India NOCs Keep Brakes on Clean Energy Spending

India’s government-controlled explorers and refiners are expanding exposure to low-carbon options -- from renewables and batteries to hydrogen and gas. But their investments remain conservative given the state agenda to provide reliable energy to fuel economic growth while delivering sufficient revenue to the government (NE Dec.3'20). State firms dominate India’s energy landscape, accounting for 75% of crude production, 85% of gas production, 65% of crude processed and a 90% share of the fuel retail market. Naturally, their investments will have a bearing on the energy security and emissions levels of the world’s third largest oil consumer and fourth-largest LNG consumer. State-owned explorer Oil and Natural Gas Corp. (ONGC) has set a target to expand its renewable generation base to 10 gigawatts by 2040 from around 200 megawatts, Chairman Subhash Kumar said in mid-August. By comparison, state refiner Indian Oil Corp. (IOC), which is spearheading India’s research efforts on new energy, is working on options like biofuels, hydrogen and electric mobility, Chairman Shrikant Madhav Vaidya told shareholders Aug. 27. In March, Indian Oil formed a joint venture with Israel’s Phinergy to commercialize aluminum-air battery technology to leverage abundant aluminum reserves in the country. It is also building India’s first green hydrogen plant at its Mathura refinery in the northern state of Uttar Pradesh. Indian Oil and other state-owned refiners Hindustan Petroleum Corp. (HPCL) and Bharat Petroleum Corp., apart from investing in solar and wind power, are setting up biorefineries. These would produce ethanol from biomass and compressed biogas plants to produce gas from agricultural waste. Because local materials would be used as feedstocks, the refiners believe these initiatives align with Prime Minister Narendra Modi’s target of making the country self-sufficient in energy by 2047, when it completes 100 years of independence from British rule. Dead End However, refiners' investments in green energy pale in comparison with what the European majors and privately held companies in India are doing. In an example of that, billionaire Mukesh Ambani’s Reliance Industries in June announced plans to invest $10 billion over the next three years to build factories to produce solar photovoltaic modules, energy storage, electrolyzers and fuel cells. Comparatively, Indian Oil’s $13.6 billion capital expenditure over the next four to five years is mainly to expand its refining base. The story is no different in the case of HPCL. The state refiners are also partnering with Saudi Aramco and Abu Dhabi National Oil Co. to jointly build a 1.2 million b/d refining complex in the western state of Maharashtra for over $60 billion. Oil and Natural Gas Corp., which majority owns HPCL and Mangalore Refinery and Petrochemicals Ltd., has also charted out billions of dollars of capital expenditure for its Energy Strategy 2040, which seeks to double oil and gas production to 2.2 million b/d of oil equivalent and threefold growth in refining capacity to 2 million b/d. Comparatively, its goal for 10 GW of renewable power capacity by 2040 seems meek. The national goal is to have 450 GW of renewable power capacity by 2030 -- up from 100 GW now. Continued investments in traditional assets come as global agencies have forecast India’s demand for fossil fuels will remain robust. The International Energy Agency, in a report published in February, predicted India’s oil demand will expand to 8.7 million b/d and gas to 201 billion cubic meters by 2040 -- up from pre-pandemic demand levels of 5 million b/d and 64 Bcm. Although India’s renewable energy base has jumped over five-fold to 100 GW over the last decade, it continues to account for less than 5% of primary energy consumption. Over 90% of consumption is met by coal, oil and gas. “There is no need for national oil companies to stop investments in traditional business, as for a very long time we will remain dependent on oil and gas,” says Amit Bhandari, energy and environment fellow at Mumbai-based think tank the Gateway House. “The vehicles are not going to vanish from the streets overnight. Batteries have limited scope and cannot replace vehicles like diesel-powered long-haul trucks.” Bridge Fuel To show their commitment to climate action, the state firms, like other Asian national oil companies, are embracing gas (NE Jun.6'19). Refiners are building LNG import terminals and laying pipelines in cities to supply gas to households, automobiles and industries. They are also setting up LNG dispensing stations to supply super-cooled fuel to long-haul trucks and buses. ONGC has formed a fully owned subsidiary for the sourcing and trading of gas and LNG. The investments in gas come as Modi has set a goal of making India a gas-based economy, raising the share of gas in the primary energy mix to 15% by 2030 from 6%. But unlike President Xi Jinping, who has pledged to make China carbon-neutral by 2060, Modi is unlikely to commit to any such goal. “The state is not asking the national oil companies to reinvent themselves, and historically they have not been the nimblest companies,” says Ben Cahill, a senior fellow at the Washington-based Center for Strategic and International Studies. “I see the Indian NOCs as traditionalists that may perceive some advantages in sticking with their core business.” Rakesh Sharma, New Delhi