Despite the government push for green and clean fuel, the dependence on fossil fuel will continue over the coming two decades. As is evident, India imports more than 85% of its crude oil requirements and is the second-largest importer of liquefied natural gas in the world, importing over 50% of its natural gas needs.
In contrast, India is a net exporter of refined petroleum products globally. According to estimates by world energy agencies, India's energy demand is expected to double over the next 25 years, driven by an annual economic growth rate of 8–9%.
At NDTV Profit, we examined India's preparations in terms of energy infrastructure and its ability to meet the projected demand growth.
India, the world's 4th largest refiner, confidently journeys towards energy self-sufficiency under the leadership of PM @narendramodi Ji.
August 13, 2024
With India's energy demand expected to double by 2050 we continue to focus on expansion of our existing energy infrastructure. @IndianOilcl… pic.twitter.com/0riyqieFmQCrude Oil Production Slump
As mentioned, India imports over 85% of its crude oil from a diversified group of oil-producing countries. According to the Petroleum Planning & Analysis Cell, India's crude oil imports in FY24 rose by 23% to 233.1 million tonnes. In the first quarter of FY25, imports have already reached 58.8 MT.
India's domestic crude oil production has been steadily declining since FY12, dropping from a peak of 38.1 MT in FY12 to 29 MT in FY24, as per the PPAC data.
If India has to achieve energy security in the medium and long term, it will have to significantly reduce its import dependence. To that extent, the Indian government has increased the overall acreage under exploration by including the no-go areas and aims to take the acreage to 0.5 million square kilometres by 2025 and 1 million sq km by 2030. The total acreage under exploration at present stands at 0.27 million sq km.
The Indian sedimentary basins hold about 651.8 MT of crude oil and 1,138.6 billion cubic metres of natural gas, but only 10% of this area is under exploration. This presents an opportunity of $100 billion in investments in the segment by 2030, according to Petroleum Minister Hardeep Singh Puri.
India will have to focus on attracting supermajors to participate in the country's upstream sector. While many of the supermajors have evaluated the nation's geological data, they have largely stayed away from the auctions, according to Ashwin Jacob, energy resource and industrials leader at Deloitte India. "As India increasingly looks at exploiting its offshore and deep offshore resources, it would need the technological prowess that these players can bring in."
However, Jacob emphasised that India will also need to balance its exploitation of fossil fuels with continued development of biofuels. While the ethanol blending programme has been a great success, the country needs to also focus on biodiesel and sustainable aviation fuel.
India's renewable industry (solar and wind) offers interesting learnings on how market forces can be leveraged to develop the sector and create large platforms. Perhaps, biofuels can offer the next big play, especially if they can be made by converting the agricultural wastes like parali, which farmers burn post every harvest to prepare for the next sowing season.
Increasing Natural Gas Contribution To Energy Mix
The Indian government plans to increase the contribution of natural gas to the total energy mix to 15% by 2030 from 8.5% at present.
But if we look at the overall production of natural gas in the country, the volumes have steadily dropped in the last one decade from the high of 46,453 million standard cubic metres in 2013 to 33,664 mscm in FY23, as per the latest PPAC data. Imports rose to 31,795 mscm in FY24 compared with 17,795 mscm in FY14.
Although, natural gas production is likely to grow in coming quarters, given that Oil & Natural Gas Corp. and Reliance Industries Ltd. are ramping up the gas production from their Krishna Godavari Basin blocks and other basins on the East and the West coast of the country. Experts believe it won't be sufficient to meet the demand that is likely to double by 2030.
India will be dependent on import of natural gas to a large extent, the country would need huge infrastructure of LNG terminals with regassification units and delivery pipelines to meet the growing demand.
At present, total capacity at India's LNG terminals is 47.5 MTPA at eight locations of Dahej (17.5 MTPA), Hazira (7.5 MTPA), Kochi (5 MTPA), Dhabol (5 MTPA), Mundra (5 MTPA), Jaigarh (4 MTPA), Ennore (5 MTPA) and Dhamra (5 MTPA).
This is expected to double to 90 MTPA by 2030 with new terminals being developed by GSPC, Adani Group, H-Energy, and AG&P, along with expansions at existing sites.
Similarly, India's gas pipeline network is being increased from 17,000 km to over 34,000 km in the next three to four years. This expansion will connect major demand centres, such as power plants, fertiliser units, and industrial clusters to supply sources, including LNG terminals and domestic production fields.
Petroleum and Natural Gas Regulatory Board member AK Tiwari recently told NDTV Profit that the latest tariff guidelines would encourage investment in the sector by providing a fair return on investment for pipeline operators. It will also make the sector attractive for investments and addition of new pipelines.
Challenges In Expansion
Despite efforts to expand infrastructure, India's LNG terminals are underutilised, operating at less than half capacity. This is due to infrastructure constraints, pricing issues, and competition from other energy sources. In contrast, countries like Japan and South Korea have optimised their LNG capacities to meet demand.
In July, the PNGRB had proposed new rules to improve LNG terminal efficiency, potentially reducing operational costs and saving millions annually. According to experts demand for transparent tariffs and disclosures would lower the LNG costs for consumers, leading to savings of 5–10% on regasification charges.
Expansion Of Refining Capacities
India is the world's fourth-largest refiner, with a capacity of around 256.8 MTPA from over 23 refineries. In FY24, production of refined products rose 3.8% to 276 MTPA, a 25% increase over the last decade. Production in Q1 FY25 is flat at 69.2 MTPA compared with 69.4 MTPA a year ago.
Refineries often produce more than their nameplate capacity due to increased demand, technological improvements, and blending of imported refined products. Imports of refined products have also risen fourfold in the last decade to 48.6 MTPA from 16 MTPA in FY14.
The oil ministry projects demand for refined products to reach around 335 MT by 2030, driven by diesel, petrol, and jet fuel demand.
To meet this demand, Indian refineries are expanding. Numaligarh Refinery in Assam is expanding from 3 MTPA to 9 MTPA. Kochi Refinery is increasing capacity from 15.5 MTPA to 20 MTPA by 2025. Vadinar Refinery is adding a propylene recovery unit. These expansions are expected to increase capacity by 52 MTPA by 2028.
Opportunities and Challenges
India's energy sector faces challenges like infrastructure constraints, pricing issues, and competition from other energy sources. However, opportunities for growth exist due to the government's push for cleaner energy and rising demand for refined products.
To address these challenges, India needs to reduce dependence on foreign sources, promote domestic production, and invest in energy infrastructure. Potential growth markets include Asia, Africa, and the Middle East. Additionally, India can develop alternative energy sources like renewable energy and hydrogen fuel cells to reduce fossil fuel dependence.
With the right policies and investments, India can navigate its energy challenges and opportunities, ensuring a sustainable energy future. New rules for LNG terminals and refinery expansions are positive steps towards this goal. By learning from global examples and exploring new markets, India can achieve energy security and drive economic growth.
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