The oil & gas sector plays an important role in the Indian economy. The demand is anticipated to grow manifold and being a deficit nation with huge import bills on crude oil, the government is taking all steps to enhance indigenous energy to avoid oil crisis in future
India is an oil deficit nation. India imports 82 percent of its oil needs. In FY22 from April-August, India’s crude oil import bill has risen by over 138 percentto $ 42 billion, up from close to $ 18 billion the same period of last year.This places India as the third largest energy and oil consumer in the world after China and the USA. The country ranks fourth largest importer of liquefied natural gas (LNG).In FY 2019-20,India consumed 213.13 MMT petroleum products and 64.14 BCM natural gas marking a growth of 0.4 percent and 5.5 percent over the FY 2018-19 consumption levels. According to a report by the International Energy Agency (IEA)India’s oil demand will rise 50 percent by 2030 as against a global expansion of 7 percent. As per the IEA’s key scenario based on stated policies, India’s oil consumption is forecast to rise from 4.8 million barrels per day (mbd) in 2019 to 7.2 mbd in 2030 and 9.2 mbd in 2050.
The imported crude oil has to be processed and refined to transform it into products that are useful for driving energy, such as petrol, diesel, jet fuels, liquefied natural gas, liquefied petroleum gas, lubricants, gasoline, kerosene, asphalt, bitumen, petcoke and many more products. Being the third largest imported of crude oil and requirements for petroleum products touching the roof, India has emerged as the global refining hub with refining capacity of 249 MMTPA and is the fourth largest in the world after the United States, China and Russia. As on now India has a total of 23 refineries - 18 under public sector, 3 under private sector and 2 in a joint venture. Indian Oil Corporation (IOC) is the largest domestic refiner with a capacity of 70 MMTPA.In FY2018-19, IOC, Bharat Petroleum Corporation (BPCL) and Reliance Industries (RIL) contributed around 66.3% of India's total refining production.According to government estimates India’s consumption of petroleum products is likely to rise to 335 million tonnes per annum by 2030 and to 472 million tonnes by 2040. Taking this into consideration, India plans to invest US$26.96 billionto boost oil refining capacity by 20 percent by 2025.IOCplans to invest close to Rs 1 lakh crore to raise its refining capacity by almost a third in the next 4-5 years.Global giants Saudi Aramco and Abu Dhabi National Oil Company (ADNOC) along with Indian oil and gas PSUs (Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation)will build a new $44 billion mega refinery and petrochemicals complex in India's western port city of Ratnagiri, Maharashtra. This mega refinery and petrochemicals complex is expected to have a production capacity of 1.2 million barrels per day. Rajasthan government in partnership with Hindustan Petroleum Corporation is setting up 9 million metric ton per annum (MMTPA) capacity refinery and the co-petrochemical complex. Other key projects include major expansionin existing refineries in Panipat, Paradip and Koyali.To further augment its refining capacity, Bharat Petroleum Corporation has acquired stakes in Bina refinery situated at Bina in Madhya Pradesh. Bina Refinery operates the 7.8 million tonnes per annum capacity oil refinery. To produce niche petrochemicals Bharat Petroleum is setting up Rs 6,000-crore propylene derivatives petrochemical (PDP) complexmanufacture acrylate. Acrylate is a key input used by the specialty chemicals, plasticisers and paints and adhesives industries.
According to HTF Market Intelligence Consulting, the petrochemical market witnessed a notable change in its consumption pattern amid the pandemic. Industries, such as the automotive, construction, electronics, textiles, and rigid packaging experienced a sudden slump in demand. On the other hand, the demand for petrochemicals from flexible packaging, personal care, and healthcare has risen sharply.Their report states in terms of volume, the petrochemical market in India stood at 42.50 million tonnes and is estimated to reach 49.62 million tonnes by 2025. It will expand at a compound annual growth rate (CAGR) of ~6.14% between FY 2021 and FY 2025.According to data from the Ministry of Petroleum’s Petroleum Planning and Analysis Cell, India’s total petroleum product export rose from 3,916 TMT in April 2021 to 4,700 TMT in July 2021.
According to IBEF,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 56.8 MMT in FY21 from 60.5 MMT in FY16.
National Gas Grid – Balancing Regional Imbalance
With an aim and objective to remove regional imbalance within the country with regard to access of natural gas and provide clean and green fuel throughout the country and to connect gas sources to major demand centres and ensure availability of gas to consumers in various sectors, the government of India established the ‘National Gas Grid’ mission. The Petroleum and Natural Gas Regulatory Board (PNGRB), the authority to grant authorisation for gas pipeline and City Gas Distribution (CGD) has authorised approximately 33,764 km Natural Gas Pipeline Network. The authorized Natural Gas pipeline entity is allowed to lay spurlines as per the provision of the regulations. Accordingly, 19,998 km of Natural Gas pipeline (including sub-transmission pipeline & tie in connectivity pipeline) are operational and 15,369 km are under various stages of construction.PNGRB has authorized GAIL India to develop Jagadishpur–Haldia–Bokaro-Dhamra Pipeline (JHBDPL) project and approximately 750 km long Barauni-Guwahati pipeline as its integral part which will connect North East region with the National Gas Grid.GAIL India plans to invest over Rs. 45,000 crore over the next five years to expand the National Gas Pipeline Grid and city gas distribution network. The company has earmarked out of Rs. 45,000 crore, Rs. 32,000 crore will go into projects expanding GAIL’s gas pipeline network, while another Rs. 12,000 crore will be invested in expanding city gas distribution networks (CGD).Recently, PNGRB has invited bids for city gas distribution (CGD) network in five geographical areas (GAs) covering 27 districts across Uttar Pradesh, Bihar, Jharkhand, Chhattisgarh and West Bengal.
Government Initiatives
Importing crude oil is a biggest drain to the exchequer. In the month of August 2021, India imported 17.4 million tonnes of crude oil by paying $ 9.1 billion. This is higher than 16.9 million tonnes of imports at $ 5.5 billion last year in August 2020.In FY21India's oil Import bill stood at $ 62.7 billion. To reduce dependency on import, the government is taking various initiatives. The Ministry of Petroleum and Natural Gas is working in collaboration with various Central Government Ministries/stakeholders to make efforts to achieve reduction in import dependency on oil. The import reduction strategy broadly includes increasing domestic production of oil and gas, improving energy efficiency and productivity, giving thrust on demand substitution, promoting biofuels and alternate fuels and renewables.To intensify exploration activities, attract foreign and domestic investment and enhance domestic production the government has notified ‘Reforms in Exploration and Licensing Policy, for enhancing domestic exploration and production of oil and gas’. As per the schedule stipulated in Hydrocarbon Exploration and Licensing Policy (HELP)/Open Acreage Licensing Policy (OALP), four bidding rounds have so far been finalized in which 94 exploration blocks have been awarded covering an area of approximately 1,36,790 sq km. OALP Bid Round-V offering 11 blocks covering an area of approximately 19,800 sq km was also launched in 2020.The government has granted Petroleum Exploration Licenses (PELs) for all the offshore blocks and also recommended to all the concerned State Governments to grant PELs for all on-land blocks allocated under Hydrocarbon Exploration and Licensing Policy (HELP).
The Government, through Oil Marketing Companies (OMCs), is implementing Ethanol Blended Petrol (EBP) Programme and Biodiesel blending programme for blending of ethanol and biodiesel with Petrol and High Speed Diesel respectively. Further, in order to improve the availability of ethanol for blending with petrol and thereby reduce imports of petroleum products, the Government has opened the Second Generation (2G) route and allowed use of other feedstocks like grains, sugarcane juice, fruit and vegetable wastes etc. for production of ethanol. Government is also promoting production of Compressed Bio Gas from various wastes / biomass sources. In this direction, Oil PSUs have launched ‘Sustainable Alternative Towards Affordable Transportation (SATAT) initiative. Government has also notified the National Policy on Biofuels – 2018 which envisages an indicative target of 20% blending of ethanol in petrol and 5% blending of biodiesel in diesel by 2030.
The Government has approved major reforms in exploration and licensing policy to enhance exploration activities, attract domestic and foreign investment in unexplored/unallocated areas of sedimentary basins and accelerate domestic production of oil and gas from existing fields. The policy reforms inter-alia aims to boost exploration activities with greater weightage to work programme, simplified fiscal and contractual terms, bidding of exploration blocks under Category II and III sedimentary basins without any production or revenue sharing to Government, early monetization of discoveries by extending fiscal incentives, incentivizing gas production including marketing and pricing freedom, induction of latest technology and capital, more functional freedom to National Oil Companies for collaboration and private sector participation for production enhancement methods in nomination fields, streamlining approval processes and promoting ease of doing business including electronic single window mechanism.
To reduce dependency on oil and gas the government has come up with five-pronged strategy which comprises promoting energy efficiency and conservation measures, giving thrust on demand substitution, promoting biofuels and other alternate fuels/ renewables, increasing domestic production of oil and gas and refinery process improvements.
The Government has implemented the National Seismic Programme (NSP) for appraising unappraised areas of Indian sedimentary basins. Seismic data acquired under NSP in the state of Odisha led to offer of five blocks by DGH and OIL won all the five blocks for hydrocarbon exploration under OALP-II and III rounds.OIL has plans to acquire, process and interpret 1502 LKM of 2D seismic data and 1670 sq km of 3D seismic data in the five blocks. Interpretation of the data is envisaged to lead to an extensive exploratory drilling campaign, in quest of establishing hydrocarbon reserves.
As part of strengthening energy security, India has added Russia and Angola as new sources for crude oil imports on term basis.With a view to reducing pollution, conserve foreign exchange and increase value addition in the sugar industry the government has introduced Ethanol Blending Programme (EBP) which seeks to achieve blending of Ethanol with motor sprit.To scaleup blending targets10% ethanol blending in petrol by 2021-22 and 20% by 2030,the procedure of procurement of ethanol under the EBP has been simplified to streamline the entire ethanol supply chain.
In short the government has taken several steps to enhance exploration & production of oil and gas in the country, inter-alia,policy for relaxations, extensions and clarifications under production sharing contract (PSC) regime for early monetization of hydrocarbon discoveries, discovered small field policy,hydrocarbon exploration and licensing policy, policy for extension of production sharing contracts, policy for early monetization of coal bed methane, setting up of National Data Repository, Appraisal of un-appraised areas in sedimentary basins under National Seismic Programme, Re-assessment of hydrocarbon resources, policy framework to streamline the working of production sharing contracts in pre- NELP and NELP Blocks, policy to promote and incentivize enhanced recovery methods for oil and gas, policy framework for exploration and exploitation of coal bed methane (CBM) from areas under Coal Mining Lease allotted to Coal India (CIL) and its subsidiaries, policy framework for exploration and exploitation of unconventional hydrocarbons under existing production sharing contracts (PSCs) coal bed methane (CBM) contracts and nomination fields, reforms in Hydrocarbon Exploration and Licensing Policy for enhancing domestic exploration and production of oil and gas, Natural Gas Marketing Reforms.
The government has huge plans for the oil and gas sector knowing well the demand for oil and gas is going to raise manifold. The government has plans to invest ~Rs. 7.5 trillion (US$ 102.49 billion) on oil and gas infrastructure in the next five years and to set up around 5,000 compressed biogas (CBG) plants by 2023.The Government is also 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 in India. Keeping with the anticipated demand the government is taking all steps to enhance domestic production and refining capacity which will safeguard India’s interest.
