• AUGUST 9, 2000

Energy - All roads lead to Kakinada

The oil & gas sector is heating up. There has been a flurry of news regarding investments in this sector. Several companies have indicated grandiose investment plans. These mega-investment plans would be the natural fallout of the following:

  • If the economy is to grow by 7% - 8%, the supply of energy will have to be put in place to meet the increased demand.
  • The sector is slated to be completely deregulated by March 2002. This should see increased competition in the sector. To meet the oncoming challenge existing companies are diversifying across the energy chain to increase the stickiness of their earnings.

    The spotlight on the East coast is on Kakinada, Andhra Pradesh. It is expected to become the hydrocarbon terminal of Andhra. To achieve this objective a slew of investment plans have been lined up for this Eastern port.

    An Indian Oil (IOC) consortium has been selected to set up the Andhra Hydrocarbon Terminal (AHT). This project envisages a total investment of Rs 195 bn over a period of 3 - 4 years. IOC, in its quest to be an integrated energy company, will position itself as a complete energy solutions provider.

    To enable the company to provide a spectrum of services it will form separate joint ventures (JV's) for each of the activities. The activities include shipping, port terminal, re-gasification plant, pipeline network and mega power plant.

    Another giant eyeing the Eastern port city is Reliance Petroleum Ltd. (RPL). The company plans to make Kakinada it's marketing hub on the East coast. It plans to set up storage facilities at the port for marketing of kerosene and naphtha.

    RPL has also proposed to set up a separate jetty for itself. This will provide landing facility for the crude from the offshore rigs awarded to it in the Bay of Bengal. It will then have the upstream, exploration and production, and petroleum marketing in place, leaving the chain (refining) incomplete. We can look forward to some announcement for plugging this gap.

    Either way Andhra Pradesh will benefit from the increased investments as the focus shifts to the East coast to make up for the shortage in energy supply.

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