One of India's eight core businesses is the oil and gas industry, which has a significant impact on all other major economic sectors. Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation. According to the IEA (India Energy Outlook 2021), primary energy demand is expected to nearly double to 1,123 million tonnes of oil equivalent, as the country's gross domestic product (GDP) is expected to increase to US$ 8.6 trillion by 2040.

Indian refining capacity has increased from 215.1 million Metric Tonne Per Annum (MMTPA) to 256.8 MMTPA in last 10 years. And it is projected to increase to 309.5 MMTPA by the year 2028.

India retained its spot as the third-largest consumer of oil in the world, as of 2023. India’s consumption of petroleum products stood at 233.3 MMT in FY24, while crude oil production stood at 29.4 MMT during April-March 2024 and 13.26 MMT during April-September 2024. Assam, Gujarat, and Rajasthan account for more than 96% of oil production in India. As of October 1, 2024, India had 10,943 kms of crude pipeline network, with a capacity of 153.1 MMTPA.

India has 23 refineries - 18 are in the public sector, two in the joint sector and three in the private sector. India’s state refineries have upgraded their facilities to comply with a new government requirement to produce oil products with the equivalent of Euro VI emission standards. In FY24, the oil sector’s total installed refinery capacity stood at 253.9 MMT up to March 2024, and IOCL emerged as the largest domestic refiner with a capacity of 70.1 MMT, making it the second-largest refiner in Asia. Private companies own about 35% of the total refining capacity.

India is one of the largest exporters of refinery products due to the presence of various refineries. In terms of trade Exports of petroleum products from India reached 62.4 MMT in FY24 from 61 MMT in FY23. In FY23, crude oil imports stood at 4.67 MBPD. India’s crude oil production stood at 29.4 MMT during April-March 2024.

In FY25, April-September petroleum product export stood at 31 MMT. Petroleum products worth US$ 22 billion were exported in FY25.

India, the world’s fourth largest crude oil refiner, is expected to add one million barrels per day (mb/d) of refining capacity by 2028.

According to the International Energy Agency (IEA), India’s medium-term outlook for natural gas consumption remains solid due to rising infrastructure and supportive environment policies. Industrial consumers are expected to account for 40% of India’s net demand growth. The demand is also expected to be driven by sectors such as residential, transport and energy.

As per data released by Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflows in India’s petroleum and natural gas sector stood at US$ 8.19 billion between April 2000-June 2024.

There have been multiple partnerships in the sector. Bharat Petroleum Corporation Ltd. (BPCL) and Microsoft have established a strategic cloud partnership targeted at speeding up the company's digital transformation and influencing the oil and gas industry's future innovation. India and the US have also agreed to expand their energy collaboration by focusing on emerging fuels, which was followed by a ministerial conference of the US-India Strategic Clean Energy Partnership (SCEP).

India aims to commercialise 50% of its SPR (Strategic Petroleum Reserves) to raise funds and build additional storage tanks to offset high oil prices. Prime Minister Mr. Narendra Modi has announced that the Government of India plans to invest Rs. 7.5 lakh crore (US$ 102.49 billion) on oil and gas infrastructure in the next five years. There were 89,396 OMC retail outlets in India, as of March 1, 2024.

The Petroleum and Natural Gas Regulatory Board (PNGRB), the downstream regulator, in March 2023, announced that it has amended the PNGRB Determination of Natural Gas Pipeline Tariff regulations to incorporate provisions for Unified Tariff for natural gas pipelines with a mission of “One Nation, One Grid, and One Tariff.” Based on the regulations, PNGRB has notified a levelized Unified Tariff of Rs. 73.93/MMBTU and created three tariff zones for Unified Tariff, where the first zone is up to a distance of 300 kms from the gas source, the second zone is 300-1.200 kms, and the third zone is beyond 1,200 kms.

India’s oil and gas production is expected to achieve a mid-decade peak between 2023-2032, around 2027, driven by the KG-Basin projects operated by Reliance Industries Limited and Oil and Natural Gas Corporation (ONGC).

In May 2022, the Government announced a reduction in excise duty of Rs. 8 (US$ 0.10) per litre on petrol and Rs. 6 (US$ 0.077) per litre on diesel, to combat the high fuel prices. In the same month, the government approved changes in the Biofuel Policy to bring forward the target for 20% ethanol blending with petroleum to 2025-26 from 2030.

In the Union Budget 2022-23, the customs duty on certain critical chemicals such as methanol, acetic acid and heavy feed stocks for petroleum refining were reduced.

By 2030, India wants to increase its refining capacity by double, to 450–500 million tonnes. On the back of ongoing strong economic expansion, it is predicted that India's energy demand will increase more quickly than that of any other major global economy. Consequently, India’s energy demand as a percentage of global energy demand is expected to rise to 11% in 2040 from 6% in 2017.

References: Media Reports, Press Releases, Press Information Bureau, Ministry of Petroleum and Natural Gas, Petroleum Planning and Analysis Cell, News Articles, International Energy Agency, BP Statistical Review 2020.

Notes: MMTPA - Million Metric Tonnes Per Annum, LNG - Liquefied Natural Gas, MMSCM - Million Metric Standard Cubic Meters, BCM – Billion Cubic Meters, MCMPD - Million Cubic Metres Per Day.