THE HINDU BUSINESS LINE
Financial Daily
from THE HINDU group of publications

Monday, December 17, 2001

• AGRI-BUSINESS
• COMMODITIES
• CORPORATE
• LETTERS
• LIFE
• MARKETS
• MENTOR
• NEWS
• OPINION
• VARIETY
• INFO-TECH
• CATALYST
• INVESTMENT WORLD
• MONEY & BANKING
• LOGISTICS

• PAGE ONE
• INDEX
• HOME

News | Next | Prev


Digboi, 100, still alive and kicking


Santanu Sanyal

Recently at DIGBOI (Assam) Dec. 16

"DIG BOY, DIG", shouted the Canadian Engineer, Mr W L Lake, at his men as they watched elephants emerging out of the dense forest with oil stains on their feet. So the story goes about how Digboi township, in the north-eastern corner of the country, got its name, a place that ultimately grew into Indias as well as Asias first petroleum refinery and perhaps the worlds second such outfit.

That was in 1882, just 23 years after oil has been struck in Pennsylvania,USA, by Col. E L Drake.

Mr Lake, and his men were busy extending the Dibru-Sadiya railway line to Ledo for the Assam Railways & Trading Company (AR&TC) registered in England and engaged in transportation and trading of coal,tea and timber from the north-east of India.

(Another version of how Digboi got its name was thatDiorDeis a common prefix to names of rivers in the region, such as the river Dihing, the river Desang, and it is likely that the name Digboi was derived from the Digboi nullah in the area.)

Interestingly, traces of oil in the north-east were discovered even earlier. As early as 1825, army officers passing through the jungles in upper Assam found petroleum oozing out of the banks of rivers flowing by the jungles. In 1866, i.e. seven years after oil was struck in the US, Indias first oil well was drilled at Nahorpung, about 30 miles south-east of Digboi, at a depth of 102 ft. In 1889, the first commercial well was struck in Digboi at a depth of 662 ft. In 1893, AR&TC installed a tiny test refinery at Margheritta, about 20 kms from Digboi, and crude oil from Digboi was sent there by rail. The products included limited quantities of kerosene, lubricating oil, timber staining and preserving oil, iron coating oil and wax.

Since AR&TC did not have any expertise of its own in drilling and petroleum refining, it set up a new company called Assam Oil Company (AOC) in 1889 exclusively for taking care of its oil interests. AOC started construction of a full-fledged petroleum refinery in 1900 and commissioned it in 1901. The products were kerosene, wax oil for lubrication, fuel oil and grease with an annual production of 500 barrels.

In 1902, AOC began selling kerosene and other petroleum products,for the first time for any refinery to undertake marketing operations in a systematic way.

In 1981, by an act of Parliament, AOC was merged with Indian Oil Corporation (IOC) and bacame the Assam Oil Division (AOD) of IOC In past two decades, IOC invested around Rs 1500 crores to turn Digboi refinery into a modern refinery. The modernisation programme included installation of a reformer for production of low lead petrol,completion of wax hydrofinishing unit and a new coking unit. With the commissioning of CDU IV in 1996, the installed capacity increased to 6,50,000 tonne annually. The solve nt dewaxing and deoiling unit, hydrotreater and vacuum distillation short path are likely to be commissioned next year.

The network of LPG marketing,launched in 1982, has been expanded. Two bottling plants have been set up and one more is in the offing. Five retail outlets have been opened outside north-east and anohter 34 will be opened shortly.

Apart from owning and operating the countrys oldest oilfield, the refinery and the petroleum product marketing setup, AOC had several other firsts to its credit. Digboi oilfield, now under OIL, is perhaps the only oilfield in the world which has been p roducing oil for the past 100 years.

The production has substantially dropped over the years but some of the wells still ooze oil and many of them do so under natural pressure without the help of pumps.

Asias first oil terminal at Tinsukia was linked to Digboi refinery. Also, the first product pipeline from Digboi to Tinsukia covering a distance of 34 kms was laid in 1926. For 80 years from 1901,Digboi refinery was the countrys only integrated oil ref inery, undertaking all the operations - drilling and exploration, production of oil,refining and marketing - under one roof. Digboi refinery was the first refinery in the country to use natural gas as fuel. It also set the pioneering example of distribut ing piped gas for domestic use.

The Digboi refinery was the first in the country to extract gasoline from natural gas. For more than 50 years, it was the only refinery in the country doing such an operation.

Digboi refinery has the distinction of being the first refinery in the country to export products to Australia, Germany and UK. Paraffin wax produced in Digboi is considered one of the best in the world. Digboi formed the nucleus of research and develo pment in the petroleum industry. Last but not the least, for nearly half a century the refinery has remained singularly free from any major industrial unrest.

But then it will be a rash to claim that everything is hunky-dory at Digboi today. The biggest challenge facing the management today is how to rationalise the workforce. For a refinery of the size of Digboi (crude throughput capacity 0.65 million tonne s), a workforce of 2700 is considered to be on the high side. Some drastic steps are needed to reduce the workforce by two-thirds. But then who will bell the cat ?

Capacity expansion of the refinery is urgently needed. In todays context,no refinery having a throughput capacity of 0.65 mt can hope to survive, let alone thrive. In fact, a near-doubling of capacity is on the cards but the problems are two-fold: wher e to get the additonal crude and where to sell the increased output.

Crude production in the Assam oilfields has been virtually stagnating for the past few years, with the result that some of the refineries in the region have been unable to run to full capacity. But the bigger problem is how to sell increased production once the capacity increases.

As it is, AOD is finding it hard to sell its products within the region and has therefore been forced to open retail outlets outside it. More retail outlets outside the region are being planned. There should be no problem as long as transport subsidy i s available. It is not clear yet what will happen from April 2002 when the APM is slated to be dismantled.

Pic.: A view of the Digboi oil refinery.

Comment on this article to BLFeedback@thehindu.co.in

Send this article to Friends by E-Mail


Next: Reinsurers shun Tanir Bhavi project
Prev: GTF, Coface join hands for credit insurance
News

Agri-Business | Commodities | Corporate | Letters | Life | Markets | Mentor | News | Opinion | Variety | Info-Tech | Catalyst | Investment World | Money & Banking | Logistics |

Page One | Index | Home


Copyright © 2001 The Hindu Business Line.

Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line.