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The Oil and Gas industry is expected to attract US$ 25 billion investment in exploration and production by 2022.

Oil & Gas Industry in India

    Last updated on May, 7 2021

Indian Oil And Gas Industry Report  (Size: 649.15 KB ) (February, 2021)

Introduction

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.

Market Size

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 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 30.5 MMT. 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.

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.

Gas pipeline infrastructure in the country stood at 17,016 kms as of June 30, 2020.

Investments

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$ 7.86 billion between April 2000 and September 2020.

Following are some of the major investments and developments in the oil and gas sector:

  • In February 2021, Petronet LNG announced its plans to increase in its Dahej terminal's capacity by 29% to 22.5 million tonnes per annum (mtpa) to meet the rising demand.
  • Key Indian oil retailers such as Bharat Petroleum and Hindustan Petroleum have announced plans to increase the capacity of their outlets in rural areas in 2021.
  • In February 2021, ONGC announced that by May 2021, it would increase natural gas output from a KG basin block to 2.5-3 million standard cubic meters per day.
  • In February 2021, the government launched key oil & gas projects in Assam, such as INDMAX Unit at Indian Oil’s Bongaigaon Refinery, Oil India Limited's secondary tank farm at Madhuban, Dibrugarh and a ‘Gas Compressor Station’ at Hebeda Village, Makum and Tinsukia remotely from Dhemaji in Assam.
  • In February 2021, the government launched key oil and gas projects such as the Ramanathapuram – Thoothukudi natural gas pipeline and Gasoline Desulphurisation Unit at Chennai Petroleum Corporation Limited, Manali.
  • In February 2021, IndianOil Corp. Ltd. signed a ‘statement of intent’ with Greenstat Hydrogen India Pvt. Ltd. to establish a centre of excellence for Hydrogen value chain and other related technologies such as hydrogen storage, fuel cells, etc.
  • Foreign investors will have opportunities to invest in projects worth US$ 300 billion in India as the country looks to cut reliance on oil import by 10% by 2022 according to Mr. Dharmendra Pradhan, Minister of Petroleum and Natural Gas, Government of India.

Government Initiatives

Some of the major initiatives taken by the Government of India to promote oil and gas sector are:

  • In February 2021, Prime Minister Mr. Narendra Modi announced that the Government of India plans to invest ~Rs. 7.5 trillion (US$ 102.49 billion) on oil and gas infrastructure in the next five years.
  • In Union Budget 2021, the government allocated funds worth Rs. 12,480 crore (US$ 1.71 billion) for direct benefit transfer of LPG (liquefied petroleum gas) and Rs. 1,078 crore (US$ 147.31 million) to feedstock subsidy to BCPL/Assam Gas Cracker Complex.
  • In Union Budget 2021, the Finance Minister announced to provide 1 crore more LPG connections under Pradhan Mantri Ujjwala Yojana (PMUY) scheme.
  • The Ministry of Petroleum and Natural Gas released a draft LNG policy that aims to increase the country's LNG re-gasification capacity from 42.5 million tonnes per annum (mtpa) to 70 mtpa by 2030 and 100 mtpa by 2040.
  • The Ministry of Petroleum and Natural Gas released an ‘Ethanol Procurement Policy’ on a long-term basis under the ‘Ethanol Blended Petrol (EBP) Programme’ (October 11, 2019), which covers modalities for long-term ethanol procurement, proposed mechanisms for long-term procurement contracts, pricing methodology and other topics.
  • As per Union Budget 2019-20, Indian Scheme ‘Kayakave Kailasa’, the Ministry of Petroleum & Natural Gas has enabled SC/ST entrepreneurs in providing bulk LPG transportation. State run energy firms, Bharat Petroleum, Hindustan Petroleum and Indian Oil Corporation, plan to spend US$ 20 billion on refinery expansions to add units by 2022.
  • The Government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023.
  • The Government is planning to invest US$ 2.86 billion in the upstream oil and gas production to double natural gas production to 60 bcm and drill more than 120 exploration wells by 2022.

Road Ahead

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.

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 February 2021, Rs. 1 = US$ 0.014

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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