Oil Giants Eye India's Gas Production Potential

India's oil and gas industry is a crucial sector that meets a significant portion of the nation's energy requirements. As the demand for energy rises, the imports of oil and gas also increase, attracting the attention of investors. The government has implemented several policies to meet the growing demand, including allowing 100% foreign direct investment (FDI) in many segments of the sector. India is the third-largest consumer of oil in the world and has set a target to increase its refining capacity to 450 million metric tonnes per annum (MMTPA) by 2030. The country's crude oil production stood at 4.89 million metric tonnes (MMT) during April-May 2024, while its natural gas production was 12,135 million metric standard cubic metres (MMSCM) in July 2024. India has 23 refineries, with a total refining capacity of 253.91 million metric tonnes as of April 2023, making it Asia's second-largest refiner. The government has also taken initiatives to promote the sector, such as allocating funds for the development of pipeline infrastructure and reducing excise duty on petrol and diesel. The oil and gas sector in India offers investment opportunities, with a projected growth in the market size by 2029. Major companies in the industry include Reliance Industries Limited, Oil and Natural Gas Corporation Limited, and Indian Oil Corporation Limited.

India's energy self-sufficiency goals

India is the world's third-largest energy consumer and oil consumer, and the fourth-largest importer of liquefied natural gas (LNG). The country's energy demand is set to outpace domestic supply, with a projected growth of about 3% per annum by 2040, compared to the global rate of 1%. This demand is driven by rapid economic growth, urbanisation, rising incomes, and industrial activity.

Currently, India must import 90% of the oil, 80% of the industrial coal, and 40% of the natural gas it consumes. However, India has set an ambitious goal to achieve energy self-sufficiency by 2047. This includes raising the share of natural gas in its energy mix to 15% by 2030 and increasing its refining capacity to 450 million metric tonnes per annum (MMTPA) by 2030.

To achieve its energy self-sufficiency goals, India is focusing on several key strategies:

• Increasing domestic production and exploration: India aims to increase its exploration acreage by 0.5 million square kilometres till 2025 and 1 million square kilometres till 2030. It is offering investment opportunities worth $100 billion in the exploration and production (E&P) sector by 2030.
• Expanding refining capacity: Indian refiners are adding capacity to increase domestic capacity to 310 MMTPA by 2028, with a further goal of reaching 450-500 MMTPA by 2030.
• Promoting renewable energy sources: India has set a target of 175 gigawatts (GW) of renewable installed capacity by 2022, including 100 GW from solar energy. By February 2024, India's solar installed capacity reached 75 GW, ranking it as the third-largest country in terms of solar installations. However, this growth has been fuelled predominantly by imports, and India needs to develop self-sufficiency in solar module manufacturing to reduce its reliance on imports.
• Improving energy infrastructure: India is expanding its natural gas pipeline network, with a target of increasing pipeline coverage by ~54% to 34,500 kilometres by 2024-25 and connecting all states by 2027. It is also developing its City Gas Distribution (CGD) network, with plans to establish 12,000 CNG stations by 2030.
• Reducing oil imports and promoting biofuels: India aims to commercialize 50% of its strategic petroleum reserves and increase ethanol blending in petrol to 20% by 2025-26. It is also promoting the development of Compressed Biogas (CBG) units under the Sustainable Alternative Towards Affordable Transportation (SATAT) Scheme.
• Attracting foreign investment: The Indian government has allowed 100% foreign direct investment (FDI) in upstream and private sector refining projects, as well as natural gas and petroleum products. This has sparked interest from both domestic and international companies.

While India has made significant progress towards its energy self-sufficiency goals, challenges remain. The country's energy sector is characterized by monopoly players, state-run corporations, controlled pricing, and high barriers to market entry. Distribution bottlenecks and a lack of transparent price signals also deter investment. Additionally, India's energy transition will require significant policy support, including financial and regulatory incentives for clean technologies and investment in domestic manufacturing capacity.

Foreign investment in the oil and gas sector

India is the third-largest energy and oil consumer in the world and the fourth-largest importer of liquefied natural gas (LNG). The demand for oil and gas in India is projected to increase, making the sector attractive for investment. The Indian government has taken several measures to encourage the growth of the sector, including allowing 100% foreign direct investment (FDI) in many segments of the sector, such as natural gas, petroleum products, and refineries.

The government has also raised the FDI limit for public sector refining projects to 49% without requiring any disinvestment or dilution of domestic equity in existing public sector undertakings (PSUs). This policy change has sparked interest from both domestic and international companies, resulting in increased investment in the sector.

According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflows in India's petroleum and natural gas sector stood at US$8.19 billion between April 2000 and March 2024. The exploration and production (E&P) sector alone offers investment opportunities worth US$100 billion by 2030.

India's oil and gas sector is expected to attract US$25 billion in investment in exploration and production. The country already has 23 refineries, and expansion is planned to tap foreign investment in export-oriented infrastructure, including product pipelines and export terminals.

Some of the major investments and developments in the oil and gas sector in India include:

• Indian Oil Corporation Limited (IOCL), the country's largest domestic refiner, with a capacity of 70.1 million metric tonnes per annum (MMTPA).
• Oil and Natural Gas Corporation Limited (ONGC), India's largest company in crude oil and natural gas production and exploration.
• GAIL (India) Limited, a government-owned company that operates a vast network of natural gas pipelines, LPG pipeline systems, gas processing plants, and petrochemical projects.
• Reliance Industries Limited, a Mumbai-based company operating in multiple sectors, including petroleum refining, hydrocarbon exploration, and renewable energy.
• Adani Total Gas Ltd (ATGL), a joint venture between the Adani Group and TotalEnergies, which won licenses to expand its city gas distribution (CGD) network to 14 new geographical areas with an investment of Rs. 20,000 crore (US$2.62 billion).
• Tata Mining Limited signed a memorandum of understanding (MoU) with Gas Authority of India Limited (GAIL) to reduce its carbon footprint and supply natural gas to its Ferro Alloys Plant in Odisha.

In conclusion, India's oil and gas sector offers significant investment opportunities for foreign investors, with the government encouraging FDI to meet the growing demand for energy in the country.

Oil and gas imports

India's oil and gas sector is crucial to its economy, fulfilling a significant portion of the country's energy requirements. However, as demand rises, the gap between supply and demand is often bridged by imports, which has attracted the attention of investors. India is the third-largest consumer of oil in the world and the fourth-largest importer of liquefied natural gas (LNG).

In 2019, India was the second-largest net importer of crude oil, with imports of 205.3 million metric tons (Mt). India imports 82% of its oil needs and is highly dependent on imported crude oil to meet its energy demands. In the fiscal year 2020-21, India's net imports of crude oil were 226.95 Mt, while net imports of natural gas were 32.86 billion cubic meters (BCM). The country's import dependence is 82.8% for crude oil and 45.3% for natural gas.

Crude oil imports to India come primarily from the Middle East, with the United Arab Emirates being the largest source. However, imports from this region declined by about 28% in 2023, and the share of oil from the Commonwealth of Independent States (CIS), including Azerbaijan, Kazakhstan, and Russia, nearly doubled.

India's domestic crude oil production has been declining, with output falling by 5.2% in the fiscal year 2021. In April-May 2024, India's crude oil production stood at 4.89 million metric tons (MMT). The largest reserves of crude oil in India are found in the Western Offshore (37%) and Assam (27%).

To reduce its dependence on imports, India aims to increase its exploration acreage and develop its strategic petroleum reserves (SPR). The country plans to bring down its oil import dependence to 67% by 2022 by replacing it with local hydrocarbon exploration, renewable energy, and indigenous ethanol fuel.

In terms of natural gas, India's consumption is expected to grow, with a projected average annual growth of 9% until 2024. India's LNG imports stood at 30,917 million metric standard cubic meters (MMSCM) between April 2023 and March 2024. The largest reserves of natural gas in India are located in the Eastern Offshore (40.6%) and the Western Offshore (23.7%).

India's oil and gas sector offers attractive investment opportunities, with the government allowing 100% foreign direct investment (FDI) in various segments, including natural gas and petroleum products. The sector is expected to attract $25 billion in investment in exploration and production.

Oil and gas production

India's oil and gas industry is a crucial sector for the country's economic growth, fulfilling a significant portion of its energy requirements. However, India's domestic oil and gas production is insufficient to meet its growing demand, leading to a heavy reliance on imports. This has drawn the attention of investors, making the oil and gas sector highly attractive for investment.

The Indian government has implemented several policies to encourage investment in the oil and gas sector, including allowing 100% foreign direct investment (FDI) in many segments, such as natural gas and petroleum products. The government has also raised the FDI limit for public sector refining projects to 49% without diluting domestic equity. These policy changes have sparked interest from both domestic and international companies, resulting in increased investment.

Reserves and Consumption

India had estimated crude oil reserves of 587.335 million metric tonnes (Mt) as of April 1, 2021, with the largest reserves found in the Western Offshore (37%) and Assam (27%) regions. The estimated natural gas reserves were 1,372.62 billion cubic meters (BCM), with the largest reserves located in the Eastern Offshore (40.6%) and Western Offshore (23.7%) regions.

India is the third-largest consumer of oil in the world, and its energy demand is expected to nearly double by 2040. The country's oil demand is projected to reach 11 million barrels per day by 2045, while diesel and gasoline are expected to cover 58% of its oil demand by 2045. India's consumption of natural gas is also expected to grow, with a target to raise its share in the energy mix to 15% by 2030.

Production and Refining

India's domestic crude oil production has declined since 2011-12, with 30.49 Mt of crude oil produced in 2020-21. The country's natural gas production has also decreased, with 28.67 BCM produced in 2020-21.

As of April 2023, India had 23 crude oil refineries, with a total refining capacity of 248.87 Mt per year. Indian Oil Corporation (IOC) was the largest refiner in the country by capacity, with a capacity of 69.2288 million metric tonnes per annum (MMTPA).

Investment Opportunities

The oil and gas sector in India offers several investment opportunities. Here are some key points:

• The Exploration and Production (E&P) sector offers investment opportunities worth US$100 billion by 2030.
• India's oil and gas production is expected to peak in the mid-2020s, driven by projects in the KG-Basin operated by Reliance Industries Limited and Oil and Natural Gas Corporation (ONGC).
• Major investments and developments in the oil and gas sector include joint ventures, expansion of refineries, and development of city gas distribution networks.
• Companies such as Reliance Industries Limited, Oil and Natural Gas Corporation, Indian Oil Corporation, and Adani Total Gas Ltd have made significant investments in the sector.
• The Indian government has allocated funds for the development of pipeline infrastructure and the promotion of compressed biogas (CBG) projects.
• The government has also unveiled a strategic investment plan of US$67 billion for the Indian gas sector over the next 5-6 years.
• Oil and gas company stocks have become popular investment choices, with investors keen on investing in this sector.

Oil and gas consumption

India is the world's third-largest consumer of energy and oil. In April-September 2024, India consumed 117.7 million metric tonnes of petroleum products and 58.4 billion cubic meters of natural gas, marking a growth of 3.1% and 5% respectively from the previous year.

India's energy demand is expected to nearly double by 2040, as the country's GDP is projected to increase to $8.6 trillion. Oil demand in India is projected to double to reach 11 million barrels per day by 2045. Diesel demand is also expected to double to 163 million metric tonnes by 2029-30, with diesel and gasoline covering 58% of India's oil demand by 2045.

The consumption of natural gas in India is expected to grow by 25 billion cubic meters, registering an average annual growth of 9% until 2024. In June 2024, India's total consumption of natural gas saw a significant increase of 7.1% from the same month the previous year. The upward trend reflects the expanding application of natural gas across various sectors, including electricity generation, heating, fertilisers, and plastics.

India's crude oil production stood at 4.89 million metric tonnes during April-May 2024. The country's total installed refinery capacity as of March 2024 was 253.9 million metric tonnes per annum, with 23 refineries in operation. Indian Oil Corporation is the largest domestic refiner, with a capacity of 70.1 million metric tonnes per annum.

To meet the growing energy demand, India has taken several measures, including allowing 100% foreign direct investment in many segments of the oil and gas sector. The government has also raised the foreign investment limit for public sector refining projects to 49%. As a result, the sector has attracted both domestic and foreign investment, with companies such as Reliance Industries Ltd and Cairn India establishing a presence in the country.

In addition to increasing domestic production, India has also focused on reducing its reliance on oil imports. In 2015, the government set a target to reduce oil import reliance to 67% by 2022, but the dependency has only grown since then. The country's oil import dependency stood at 88.2% in the first half of the 2024-25 financial year, up from 87.6% in the same period the previous year.

To address this issue, the government has implemented various policy measures to incentivise investments in oil and gas exploration and production. These include allocating funds for the development of pipeline infrastructure and promoting the use of compressed biogas and electric mobility. Despite these efforts, India's energy demand continues to rise, and the country remains heavily dependent on imported crude oil to meet its needs.

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