India, positioned as the world's third-largest energy consumer, projects its primary energy demand to nearly double to 1,123 million tonnes of oil equivalent by 2040, coinciding with an anticipated GDP growth to USD 8.6 trillion. As of April 1, 2023, the country's refining capacity reached 253.91 MMTPA, with plans underway to double it to 450-500 million tonnes by 2030. India solidifies its position as the world's third-largest oil consumer, with oil consumption surging to nearly 4.9 million barrels per day in 2021, marking a historic high in petroleum product consumption at 222.3 MMT in FY23. Additionally, India stands as the fourth-largest importer of liquefied natural gas (LNG), aiming to double its gas demand and expand LNG import capacity to 50 million tonnes. Recent initiatives include the Open Acreage Licensing Policy (OALP) to encourage foreign participation, significant reductions in excise duty on petrol and diesel, and efforts to explore alternative energy sources like Coal Bed Methane (CBM), Underground Coal Gasification (UCG), and the National Gas Hydrate Programme (NGHP). Furthermore, bio-fuels sourced from renewable resources are being promoted to reduce emissions and enhance energy security.
Market Overview
India, as the world's third-largest energy consumer, showcases significant activity in its oil and gas sector. With notable contributions from states like Assam, Gujarat, and Rajasthan, India's crude oil production stands at 29.2 million metric tonnes in FY22-23, with dominant players like ONGC in the upstream segment and IOCL in midstream operations. The country's strategic oil reserves and growing consumption trends underscore its reliance on both domestic production and imports to meet energy demands, fuelling the trajectory of rapid economic growth.
Growth Drivers
India's energy landscape showcases a dynamic mix of increasing natural gas demand, expanding refinery exports, and a robust upstream and downstream oil and gas sector. Natural gas consumption is projected to rise to 143.08 BCM by 2040, driving significant investment in upstream production. India's status as a leading exporter of refinery products is underscored by the export of 61 MMT of petroleum products in FY23, led by High-Speed Diesel (HSD). In the upstream segment, ONGC dominates crude oil production, with offshore fields contributing substantially. India's downstream sector, comprising 23 refineries, witnesses substantial throughput growth, with IOCL leading the refining capacity expansion efforts. State refiners have committed significant investments to augment refining capacity by 20% by 2025, reflecting the sector's strategic vision and growth trajectory.
Why Invest in India?
India's energy sector is experiencing rapid expansion with ambitious initiatives underway, including augmenting refinery capacity, commercializing Strategic Petroleum Reserves, and greenlighting significant oil and gas projects, reflecting an investment of INR 7.5 trillion over the next five years. Supportive FDI guidelines, such as 100% FDI under the automatic route for oil and gas PSUs and customs duty reductions for critical chemicals, further enhance the sector's attractiveness. With robust demand dynamics, including a surge in oil product demand and anticipated growth in natural gas consumption, India positions itself as a pivotal player in the global energy landscape, with forecasts indicating a doubling of oil demand and significant growth in natural gas consumption by 2045.
Strategies Adopted for Growth and Expansion
India's energy sector has witnessed remarkable developments and strategic partnerships in recent years, reflecting a commitment to infrastructure enhancement and renewable energy transition. Collaborations such as ONGC's venture with NTPC Green Energy Limited and BPCL's renewable energy aspirations highlight the industry's dedication to sustainability. Significant investments by IOCL, Oil India, and Adani Total Gas Ltd underscore efforts to augment India's energy infrastructure. Additionally, initiatives like India's foray into shale gas production and partnerships with international players such as Microsoft and Greenstat Hydrogen India Pvt. Ltd. signify a drive towards innovation and technological advancement. Moreover, India's collaborations with the United States and the introduction of joint initiatives like the Model Retail Outlet Scheme demonstrate a collective endeavour to enhance service standards and embrace clean energy solutions, shaping the future of the nation's energy landscape.
Regulatory Framework
The energy landscape in India has seen significant policy developments aimed at promoting renewable fuels and expanding infrastructure. The National Policy on Biofuels, amended in May 2022, accelerated the target for 20% ethanol blending in petrol to 2025-26 and introduced incentives for advanced biofuels. Additionally, the Ethanol Procurement Policy under the Ethanol Blended Petrol Programme and a draft policy for LNG expansion signify efforts to enhance energy security and sustainability. The Open Acreage Licensing initiative, introduced in June 2017, aimed at fostering competitiveness and flexibility in petroleum exploration and production, reflecting a proactive approach to energy resource management.
Key Opportunities
India's energy sector presents vast opportunities across its upstream, midstream, and downstream segments. With 78% of its sedimentary area yet to be explored, there's considerable potential for discovering new fields, especially in unconventional resources like CBM fields and deep-sea areas. The government aims to increase the share of natural gas in the energy mix to 15% by 2030, driving demand for skilled labor and oilfield services. In the midstream, plans to expand the gas pipeline transmission network to 34,135 km aim to establish a national gas grid and enhance gas availability. Refining capacity expansion involves tapping foreign investment for export-oriented infrastructure, while the development of City Gas Distribution networks and LNG stations aims to expand natural gas accessibility and reduce diesel consumption significantly, reflecting India's commitment to meeting its growing energy demands.
Conclusion
India's energy demand is poised to outpace that of all major economies, driven by robust economic growth. This surge is anticipated to elevate India's energy demand share to 11% of the global energy demand by 2040, a substantial rise from 6% in 2017. Projections indicate a significant increase in crude oil consumption, expected to grow at a CAGR of 4.59% to reach 500 million tonnes by FY40 from 223.0 million tonnes in FY23. Similarly, natural gas consumption is forecasted to experience a remarkable growth trajectory, with a projected CAGR of 12.2%, aiming to reach 550 MCMPD by 2030 from 174 MCMPD in 2021. Moreover, diesel demand is set to double to 163 million tonnes by 2029-30. These trends underscore India's evolving energy landscape, with oil consumption projected to ascend from 4.05 MBPD in FY22 to 7.2 MBPD in 2030 and further to 9.2 MBPD in 2050.
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