Oil & Gas Industry in India

India's oil demand is expected to increase 50% by 2030 compared to 7% growth for global demand.

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 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 mmtpa to 9 mmtpa.

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 the Union Budget 2022-23, the customs duty on certain critical chemicals for petroleum refining were reduced.

* 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.

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Last updated: Apr, 2022

Oil And Gas Industry Report

Feb, 2022

Introduction

The 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. 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. 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 US$ 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 imports rose sharply to US$ 94.3 billion in FY22 (April to January) from US$ 70.72 billion in FY17.

As of September 01, 2021, India's oil refining capacity stood at 248.9 million metric tonnes per annum (MMTPA), making it the second-largest refiner in Asia. Private companies owned about 35% of the total refining capacity. IOC is the largest domestic refiner, with a capacity of 69.7 MMTPA.

India's crude oil production in FY22 till January stood at 32.2 MMT.

India's consumption of oil products stood at 201.26 MMT in 2021, a 3.7% YoY increase.

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 7.9 billion cubic meters (BCM) between October-December 2021. The import for the entire year stood at 24.46 BCM. India is the fourth-largest LNG importer in the world.

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.

According to the 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.

Exports of petroleum products from India reached 56.8 MMT worth US$ 21.41 billion in FY21.

As of June 31, 2021, Gas Authority of India Ltd. (GAIL) had the largest share (57.56% or 18,834 kms) of the country's natural gas pipeline network (32,718 kms).

Investment

According to the data released by Department for Promotion of Industry and Internal Trade Policy (DPIIT), FDI inflows in India's petroleum and natural gas sector stood at US$ 7.98 billion between April 2000-December 2021.

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

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 licenses 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 the petrochemicals arm—ONGC Petro Additions Ltd. (OPaL)—to meet its equity requirements.
In November 2021, Indian Oil, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited have announced the launch of 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 6 crore consumers every day.
In September 2021, Indraprastha Gas Limited (IGL) signed a memorandum of understanding with South Delhi Municipal Corporation (SDMC) to build a waste to energy plant in Delhi to fuel vehicles.
In September 2021, Bharat Petroleum Corporation Ltd. (BPCL) announced its plan to invest over Rs. 1 lakh crore (US$ 13.66 billion), over a period of five years, to enhance petrochemical capacity and improve refining efficiency, gas proliferation, upstream oil & gas exploration and production and augment the (fuel) marketing infrastructure
In August 2021, Indian Oil Corp (IOC) announced an investment of Rs. 1 lakh crore (US$ 13.12 billion) to raise its refining capacity by almost a third over the next 4-5 years.
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 July 2021, Great Eastern Energy Corporation Limited (GEECL) announced plans to invest Rs. 15,000 crore (US$ 1.96 billion) for shale gas core well exploration in West Bengal.
In July 2021, IndianOil Petronas Pvt. Ltd. announced its plan to establish a new brand for auto fuels retailing in India to further expand its business operations in the country.
In July 2021, Indian Oil Corporation (IOC) announced to establish India's first green hydrogen plant at Mathura refinery to introduce green hydrogen activities and projects in the oil and gas sector in the country.
In July 2021, ONGC announced that it will spend Rs. 300 billion (US$ 4.03 billion) in FY22 to boost its oil & gas output.
To expand beyond the natural gas business, in July 2021, GAIL (India) Ltd. announced investment of Rs. 5,000 crore (US$ 670.18 million) to establish a portfolio of renewable energy targeting a capacity of at least 1 gigawatts and build plants for both compressed biogas and ethanol.
In July 2021, Bharat Petroleum Corporation Ltd. (BPCL) announced plan to establish its first-generation ethanol production plant in Telangana at an estimated investment of Rs. 1,000 crore (US$ 134.04 million).
In July 2021, ONGC, an upstream oil company, and NTPC announced plans to expand the offshore wind energy development in India and accelerate presence in the renewable energy space.
In February 2021, Petronet LNG announced its plans to increase its Dahej terminal's capacity by 29% to 22.5 MMTPA to meet the rising demand.
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.

Government Initiatives

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

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, 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 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.
In July 2021, the Minister for Road Transport and Highways, Mr. Nitin Gadkari inaugurated India's first liquefied natural gas (LNG) facility plant in Nagpur, Maharashtra.
In July 2021, India diversified procurement for crude by announcing its first shipment from Guyana. This move also indicates a future roadmap for extended alliance with Guyana in the oil & gas sector.
In June 2021, the government announced that it will auction unmonetised large oil and gas fields of state-owned ONGC and OIL to boost hydrocarbon production.
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.
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 MTPA to 70 MTPA by 2030 and 100 MTPA by 2040.
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.
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.
The Government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023.

Road Ahead

India is planning to double its 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 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 to two-fold by 2035.

Crude oil consumption is expected to grow at a CAGR of 4.66% to 500 MMTPA by 2040 from 201.26 million tonnes in 2021.

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 4.9 million barrels per day in 2021.

Natural Gas consumption is forecast to increase at a CAGR of 12.2% to 550 MCMPD by 2030 from 174 MCMPD in 2021.

Diesel demand in India is expected to double to 163 MMTPA by 2029-30, with diesel and gasoline covering 58% of India's oil demand by 2045.

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 November 2021, Rs. 1 = US$ 0.01336

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.