Advantage India
Growing
Demand
* Oil demand in India is projected to register a 2x growth to reach 11 million barrels per day by 2045.
* Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and gasoline covering 58% of India’s oil demand by 2045.
* Consumption of natural gas in India is expected to grow by 25 billion cubic metres (BCM), registering an average annual growth of 9% until 2024.
Rapid
Expansion
* India aims to commercialise 50% of its SPR (strategic petroleum reserves) to raise funds and build additional storage tanks to offset high oil prices.
* In May 2022, ONGC announced plans to invest US$ 4 billion from FY22-25 to increase its exploration efforts in India.
Supportive FDI
Guidelines
* In July 2021, the Department for Promotion of Industry and Internal Trade (DPIIT) approved an order allowing 100% foreign direct investments (FDIs) under automatic route for oil and gas PSUs.
* The Government has allowed 100% Foreign Direct Investment (FDI) in upstream and private sector refining projects.
policy
Support
* In 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.
* In September 2021, India and the US agreed to expand their energy collaboration by focusing on emerging fuels.
Introduction
The oil and gas sector is among the eight core industries in India and plays a major role in influencing the decision-making for all the other important sections of the economy.
India’s economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to increase, thereby making the sector quite conducive for investment. India retained its spot as the third-largest consumer of oil in the world as of 2021.
The Government has adopted several policies to fulfil the increasing demand. It has allowed 100% foreign direct investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries, among others. The FDI limit for public sector refining projects has been raised to 49% without any disinvestment or dilution of domestic equity in existing PSUs. Today, it attracts both domestic and foreign investment, as attested by the presence of companies such as Reliance Industries Ltd (RIL) and Cairn India. The industry is expected to attract US$ 25 billion investment in exploration and production by 2022. India is already a refining hub with 21 refineries, and expansion is planned for tapping foreign investment in export-oriented infrastructure, including product pipelines and export terminals.
India’s crude oil production in FY22 stood at 29.7 MMT.
Market Size
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 India's gross domestic product (GDP) is expected to increase to US$ 8.6 trillion by 2040.
As of September 2021, India’s oil refining capacity stood at 248.9 MMTPA, making it the second-largest refiner in Asia. Private companies owned about 35% of the total refining capacity.
India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. India’s consumption of petrol products stood at 126.12 MMT in April-October, 2022. High Speed Diesel was the most consumed oil product in India and accounted for 38.84% of petroleum product consumption in FY22.
India’s oil consumption stood at almost 4.9 million barrels per day (BPD) in 2021, up from 4.65 million BPD in 2020.
India’s LNG import stood at 2,411 million metric standard cubic meters (MMSCM) in October 2022. Gross production of LNG was 2,883 MMSCM in the same month. According to the International Energy Agency (IEA), consumption of natural gas in India is expected to grow by 25 BCM, registering an average annual growth of 9% until 2024.
Investments/Recent Developments
According to the 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$ 7.98 billion between April 2000-March 2022.
Following are some of the major investments and developments in the oil and gas sector:
- India’s crude oil production in April-October 2022 stood at 17.2 MMT.
- The total number of OMC retail outlets increased to 84,895, as of November 1, 2022, from 59,595 in FY17.
- As of August 1, 2022, India had 10,420 kms of crude pipeline network, with a capacity of 147.9 MMTPA.
- As of June 30, 2022, Gas Authority of India Ltd. (GAIL) had the largest share (57.74% or 19,524 kms) of the country’s natural gas pipeline network (33,815 kms).
- In May 2022, ONGC announced plans to invest US$ 4 billion from FY22-25 to increase its exploration efforts in India.
- In April 2022, Indian Oil Corporation Limited, Larsen & Toubro and Goldman Sachs-backed renewable energy producer ReNew Power formed a joint venture by signing a term sheet. This JV will develop green hydrogen projects, helping India cut down its carbon emissions.
- Exports of petroleum products from India reached 62.7 MMT in FY22. The value of these crude oil and petroleum products stood at US$ 44.41 billion. In FY22, crude oil imports stood at 4.24 MBPD, which was worth US$ 120.4 billion.
- In March 2022, the Board of IOCL approved plans to invest Rs. 7,282 crore (US$ 932.6 million) for the development of City Gas Distribution (CGD) network in 9 geographical areas (GAs).
- In March 2022, the Board of Oil India approved an investment of Rs. 6,555 crore (US$ 839.49 million) for Numaligarh petrochemical project.
- As of March, 2022, the oil sector’s total installed provisional refinery capacity stood at 249.21 MMT, and IOC emerged as the largest domestic refiner with a capacity of 70.05 MMT.
- In January 2022, Indian Oil Corp. Ltd. (IOCL) announced plans to expand its city gas distribution (CGD) business, looking to invest Rs. 7,000 crore (US$ 918.6 million).
- In January 2022, Adani Total Gas Ltd (ATGL), a joint venture between the Adani Group and TotalEnergies, won licences to expand its City Gas Distribution (CGD) network to 14 new geographical areas, with an investment of Rs. 20,000 crore (US$ 2.62 billion).
- In November 2021, Oil and Natural Gas Corp. Ltd (ONGC) announced that it invested up to Rs. 6,000 crore (US$ 800 million) in its petrochemicals arm (ONGC Petro Additions Ltd.) to meet its equity requirements.
- In November 2021, Indian Oil, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited announced the launch of the Model Retail Outlet Scheme and a Digital Customer Feedback Programme called Darpan@petrolpump. These three oil PSUs have joined hands to launch model retail outlets to enhance service standards and amenities across their networks, which serve over six crore consumers every day.
Government Initiatives
Some of the major initiatives taken by the Government of India to promote the oil and gas sector are:
- On May 21, 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.
- In May 2022, 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.
- In February 2022, , Minister of Petroleum & Natural Gas, and Housing & Urban Affairs, Mr. Hardeep Singh Puri, said that India will more than double its exploration area of oil and gas to 0.5 million sq. km. by 2025 and to 1 million sq. km. by 2030 with a view to increase domestic output.
- In December 2021, the Ministry of Petroleum and Natural Gas launched the seventh bid round under the OALP. Under this round, around 15,766 sq. km. has been offered to investors.
- In November 2021, India announced that it will release 5 million barrels of crude oil from its strategic petroleum reserves in a concerted effort to bring down global crude oil prices. This is roughly equivalent to a day’s consumption in the country.
- In November 2021, the government set up a committee to work out measures needed to make natural gas available to power plants at reasonably stable prices.
- In October 2021, the Union Ministry of Petroleum & Natural Gas approved a revised project cost of Rs. 28,026 crore (US$ 3.8 billion) to increase refining capacity for the ongoing Numaligarh Refinery Expansion Project from 3 to 9 MMTPA.
- In September 2021, the Indian government approved oil and gas projects worth Rs. 1 lakh crore (US$ 13.46 billion) in Northeast India. These projects are expected to be completed by 2025.
- In September 2021, India and the US agreed to expand their energy collaboration by focusing on emerging fuels. This was followed by a ministerial conference of the US-India Strategic Clean Energy Partnership (SCEP).
- In July 2021, the Department for Promotion of Industry and Internal Trade (DPIIT) approved an order allowing 100% foreign direct investments (FDIs) under automatic route for oil and gas PSUs.
- The Government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023.
Road Ahead
Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation. Crude oil consumption is expected to grow at a CAGR of 5.14% to 500 million tonnes by FY40 from 202.7 million tonnes in FY22. In terms of barrels, India’s oil consumption is forecast to rise from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and 9.2 MBPD in 2050. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and petrol covering 58% of India’s oil demand by 2045. Demand is not likely to simmer down anytime soon, given strong economic growth and rising urbanisation.
Natural Gas consumption is forecast to increase at a CAGR of 12.2% to 550 MCMPD by 2030 from 174 MCMPD in 2021.
India is planning to double its oil refining capacity to 450-500 million tonnes by 2030.
Energy demand of India is anticipated to grow faster than energy demand of all major economies globally on the back of continuous robust economic growth. Moreover, the country’s share in global primary energy consumption is projected to increase to two-fold by 2035.
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
Note: 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
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