Oil and gas sector is among the eight core industries in India and plays a major role in influencing 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 grow more, thereby making the sector quite conducive for investment.
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. Today, it attracts both domestic and foreign investment as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.
According to 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 USD 8.6 trillion by 2040.
India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. Crude Oil import rose sharply to US$ 101.4 billion in 2019-20 from US$ 70.72 billion in 2016-17.
As of June 01, 2021, the sector’s total installed provisional refinery capacity stood at 249.9 MMT and IOC emerged as the largest domestic refiner, with a capacity of 69.7 MMT.
As of December 01, 2020, India’s oil refining capacity stood at 259.3 million metric tonnes (MMT), making it the second-largest refiner in Asia. Private companies own about 35.29% of the total refining capacity in FY20.
In FY20, crude oil production in India stood at 32.2 MMT. Crude oil production stood at 4.9 MMT in FY22 (April-May 2021) and was 30.5 MMT for FY21. In FY20, crude oil import increased to 4.54 mbpd from 4.53 mbpd in FY19. Natural Gas consumption is forecast to reach 143.08 million tonnes (MT) by 2040. India’s LNG import stood at 33.68 bcm during FY20.
According to the International Energy Agency (IEA), 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.
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.
India’s consumption of petroleum products grew 4.5% to 213.69 MMT during FY20 from 213.22 MMT in FY19. The total value of petroleum products exported from the country increased to US$ 35.8 billion in FY20 from US$ 34.9 billion in FY19. Export of petroleum products from India increased from 60.54 MMT in FY16 to 65.7 MMT in FY20.
Exports of petroleum products from India reached 56.8 MMT in FY21 from 60.5 MMT in FY16.
As of December 31, 2020, Gas Authority of India Ltd. (GAIL) had the largest share (69.39% or 11,884 kms) of the country’s natural gas pipeline network (17,126 kms).
According to the data released by Department for Promotion of Industry and Internal Trade Policy (DPIIT), the petroleum and natural gas sector attracted FDI worth US$ 7.92 billion between April 2000 and March 2021.
Following are some of the major investments and developments in the oil and gas sector:
Some of the major initiatives taken by the Government of India to promote oil and gas sector are:
Energy demand of India is anticipated to grow faster than energy demand of all major economies on the back of continuous robust economic growth. India’s energy demand is expected to double to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2017. Moreover, the country’s share in global primary energy consumption is projected to increase by two-fold by 2035.
Crude oil consumption is expected to grow at a CAGR of 3.60% to 500 million tonnes by 2040 from 221.56 million tonnes in 2017.
India’s oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 5.05 million barrel per day in 2020.
Natural Gas consumption is forecast to increase at a CAGR of 4.18% to 143.08 million tonnes by 2040 from 58.10 million tonnes in 2018.
Diesel demand in India is expected to double to 163 million tonnes (MT) by 2029-30.
As per preliminary data of gasoline sales, fuel consumption in India registered growth in June 2021 and is expected to further recover by end-2021. Gasoline sales by state refiners stood at 2.12 million tonnes in June 2021, registering an increase of 5.7% YoY.
India is set to expand India’s natural gas grid to 34,500 kms by adding another 17,000 km gas pipeline. The regasification capacity of the existing 42 MMT per annum will be expanded to 61 MMT per year by the year 2022.
Note: Conversion rate used in August 2021, Rs. 1 = US$ 0.013
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
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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