OIL AND GAS SECTOR IN INDIA
OIL AND GAS SECTOR IN INDIA
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 fulfill 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.
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 May 01, 2021, the sector’s total installed provisional
refinery capacity stood at 249.9 MMT; and IOC emerged as the largest
domestic refiner, with a capacity of 69.7 MMT.
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 32.2 MMT. In April
2021, the crude oil production stood at 2.5 MMT, while for FY21 it
was 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.
Exports of petroleum products from India reached 55.9 MMT in FY21
from 60.5 MMT in FY16.
As of December 31, 2020, Gas Authority of India Ltd. (GAIL) had the
largest share (69.39% or 11,884 kms) of the country’s natural gas
pipeline network (17,126 kms).
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$ 7.91 billion between
April 2000 and December 2020.
According to government data, India's natural gas production
increased by 22.7% YoY in April 2021, as Reliance Industries Ltd.
and its partner, BP plc, increased production in the KG-D6 block on
the east coast.
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.
In February 2021, Prime Minister Mr. Narendra Modi announced that
the Government of India plans to invest ~Rs. 7.5 trillion on oil and
gas infrastructure in the next five years.
In Union Budget 2021, the government allocated funds worth Rs.
12,480 crore for direct benefit transfer of LPG (liquefied petroleum
gas) and Rs. 1,078 crore 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.
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.
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