Key Opportunities for low carbon transition in the Oil and Gas sector in India

India is the world's third-largest energy consumer after China and the United States. It is also the most rapidly rising energy consumer. As one of the eight key industries, the oil and gas sector in India has a significant influence on all other critical sectors of the economy. Coal, crude oil, natural gas, and renewable energy supply a substantial portion of India's energy needs. The demand for energy in India is anticipated to increase far more quickly than that of any other developed nation in the globe. India currently consumes 6.1% of the world's primary energy, and by 2050, it is projected that this percentage will rise to around 9.8%. India's share of global oil demand is predicted to climb to 11%, while gas demand is expected to increase by 500%, making it an appealing destination for investment and collaboration. In the primary energy mix, the oil and gas sector dominates since hydrocarbons provide more than one-third of the energy needed. The main factors driving the yearly increase in oil and gas consumption are the expanding economy and population. Unfortunately, this means an increase in hydrocarbon emissions. As a result, India must boost its energy supply in a sustainable manner that does not result in a significant increase in emissions.

To meet priorities including Energy Access, Energy Efficiency, Energy Sustainability, and Energy Security, the government has pioneered a variety of policy reforms and efforts to increase the production and utilisation of domestic petroleum resources. These are also intended to remove barriers to infrastructure investment in the oil and gas sector based on the principles of ease of doing business, minimal government, maximum governance, and promotion of the Make-in-India drive. To meet the increased demand for hydrocarbon fuel, major strategies adopted include attracting investment in exploration and production to increase domestic oil and gas production, shifting to a gas-based economy, technological advancement to improve refinery processes, energy efficiency and productivity, accelerating bio-fuel economy, expanding overseas oil and gas portfolio, diversifying oil and gas supply sources, and so on. The government has also stated its intention to achieve 500 GW of installed capacity from non-fossil fuel capacity (hydro, nuclear, solar PV, wind, biomass, etc.) by 2030.

Note: MMSCM-Million Metric Standard Cubic Meters, MMT- Million Metric Ton

The Indian Oil and Gas Industry

Coal (for the production of electricity) and oil (for transportation) are the two sources of energy that contribute the most to the increasing energy demands. Over the next two decades, India will be a primary driver of expanding energy demand, accounting for 25% of world growth. India has surpassed the US$ 3 trillion mark and is on track to surpass the US$ 5 trillion mark by 2026-27. This expansion is mostly powered by the growing consumption of energy. India has increased nine times, and the number of CNG stations has increased from 900 in 2014 to 5000 presently. In 2022, the terminal regasification capacity of 21 MMTPA has more than doubled. Moreover, the gas pipeline network has increased to 22,000 kilometres from 14,000 in 2014 and the network is further expected to expand to 35,000 kilometres in the next 4-5 years. India has 23 refineries, 18 of which are public, two of which are joint, and three are private, accounting for the country's energy supply. In 2022, public-sector refineries processed 138.08 MMT of crude oil, up 1.65% from 108.03 MMT in 2016-17. On the other hand, crude oil throughput in private sector refineries climbed at a CAGR of 6.27% from 33.43 MMT to 83.18 MMT during the same period.

Source: Ministry of Petroleum and Natural Gas

Major Sectors

Opportunities In Oil and Gas Industry

• Biofuel

  Biofuels involve the direct conversion of biomass into liquid fuels that can be combined with conventional car fuels. The two main transport biofuels are ethanol and biodiesel. Demand for biofuels is predicted to increase by 9% in 2022 and 12% in 2023.

  • Ethanol

  The government is executing the Ethanol Blended Petrol (EBP) Programme through Oil Marketing Companies (OMCs), under which OMCs would offer ethanol-blended petrol containing up to 10% ethanol beginning in May 2022. India increased the amount of ethanol in petrol from 1.53% in 2013–14 to 10.17% in 2022 and pushed back its goal of 20% ethanol blending in fuel from 2030 to 2025–26. In 2001, the Government of India initiated three pilot projects, two in Maharashtra and one in Uttar Pradesh, to deliver ethanol-blended petrol only to retail outlets in their respective supply areas.

  Ethanol Supply Year	Projected Petrol Sale (MMT)	Blending (in %)	Ethanol required for blending in Petrol (crore litres)
  2019-20	24.1 (Actual)	5		173
  2020-21	27.7	8.5		332
  2021-22	31	10		437
  2022-23	32	12		542
  2023-24	33	15		698
  2024-25	35	20		988
  2025-26	36	20		1,016

  Under the PM JIVAN scheme, 12 commercial plants and 10 demonstration plants of 2G biorefineries are scheduled to be built in places with significant biomass supply, ensuring that ethanol is available for blending across the country.

  • BioDiesel

  The consumption of High-Speed Diesel (HSD) in the country will be 96.2 MKL in 2022, up from 76.7 MMT/93.13 MKL in 2021-22. At 5% blending, 481 crore litres of biodiesel would be required in 2023. In India, more than 50 MSME facilities and five major bio-diesel units are now in operation with a nameplate capacity of 150 million litres per year.

  

  • Compressed Bio-Gas (CBG)

Anaerobic decomposition of waste and biomass sources results in the production of biogas. CBG has a strong potential to replace CNG in automotive, industrial, and commercial domains, given the abundance of biomass available in the nation. Under SATAT, Oil and gas Marketing Companies (OGMCs) such as Indian Oil, HPCL, BPCL, GAIL, and IGL have invited expressions of interest (EOIs) from potential investors/entrepreneurs to invest in CBG. The Government of India has set a target of increasing the share of petrol in the energy mix from 6.5% (now) to 15% by 2030 in order to transform India into a gas-based economy. CBG can contribute to this build-up by serving as a crucial domestic supply source.

• Indian Cooking Fuel

Until recently, most Indian homes relied on solid fuels such as firewood, crop residue, and dung cakes for primary cooking fuel. Between 2016 and 2019, the Indian government offered subsidised LPG connections to approximately 8 crore low-income families through the Pradhan Mantri Ujjwala Yojana (PMUY) programme. It contributed to an increase in LPG coverage from 62% on May 1, 2016 to 99.8% on April 1, 2021. Some of the clean cooking fuel options are Biogas, Piped Natural Gas (PNG), Electricity-based cooking, Improved cook-stoves, Liquefied Petroleum Gas (LPG).

• Hydrogen

Currently, hydrogen is largely employed as a feedstock in a variety of sectors. However, with technological breakthroughs in electrolysers (for green hydrogen) and developments in carbon capture and storage technology (CCS utilised for blue hydrogen), it is predicted to be the clean fuel of the future.

To distinguish hydrogen created from diverse sources, different colour codes have been allocated. The terms "black," "grey," and "brown" refer to hydrogen production from coal, natural gas/naphtha, and lignite, respectively. The term "blue" is widely used to describe hydrogen produced from fossil fuels with the capture of CO2 generated in the process. The term "green" refers to hydrogen created through water electrolysis using renewable energy. In January 2022, GAIL Limited began India's first project to incorporate hydrogen into the natural gas system in Indore, supplying natural gas that has been blended with 2% hydrogen (by volume) via the 1,100 km Avantika Gas pipeline network. Similar projects have also been started by Oil India in Assam.

• Sustainable Aviation Fuel (SAF)

They are aviation fuels that are either renewable or waste-derived. European countries are already blending 0.5 to 1% SAF in aviation turbine fuel (ATF) as part of their SAF blending programme. As a first step towards broader deployment in India, India's Centre for Military Airworthiness and Certification (CEMILAC) piloted SAF use across the Indian Air Force's AN-32 fleet. In 2018, SpiceJet conducted India's first domestic biofuel test flight, using a 25% SAF blend. Indigo also recently completed its first flight using SAF in February 2022, with a blend of 10% SAF and 90% conventional ATF. In India, two regulatory institutions provide SAF certification: the Centre for Military Airworthiness and Certification (CEMILAC) and the Directorate General of Civil Aviation.

• Natural Gas And LNG

India, one of the top 13 gas-consuming countries in the world, needs to switch quickly from other fossil-based fuels to natural gas in order to meet its environmental objectives. India seeks to become a natural gas-based economy by increasing its gas contribution of the main energy mix to 15% by 2030. As the country transitions to cleaner energy sources, India's natural gas contribution is predicted to be 11-15% by 2040. As of April 1, 2019, a 16,324-kilometer-long natural gas pipeline is operating, with another 15,000 kilometres under development across the country. This initiatives has facilitated the expansion of City Gas Distribution (CGD) to deliver CNG and PNG.

Trucks can cover more miles with the same fuel amount because of LNG's higher calorific value than diesel. Notably, LNG emissions are substantially lower than diesel emissions and can help to reduce GHG emissions. The draft LNG policy 2021 called for the construction of LNG distribution stations along the designated routes. The draft LNG policy 2021 intends to build a regasification capacity of 70 MMTPA by 2030 and 100 MMTPA by 2040. The policy also aims to increase the capacity of common carriers in LNG facilities. These terminals are planned to be built along India's eastern and western coastlines. To accommodate LNG demand, India must establish a free and competitive regasification market, including on- and off-shore facilities.

• Zero Carbon Shipping

India is the world's 16th largest shipping country. Around 80% of worldwide transportation volume is accounted by the shipping industry. However, the sector accounts for only 10% of total transport emissions and 2-3% of total greenhouse gas (GHG) emissions. Every year, shipping volumes are predicted to rise by about 1.3% on average. India has one of the world's greatest shorelines, which can be used to serve as an efficient means of freight movement.

Road Ahead

The monopoly of some countries over the production and supply of energy, particularly oil and gas, and the reliance of certain nations on imports to meet even the most basic energy requirements have highlighted global vulnerability, where the sustained supply of energy was formerly taken for granted. Thus, India would need to take a transition path based on two pillars: increasing its share of electricity in final energy consumption and harnessing the full potential of domestic renewable resources, which would result in less reliance on imports and provide a much-needed boost to the rural / agri-based economy. Only roughly 18% of India's energy needs are now fulfilled by power flowing from the grid. By 2035, this must quickly reach greater than 40%.

India is one of the world's leading proponents of the energy transition and the development of new energy sources. The Prime Minister stated that India's energy demands will be highest in the coming decade, which creates an opportunity for energy investors and stakeholders. He stated that India currently accounts for 5% of the world's oil demand, but that percentage is predicted to increase to 11%, while India's petrol demand is predicted to rise by up to 500%. India is one of the few countries on track to meet its Paris Agreement pledges to reduce greenhouse gas emissions by 2030. More than 35% of its power generation capacity is generated from renewable energy sources in India.