Petrochemical industries & oil refining

• Proximity to petroleum refineries or areas where gas pipelines reach. Mumbai is the hub of petrochemical industries.
• Efficient transportation to ensure continuous supply without any leakages.
• Port facilities for easy export of final products.
• Market availability is a very important factor. Petrochemical plants are not present in West Asian countries, because although there are refineries there is no large local market for the end products of the industry.

OIL REFINING

• Work of refining is to breakdown various hydrocarbons into their respective groups or factions through a complex process of distillation.
• Not only split into many components but impurities are also removed.
• Changes in the oil-refining space: Much larger capacity refineries are being set up, the advent of Electric Vehicles has led to shutting down of capacity in Europe. However, demand for petroleum products is still increasing in developing world which continue to expand refining capacity. India is still adding capacity to its refining capacity with new refineries planned at Nagapattinam, Tamil Nadu, Barmer Refinery, Rajasthan etc. 

LOCATION OF OIL REFINING

• Most of the world’s oil is produced in countries which do not have much demand hence it must be traded.
• Most of the major refineries are therefore situated on the coast, whether they are in producing or consuming countries. 
• Petrochemical industries are located close to refineries, but they also tend to locate near their major markets.
• Market based refineries: N. America, Europe and Japan have market-oriented refineries. 

OIL FIELD BASED REFINERIES

• Greatest advantage of such refineries is the proximity of crude oil, transport costs are saved, and refining can begin as soon as oil is brought to the surface.
• Chief disadvantage of such locations are the refineries will be useless when the field is exhausted. 
• They are distant from petroleum products markets.
• Creating refining facilities in sparsely populated, inhospitable terrain or inclement weather conditions is difficult.
• If field-based refineries get located at or near the coast they have added advantage of easy import of machineries/tools/labor and easy export of the finished goods. EG: Saudi Arabia. 
• Apart from economic reasons other factors such as political unrest, fear of nationalization of refineries and as a basis of industrial development in underdeveloped countries. 
• Developing refineries also provide employment and supply fuel requirement, better value of export and increased revenue. That’s why many developing or underdeveloped nations insist that at least some of the oil must be refined locally. Ex. Venezuela and Middle East.

INTERMEDIATE LOCATIONS

• Guided by consideration other than market or fuel.
• Difficult approach to the coast because of shallow and narrow coastal entrance waters: Venezuela: The oil fields of Lake Maracaibo do not have refining facilities there but at nearby islands of Aruba and Curacao which are more easily accessible and not far from Venezuelan oil fields.
• Ready market as well big export hub: Singapore has no oil of its own, but it is surrounded by countries (Indonesia and Brunei) which extract a lot of crude oil. Refining facilities have come up in Singapore because of large volume of international trade takes place at the port. 
• Deep harbor positions have an advantage of capacity to handle larger tankers and hence the refineries tend to get located close to nearest deepest harbor to the market. Ex. Rotterdam. 

MARKET LOCATIONS

Main oil consuming regions are areas of dense population and big industries. 

• Establishment of refineries in urban and industrial regions has several advantages. Such as:
  • Availability of technicians, skilled labor, construction material and commercial know how. 
  • High standard of living ensures continuous demand and large markets.
  • Petrochemical industries (Plastic, synthetic fiber & rubber) also have main markets in these countries. 
  • Refineries at these locations tend to be massive and provide a large range of finished products than refineries at the field locations.
  • All the fractions of oil have some end use. Hence, it makes sense to transport single product, the raw material i.e., crude oil, than transporting 8-9 fraction products. Hence, refineries tend to be located near demand centers. 
• Any location in the big consuming nation will be categorized as market locations. Ex.: Rotterdam & Antwerp refineries in Europe. Most refineries in UK are located on the Thames River.