The flow of oil from the Middle East is set to increase when the country's first joint-venture refinery at Mangalore in southern India comes on stream in 1996. The refinery, which will receive imports from the Oman Oil Company (OOC), will initially process 60,000 barrels a day (b/d), rising to 180,000 b/d.

OOC will supply a further 240,000 b/d by 2001 to feed two other joint- venture refineries, each with a capacity of 120,000 b/d, in central and western regions of the country.

The government wants to develop a refining capacity of 3 million b/d in the country. In order to meet this target it has opened the refining sector to private investment. Prospective investors are now carefully evaluating a number of projects.

With greater private sector activity in the oil sector, the monopoly of the Indian Oil Corporation (IOC) as an importer of crude oil will end. Annual purchase contracts with supplier countries could also eventually disappear.

However, the government is reluctant to make a complete break with the past and continues to enter into annual term deals with the traditional crude suppliers of the Gulf. This practice was initiated during the tight international oil market conditions of the 1970s. About 840,000 b/d out of the 1.56 million b/d being lifted by the IOC in the year ending March 1994 was supplied through such deals.

Liquefied petroleum gas (LPG) and liquefied natural gas (LNG) imports have also been opened to the private sector. The levy on the import of these fuels has been reduced to 15 per cent. Demand for LNG is huge, with more than 13 million Indians waiting to receive domestic gas supplies. LPG importers are investing heavily in handling and storage facilities at ports to cater for an increase in imports.

LPG imports by private investors rose to about 200,000 tonnes a year (t/y) in 1994, up from 11,000 tonnes in 1993. The Royal Dutch/Shell Group and the US' Caltex are among a number of multinationals involved in the import and marketing of gas in the country.