Trade Analytics
Oil And Gas
India will overtake Japan to become the world’s third largest oil consumer behind the US and China by 2025.

Oil & Gas Industry in India

Latest update: April, 2018

  • Oil consumption has expanded at a CAGR of 3.3 per cent during FY2008–16F to reach 4.0 mbpd by 2016.
  • Due to the expected strong growth in demand, India’s dependency on oil imports is likely to increase further
  • Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation
  • With rising income levels, demand for automobile is estimated to increase, in turn leading to augmented demand for oil and gas.

Notes: F- Forecast, CAGR - Compound Annual Growth Rate, mbpd - Million Barrels Per Day
Source: Ministry of oil and Natural Gas, BP Statistical Review 2015 BMI Forecasts, Aranca Research

Growth
  • In FY16, total crude oil imports were valued at US$ 64.4 billion as compared to US$ 112.7 billion in FY15. In FY14, imports accounted for more than 80 per cent of the country’s total oil demand.
  • Backed by new oil fields, domestic oil output is anticipated to grow to 1.0 mbpd by FY16.
  • In March 2017, the Indian Strategic Petroleum Reserve Ltd (ISPRL) and Abu Dhabi National Oil Company (ADNOC) of UAE signed an agreement, to fill up 0.81 MMT or 5,860,000 million barrels of crude oil at ISPRL storage facility at Mangalore, Karnataka.
  • According to the Organisation of the Petroleum Exporting Countries (OPEC), the demand for oil across the world will grow by 1.26 million barrels per day (mb/d). Moreover, majority of the oil demand across the globe is expected to originate from India.

Notes: F - Forecast, mbpd - Million Barrels Per Day
Source: Ministry of Oil and Natural Gas, BMI forecasts, Aranca Research

Growth

 

Last Updated: April, 2018

SECTORAL REPORT | April, 2018

Introduction

The oil and gas sector is among the six core industries in India and plays a major role in influencing decision making for all the other important sections of the economy.
In 1997–98, the New Exploration Licensing Policy (NELP) was envisaged to fill the ever-increasing gap between India’s gas demand and supply. India’s economic growth is closely related to energy demand; therefore the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment.

The Government of India has adopted several policies to fulfil the increasing demand. The government has allowed 100 per cent 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.

Market Size

India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. Oil imports rose sharply year-on-year by 27.89 per cent to US$ 9.29 billion in October 2017. India’s oil consumption grew 8.3 per cent year-on-year to 212.7 million tonnes in 2016, as against the global growth of 1.5 per cent, thereby making it the third-largest oil consuming nation in the world.

India is the fourth-largest Liquefied Natural Gas (LNG) importer after Japan, South Korea and China, and accounts for 5.8 per cent of the total global trade. Domestic LNG demand is expected to grow at a CAGR of 16.89 per cent to 306.54 MMSCMD by 2021 from 64 MMSCMD in 2015.

The country's gas production is expected to touch 90 Billion Cubic Metres (BCM) in 2040 from 21.3 BCM in 2017-2018 (Apr-Nov). Gas pipeline infrastructure in the country stood at 16,470 km in September 2017.

Investment

According to data released by the Department of Industrial Policy and Promotion (DIPP), the petroleum and natural gas sector attracted FDI worth US$ 6.86 billion between April 2000 and September 2017.

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

  • World's largest oil exporter Saudi Aramco is planning to invest in refineries and petrochemicals in India as it looks to enter into a strategic partnership with the country.
  • Foreign investors will have opportunities to invest in projects worth US$ 300 billion in India, as the country looks to cut reliance on oil imports by 10 per cent by 2022, according to Mr Dharmendra Pradhan, Minister of Petroleum and Natural Gas, Government of India.
  • During the bilateral meeting held in Tokyo between Mr Dharmendra Pradhan, Minister of Petroleum and Natural Gas, Government of India and Mr Hiroshige Seko, Minister of Economy, Trade, and Industry of Japan, signed a memorandum of cooperation on establishing a liquid, flexible and global liquefied natural gas (LNG) market by exploring joint cooperation in the areas of sourcing, swapping and optimisation of LNG sources.
  • State-owned Oil and Natural Gas Corporation (ONGC) has come up with the new blueprint to increase the crude oil production by 4 million tonnes and to double its natural gas production by 2020 to curb the country’s import dependency by 10 percent. The company will raise its crude oil production from 22.6 million tonnes in 2017-2018 to 26.42 million tonnes in 2021- 2022.

Government Initiatives

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

  • State-run oil firms are planning investments worth Rs 723 crore (US$ 111.30 million) in Uttar Pradesh to improve the liquefied petroleum gas (LPG) infrastructure in a bid to promote clean energy and generate employment, according to Mr Dharmendra Pradhan, Minister of Petroleum and Natural Gas, Government of India.
  • A gas exchange is planned in order to bring market-driven pricing in the energy market of India and the proposal for the same is ready to be taken to the Union Cabinet, according to Mr Dharmendra Pradhan, Minister of Petroleum and Natural Gas, Government of India.
  • The Oil Ministry plans to set up bio-CNG (compressed natural gas) plants and allied infrastructure at a cost of Rs 7,000 crore (US$ 1.10 billion) to promote the use of clean fuel.

Road Ahead

India’s oil demand is expected to grow at a CAGR of 3.6 per cent to 458 Million Tonnes of Oil Equivalent (MTOE) by 2040, while demand for energy will more than double by 2040 as economy will grow to more than five times its current size, as stated by Mr Dharmendra Pradhan, Minister of State for Petroleum and Natural Gas.

Gas production will likely touch 90 Billion Cubic Metres (BCM) by 2040, subject to adjustment to the current formula that determines the price paid to domestic producers, while demand for natural gas will grow at a CAGR of 4.6 per cent to touch 149 MTOE.

After the completion of certain projects which are undertaken by various refineries, the Refining Capacity of India is expected to reach 256.55 MMTPA by 2019-20.

The demand for petroleum products is estimated to reach 244,960 MT by 2021-22, up from 186,209 MT in 2016, and the demand for natural gas is expected to reach 606 MMSCMD by 2021-22 as against a demand of 473 MMSCMD in 2016-17.

Exchange Rate Used: INR 1 = US$ 0.015 as on January 4, 2018

References: Media Reports, Press Releases, Press Information Bureau, Ministry of Petroleum and Natural Gas, Union Budget 2016-17

Note: 1- According to data from the Petroleum Planning & Analysis Cell, Ministry of Petroleum and Natural Gas; 2- According to a report by Fitch; 3- IGU World Gas LNG Report 2016 Edition

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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