India Sees Robust Oil, Gas Demand Despite Net-Zero Goal

Copyright © 2022 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.

India’s demand for oil and gas will continue to grow at a strong pace over coming decades despite Prime Minister Narendra Modi promising net-zero emissions by 2070.

The world’s third-largest oil consumer’s refining capacity may expand to 7 million barrels per day by 2030 and to 8 million b/d by 2040, Hindustan Petroleum Corp.'s Chairman Mukesh Surana told an industry conference Thursday. India currently has a refining base of 5 million b/d.

“In a country like India where oil occupies 28% and coal occupies more than 50% of the total energy basket, there is still bit of time for renewables [to] overtake the fossil fuels,” Surana said.

Modi made a surprising announcement at the Glasgow climate talks, committing the world’s third-largest greenhouse gas emitter to net-zero emissions by 2070.

It is a push that could disrupt global energy markets as India is the world's second-largest coal, third-largest oil and fourth-largest LNG consumer. But the oil industry feels that since India’s overall demand for energy is rising, the consumption of oil and gas will continue to expand.

Still, New Delhi believes it can manage its transition. "I am quite sure producing countries cannot hold consuming countries to ransom ... We will make the transition [and produce our own oil and gas]," Indian Oil Minister Hardeep Singh Puri told an industry conference Friday. 

Oil and Gas Consumption to Expand

The South Asian nation’s oil demand will not peak before 2040, Surana said. He added that diesel demand may peak later than gasoline as gasoline demand faces significant pressure with increasing penetration from electric vehicles (EVs).

Diesel is not only used as a transportation fuel but also for running power backup generators, pumps for irrigating fields and in industry.

India’s gas demand could expand to 380 million cubic meters per day by 2030 under conservative estimates and to as high as 550 MMcm/d from 174 MMcm/d now, said ES Ranganathan, marketing director at state gas pipeline utility Gail India.

That jump in consumption will be aided by Modi’s goal of raising the share of gas in the energy mix to 15% by 2030 from just 6%.

India meets 85% of its oil and half of its gas demand via imports. The jump in consumption will have to be met by increasing imports as local production cannot match demand, executives at the event said.

Potential Challenge From Clean Energy

A key risk to fossil fuel demand could come from green hydrogen and a more rapid adoption of EVs, backed by government policy.

India is considering mandating the use of green hydrogen in refineries and the fertilizer sector, said SSV Ramakumar, director of research and development at state refiner Indian Oil Corp. He added that the government may mandate the use of 5% green hydrogen in both industries by 2023-24 and hike it to 23% by 2026-27 and then to 50% by 2029-30 in a bid to boost its consumption.

The key challenge facing green hydrogen consumption is its cost which is around $5 per kilogram compared with $1-$1.50/kg for gray hydrogen, Surana said. Reliance Industries has set a goal of reducing green hydrogen costs to below $1/kg by 2030.

“Earlier also there were many waves of interest in hydrogen not only in India but across the globe,” Ramakumar said. “But now the inevitability of hydrogen is writ large. The current traction seems to be taking hydrogen to its logical end and [giving] it its rightful place in [the] energy basket.”

President Joe Biden has emphasized that the US is lining up broad economic sanctions against Russia, if it should decide to invade Ukraine.
Fri, Jan 21, 2022
China appears to have imported far more sanctioned Iranian crude in December than the roughly 60,000 b/d reported in its official customs data.
Fri, Jan 21, 2022
Russia’s Urals crude oil has capitalized on a buoyant physical market.
Wed, Jan 19, 2022