing Union (ACU) currency swap
system to pay Iran. They argued that this mechanism, established at the initiative of the United
Nations Economic and Social Commission for Asia and Pacific (ESCAP) and in operation since
1974, was disconcertingly opaque. Consequently, it was difficult to ascertain whether the money
flowing into Iran's coffers was not used to fortify the country's nuclear programme. Faced with
these objections, India, according to the Financial Times, began using the German bank, EIH, for
making payments. However, this channel broke down in May 2011, after the European Union
imposed sanctions on Iran.
Iran is India's core energy partner its second largest oil supplier. Nearly 12 per cent of India's
total demand, around 4,00,000 barrels a day, feeds India's refineries and petrochemical
complexes. The Mangalore Refinery and Petrochemicals Ltd (MPCL) is the largest oil importer
from Iran. The IOC, BPCL, HPCL and Essar are also major consumers of Iranian crude.
Because of the difficulties over payments, Indian companies have accumulated a debt of nearly $5
billion. With the payment row festering, Iran decided to halt supplies to Indian firms for August.
However, as the deadline for the payments neared, both sides scrambled to achieve a

breakthrough. On July 31, Iran's Oil Ministry website SHANA reported that the payment row had
been settled. India would pay part of the debt promptly and the rest would be gradually
settled. The Ministry's optimism notwithstanding, details of the inner workings of the new
mechanism and the prospects of its durability remain far from clear.

The payment problem solved by Ditching the dollar, Iran and India have agreed to settle all
outstanding crude oil dues in rupees in preparation to future trade in their national currencies.
The dollar dues $6.5 billion equaling 55 per cent of oil payment would be deposited in
Natal Iranian Oil Co account with Indian banks.

6. Research the key initiatives taken by the Government of India to promote the trading
of oil and natural gas in the global market. How far it stands successful?

The oil and gas sector is among the six core industries in India and plays a major role
in influencing decision making for all the other important sections of the economy.
In 199798, the New Exploration Licensing Policy (NELP) was envisaged to fill the
ever-increasing gap between Indias gas demand and supply. Indias economic
growth is closely related to energy demand; therefore the need for oil and gas is
projected to grow more, thereby making the sector quite conducive for investment.
The Government of India has adopted several policies to fulfil the increasing demand.
The government has allowed 100 per cent Foreign Direct Investment (FDI) in many
segments of the sector, including natural gas, petroleum products, and refineries,
among others. Today, it attracts both domestic and foreign investment, as attested by
the presence of Reliance Industries Ltd (RIL) and Cairn India.