Quitol (South Goa): India will see a continued growth in oil demand, assuming the position of the world’s largest source of global oil demand growth, between now and 2030, however, its domestic oil production is poised to decline despite investments, says a new report launched by the International Energy Agency (IEA) at India Energy Week (IEW) 2024 in Quitol, Goa. This means that India will be importing more oil to meet the rise in demand which will have implications for its energy security.
“As energy transitions gather pace and China’s economy shifts gear towards a less energy-intensive phase, India will assume the position as the world’s largest source of oil demand growth this decade. In our 2023-2030 forecast period, India accounts for more than one-third of global oil demand growth,” said the IEW oil report on India.
“India’s role in global oil markets is expected to expand substantially over the remainder of the decade, fuelled by strong growth in its economy, population and demographics,” the report said.
The report was launched by Additional Petroleum Secretary Praveen Mal Khanooja on Wednesday at IEW 2024 along with Keisuke Sadamori, Director, Energy Markets and Security, IEA, Toril Bosoni, Head of oil markets, IEA, and P Manoj Kumar, Director-General of Petroleum Planning and Analysis Cell (PPAC).
India is on track to post an increase of almost 1.2 mb/d, accounting for more than one-third of the projected 3.2 mb/d global gains in oil production, to reach 6.6 mb/d by 2030, said the IEW in its report. The massive industrial expansion means that diesel/gasoil is the single largest source of oil demand growth, accounting for almost half of the rise in the nation’s demand and more than one-sixth of total global oil demand growth through to 2030.
Indian oil companies are investing heavily in the refining sector to meet the rise in domestic oil demand. Over the next seven years, 1 mb/d of new refinery distillation capacity will be added – more than any other country in the world outside of China. Several other large projects are currently under consideration that may lift capacity beyond the 6.8 mb/d capacity that we expect so far. New refining capacity is forecast to boost product supplies to global markets to 1.4 mb/d through mid-decade before edging lower to 1.2 mb/d by 2030, given the steady rise in domestic demand, said the IEA.
India is set to maintain its position as a key exporter of transportation fuels to markets in Asia and the Atlantic Basin. Continued investment in refining capacity and complexity will boost light and middle distillate production, even as the industry pivots further towards heavier and more sour crudes. India’s role as a global swing supplier has risen since 2022 as the loss of Russian product exports to European markets has increased the pull of Asian diesel and jet fuel westward.
As a relatively small oil producer, and with limited potential for near-term growth, India’s domestic production accounted for just 13 percent of the country’s supply needs. In 2023, domestic oil production averaged around 700 kb/d. Despite renewed efforts by the government to attract foreign upstream investment, domestic crude oil production is expected to see continued declines over the medium term. A dearth of new discoveries in recent years will contribute to Indian oil supply falling to 540 kb/d by 2030, said the IEA.
Even as the oil production declines in the medium term, India’s efforts to accelerate its energy transition is set to deliver significant oil savings in the forecast period. Increased uptake in electric vehicles is set to play a key role in decarbonising the transport sector. “We estimate that, combined, new EVs and energy efficiency improvements will avoid 480 kb/d of extra oil demand in the 2023-2030 period. That means without these gains India’s oil demand would reach a much higher 1.68 mb/d by 2030 compared with the current forecast,” said the IEA report.
Biofuels are also expected to play a key role in India’s decarbonisation of the transport sector. The South Asian nation is already the world’s third-largest producer and consumer of ethanol, as domestic production has tripled over the last five years. Supported by the country’s abundant feedstocks, political support and effective policy implementation, its ethanol blending rate of around 12 percent is amongst the world’s highest. India has advanced by five years its deadline for doubling nationwide ethanol blending in gasoline to 20 percent in Q4 2026. “Achieving 20 percent ethanol blending in such a short time frame presents several challenges, not least rapidly expanding feedstock supplies,” said the IEA.
“The country’s spectacular economic growth story, however, brings myriad challenges for its security of energy supplies. India was already the world’s second-largest crude oil net importer in 2023, having boosted imports by 36 percent over the past decade to 4.6 mb/d to meet rising refinery intake. Increased refining processing will lift crude oil imports further, to 5.8 mb/d by 2030, with major implications for India’s security of supply,” said the IEA.
“The energy crisis and recent surge in long-haul crude sources, notably from Russia, has also added further impetus to sustaining the country’s oil resilience in case of market disruptions. Based on IEA methodology, current stock holding levels equate to 66 days of net-import cover, with SPR stocks of 26 mb equal to seven days. India needs to enhance its capacity to respond to possible oil supply disruptions by implementing and strengthening its SPR programmes and improving oil industry readiness,” said the IEA report.
(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)