The 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. The government has adopted several policies to fulfil the increasing demand for oil and gas. It has allowed 100 per cent foreign direct investment in many segments of the sector, including natural gas, petroleum products and refineries. The sector currently attracts both domestic and foreign investment.
According to India Energy Outlook 2021, the primary energy demand in India is expected to nearly double to 1,123 million tonnes of oil equivalent (mtoe), as the country’s GDP is expected to increase to $8.6 trillion by 2040. As of May 2021, the sector’s total installed provisional refinery capacity stood at 249.90 mt, and Indian Oil Corporation was the largest domestic refiner with a capacity of 69.7 mt.
Over the past few years, the government has introduced various policies to streamline activities in the sector. These include the Open Acreage Licensing Policy (OALP); the National Policy on Biofuels, 2018; the Ethanol Procurement Policy; and the Liquefied Natural Gas Policy. In January 2020, OALP Bid Round V offered eight sedimentary basins and 11 blocks with a total area of 19,789.04 square km.
The city gas distribution (CGD) segment has also witnessed significant growth in the past few years. The number of compressed natural gas (CNG) stations in the country has grown from 1,081 in 2015-16 to 3,180 in June 2021. The piped natural gas (PNG) network has also grown at a rapid pace, with the number of PNG connections increasing from 3.16 million in 2015-16 to 7.95 million in June 2021.
Indian Infrastructure tracks the key developments in the sector over the past year…
- In February 2021, the central government announced its plans to invest around Rs 7.5 trillion ($102.49 billion) in oil and gas infrastructure over the next five years.
- In the Union Budget 2021, the government allocated Rs 124.8 billion ($1.71 billion) for direct benefit transfer of liquefied petroleum gas (LPG) and Rs 10.78 billion ($147.31 million) for feedstock subsidy to Brahmaputra Cracker and Polymer Limited Assam Gas Cracker Complex.
- Under the Union Budget 2021, the finance ministry also announced that 10 million additional LPG connections will be provided under the Pradhan Mantri Ujjwala Yojana.
- In February 2021, Petronet LNG announced plans to increase its Dahej terminal’s capacity by 29 per cent to 22.5 mt per annum, to meet the rising demand. The Oil and Natural Gas Corporation (ONGC) also announced that it would increase its natural gas output from a KG basin block to 2.5-3 million standard cubic metres per day. Further, 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, the central government launched several key oil and gas projects in Assam. These include an 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. The government also launched the Ramanathapuram– Thoothukudi natural gas pipeline and a gasoline desulphurisation unit at Chennai Petroleum Corporation Limited, Manali.
- India has also set a target of $100 billion for investment in gas infrastructure by 2022, and the addition of another 228 cities to the CGD network. This would include setting up R-LNG terminals, pipeline projects, completing the gas grid and setting up CGD networks in more cities.
- On September 15, 2020, the central government inaugurated three petroleum sector projects in Bihar, entailing an investment of more than Rs 9 billion ($122 million).
- In October 2020, Torrent Gas Limited announced its plans to spend Rs 80 billion over the next five years to expand its urban gas operations with the aim of setting up 500 CNG dispensing pumps by March 2023.
- As of 2020, the Organisation of the Petroleum Exporting Countries (OPEC) meets 78 per cent of India’s crude oil demand, 59 per cent of its LPG needs and around 38 per cent of its LNG consumption. In November 2020, the Indian government urged the OPEC to remove pricing anomalies for different regions with a view to help the Covid-19- affected global oil industry get back to normalcy.
- In October 2020, the Cabinet Committee on Economic Affairs allowed the Abu Dhabi National Oil Corporation to commercially use 50 per cent of the oil it had stored in Indian underground strategic reserves. This flexibility will encourage the company to store more oil in the three strategic petroleum reserves built at Visakhapatnam, Mangaluru and Padur, and will act as an insurance against supply and price disruptions.
- The Indian oil and natural gas sector is expected to witness investments of $206 billion over the next eight to 10 years. Indian Oil Corporation Limited (IOCL) is planning to invest Rs 1.43 trillion to double its oil refining capacity to 150 mt by 2030. Meanwhile, ONGC is planning to invest more than $500 million in Mumbai High.
- In December 2020, IOCL announced plans to invest Rs 16.89 billion in new projects in Andhra Pradesh. This includes investments of Rs 15.22 billion in petro product infrastructure and Rs 1.67 billion in LPG storage facilities.
- In December2020, IOCL launched a world-class premium grade petrol (Octane100) in India. Branded as XP100, it was launched in 10 cities.
- In February 2021, IOCL signed a statement of intent with Greenstat Hydrogen India Private Limited to establish a centre of excellence for the hydrogen value chain and other related technologies such as hydrogen storage, fuel cells, etc.
- The central government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023. In December 2020, the Ministry of Petroleum and Natural Gas laid the foundation stone for Leafiniti Bioenergy’s CBG plant in Bagalkot district of Karnataka. This plant will utilise 200 tonnes per day of pressmud and will be commissioned at an estimated cost of Rs 420 million ($5.6 million).
- In November 2020, the Petroleum and Natural Gas Regulatory Board (PNGRB) released regulations for the determination of the transportation rate for CGD and CNG. These regulations will apply immediately at the end of the period of exclusivity from the purview of a common/contract carrier, pursuant to the PNGRB.
- On November 5, 2020, the PNGRB issued an order granting more time to 41 CGD players setting up projects in 185 geographical areas (GAs) to complete their network roll-out commitment. A large number of these 185 GAs had received authorisation in bid rounds 9 and 10. The time granted varies from 129 days to 251 days across different GAs, depending on the duration of the Covid-19 lockdown there.
- On December 22, 2020, the Ministry of Environment, Forest and Climate Change identified about 1,644 industrial units spread across 50 industrial areas in Delhi for switching over to PNG, owing to high levels of pollution. All industrial units were switched to PNG by January 31, 2021.
- In June 2020, Indian Gas Exchange Limited, India’s first automated national-level gas exchange, was launched to promote and sustain an efficient and robust gas market. The gas trading platform has been operating as a gas exchange since December 10, 2020.
Going forward, energy demand is anticipated to grow faster in India than in other major economies owing to its 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 double by 2035. Natural gas consumption is predicted to increase at a compound annual growth rate of 4.18 per cent to 143.08 mt by 2040 from 58.1 mt in 2018.