Document No.: A460 0486
Published: February 22, 2024.
India is the new growth engine of the international oil market
As the most populous country with rapid economic growth, India's energy and oil consumption continues to increase, and the International Energy Agency (IEA) predicts that India will become the largest growth engine of the international oil market by 2030.
Wang Nengquan. According to the United Nations, on April 14, 2023, India surpassed our country to become the world's most populous country. Currently, India is the fifth-largest economy in the world. India's finance ministry expects it to overtake Japan and Germany in 2027 to become the world's third-largest economy and a developed country by 2047. Many international organizations and institutions, including the World Bank, have very optimistic expectations for India's economic prospects. Due to its huge population size and growing economy, India has been the fastest growing primary energy consumption among the world's three largest energy consumers in China, the United States and India for more than a decade. Many industry players and many international institutions generally believe that India will be the largest growth driver of the international oil market between now and 2030. Based on the International Energy Agency's February 2024 report "Indian Oil Market – 2030 Outlook", this article will introduce India's oil production, consumption, refining, import and export from now to 2030, and its impact on the international oil market.
Declining oil production and rapidly expanding refining capacity.
India's oil production peaked at 900,000 barrels per day in 2011 and has been steadily declining for more than a decade, reaching just under 700,000 barrels per day in 2023, of which 600,000 barrels per day and the rest are natural gas liquids. India's oil production is mainly concentrated in the west, with the Mumbai offshore basin accounting for 60% of oil production and the Rajasthan basin accounting for about 20%.
From 2018 to 2023, India's oil production fell by about 4% per year, and will continue to decline at a similar rate in the future, with India's total oil production expected to fall to 540,000 barrel-days by 2030, of which ** production will fall to 460,000 barrel-days.
India's refining capacity has increased rapidly in recent years, from 3.1 million barrels per day in 2006 to 5.8 million barrel days in 2023, making India the world's fourth-largest refining capacity. Currently, there are 23 operating refineries in India, as well as a greenfield project scheduled to be operational in 2026. Between 2023 and 2030, India is expected to have 1 million barrel days of new refining capacity operational, with an average increase of about 150,000 barrel days per year. As a result, India's refining capacity will increase from 5.8 million barrels per day to 6.8 million barrel days by 2030, with most of the new capacity coming online in 2026.
The growth of refining capacity in India is expected to be driven mainly by state-owned refiners that are poised to cope with the growing domestic demand for oil and petrochemicals, while the prospects for a significant expansion of refining operations by private refineries are slim.
Indian Oil Corp ltd.IOCL) has a significant presence in India's refining industry, operating and holding approximately 28% of India's total refining capacity as of 2023. Indian Oil Corporation plans to expand and increase its existing capacity by another 32 percent by 203070,000 barrels per day.
Reliance Industries, which currently operates India's largest and most complex refinery, the Jamnagar Refinery Complex, with a total capacity of 1.48 million barrel days, is the world's largest refinery hub with 216 different types of refineries, the refinery has no plans to expand capacity, and future debottlenecking and upgrades will depend on the outlook of the petroleum products market.
India will be the largest engine of global oil demand growth until 2030.
From 2023 to 2030, India is expected to be the single largest increase in global oil demand**. India's oil demand is expected to increase by about 1.2 million barrels per day (bpd) during the period, or more than one-third of the world's projected growth of 3.2 million bpd, underpinned by strong economic growth and a large population. In particular, compared to other major economies, India's oil demand growth is more diversified across product categories, with only 18% of the demand growth going to petrochemicals, compared to more than 90% globally, and almost all of China's net oil demand growth will be in chemical production.
In terms of industry and product demand, the growth of India's oil consumption between now and 2030 is as follows:
a) Road transport is leading the growth of oil demand in India.
India's rapidly growing economy has a significant impact on personal movements, business activities and transport demand. Road travel accounts for about 90 per cent of personal travel and 70 per cent of cargo transport in India. Given that petroleum products are essential for road fuels, this means that the growth of the Indian economy is expected to translate into continued strong growth in demand for diesel.
Despite the growth in recent years, car ownership in India is still very limited. In 2023, there will only be about 58 million cars on India's roads. Although this represents an eight-fold increase compared to the level of 2000, the figure is still low by international standards, highlighting the strong potential for further growth in car ownership in India. Car ownership in India is expected to grow by more than 40% by 2030.
Two- and three-wheeled vehicles are a major driver of growing demand for automobiles in India. It is estimated that two-wheeled motorcycles account for about three-quarters of the total number of cars in India and account for a very high proportion of the total number of vehicles due to their lower purchases** and operating costs. At the same time, motorized tricycles play an important role in urban passenger services and last-mile cargo transportation. While the fuel consumption per kilometre (estimated to be around 25 per cent) and average distance traveled per year for these vehicles is lower than that of cars, the size of this fleet means that they are highly correlated with India's overall demand for transport fuel.
The load capacity is more than 3Five-tonne commercial trucks, which account for about four-fifths of India's road freight traffic, are more important in India than in most major economies because of the relatively fragmented ownership model and the road network restricting the use of large trucks. These diesel-consuming cars play an important role in India's manufacturing and commerce. Due to the rapid and sustained growth of manufacturing and commerce, there is an expectation of strong growth in diesel usage.
It is estimated that the demand for on-road diesel, dominated by these vehicles, accounts for about 70% of India's total diesel consumption. In addition, diesel vehicles also account for a large proportion of passenger cars in India, with a 40-50% share of diesel vehicle sales in the 2010s. This, coupled with the strong performance of the manufacturing sector, means that the growth in road diesel demand will be almost all of India's projected increase in diesel demand of 540,000 barrels per day and will be the most important driver of oil demand growth in India from 2023 to 2030.
India's diesel consumption will grow by 540,000 barrel-days per day between 2023 and 2030, accounting for one-sixth of the total global oil demand growth and one-third of the growth in diesel consumption in non-OECD countries, and as OECD diesel use declines, India's diesel consumption will grow more than the total global net increase for the product.
ii) Demand for air travel is limited, but there is still room for growth.
In 2023, jet fuel accounted for only 3 percent of India's oil demand4%, just 180,000 barrel days, less than the global average (7.).3%), India's total air traffic and jet fuel demand are roughly on par with France's. This illustrates the fact that air travel and the use of aviation fuel are closely linked to revenue. India's jet fuel demand is expected to grow at an average annual rate of 5 from 2023 to 20309%。
3) The Clean Cooking Program will continue to drive demand growth for LPG.
Since 2016, India** has promoted the use of liquefied petroleum gas (LPG) as a clean cooking fuel, distributing 50 million LPG stoves to poor households to replace the use of various highly polluting solid fuels. This scheme, which includes the provision of stoves and subsidies, has significantly boosted India's LPG demand, which has grown by 51% (an annual average of 5.) between 2015 and 20233%）。In 2021, 62% of Indian households used LPG as their primary cooking fuel. However, according to the Multiple Indicator Survey Survey (MIN) conducted by the National Sample Survey Office of India, 34 per cent of households still use firewood. It is estimated that from 2023 to 2030, India's LPG ethane demand will increase by 200,000 barrels per day (an average of 27%), of which the growth in demand for LPG, driven by the Clean Cooking Program, will account for a little more than half.
4) The growth of oil demand in the petrochemical industry is lower than the global average.
Globally, the petrochemical industry is expected to be the most important driver of oil demand growth in the medium term, which will generate an increase in oil demand of about 2.7 million barrels per day between 2023 and 2030. Oil demand from India's petrochemical sector is expected to increase by about 210,000 barrels per day due to the commissioning of new ventures and the expansion of existing projects, of which 120,000 barrel-days is naphtha for steam cracking and aromatics production, and 90,000 barrel-days is liquefied petroleum gas and ethane for steam cracking and propane dehydrogenation units.
5) Agricultural and forestry demand is expected to remain stable.
In addition to the above-mentioned sectors, India's agriculture and forestry sector uses just over 200,000 barrels per day of diesel, which accounts for about 4% of total oil demand, about one-eighth of India's total diesel use, and more than double the global average, reflecting the industry's relatively high position in the Indian economy. This part of diesel demand is expected to remain largely unchanged in 2030, accounting for about 45% of India's non-road diesel consumption.
India's rapid and sustained growth in oil demand stems from its dynamic economic development and relatively low per capita fuel use, especially the rapid development of its manufacturing, commercial, transport and agricultural sectors, which will lead to a sustained and substantial increase in diesel consumption.
India's economy has been performing exceptionally well since the beginning of the 21st century. In the decade leading up to 2020, India's GDP grew at an average annual rate of 68% and quickly returned to normal levels after the pandemic, thus making it a global economic powerhouse and the undisputed darling of emerging market investors. In 2024, India is on track to be the fastest-growing country among the world's major economies for the third consecutive year, and the International Monetary Organization expects India to contribute more than 16% to global economic growth. India's economic growth momentum is set to continue, with Oxford Economics** adding an average annual GDP growth rate of 6 per year to 2024-2030, driven by a large domestic consumer market, low-cost labour and a favourable demographic structure5%。
India's oil consumption is set to grow at a faster rate than other countries, in part because the country is still in the early stages of economic development. The World Bank estimates that India's GDP per capita in 2022 was just $2,400, lagging behind the Democratic Republic of the Congo, Bangladesh and Angola. It is a common phenomenon that when per capita GDP growth in developing countries is between $2,000 and $10,000, energy consumption grows at the fastest rate, that is, the income elasticity of energy demand is highest during this period.
Rapid economic growth has created a new middle class in India, characterized by rising living standards and changing consumption habits. As consumers become wealthier, they are more inclined to buy large, energy-intensive items, such as cars and home appliances. Due to India's relatively young demographics, the median age is 287 years old, so as consumers move to higher income and wealth classes, it will create a very large long-term growth potential for oil demand.
Industrialization, which has played an additional role in the growth of oil consumption. Energy-intensive manufacturing is also expanding as strong aggregate domestic consumption in turn increases demand for capital goods. In recent years, India has become a key industrial hub across the globe, and international companies are moving their ** chains to this hub, which has also boosted India's growth prospects. In addition, India's ambition to improve the country's poor quality infrastructure is supporting industrialization and faster oil demand growth.
The world's second-largest ** net importer and sixth largest exporter of refined oil products.
With a rapid increase in refining capacity, India's imports have increased by 36% over the past decade to 4.6 million barrels per day, with 90% of imports dependent. As refining capacity grows, India's imports are getting heavier and the sulphur content is getting higher, with the share of heavy, high-sulphur** increasing by 50% over the past 10 years. In 2023, medium and high densities** accounted for 63% of India's imports**. Before 2021, India's imports of heavy and high sulphur were mainly from the Middle East, and then mainly from Russia. India is a major exporter of oil products east of the Suez Canal and exports refined products to the Atlantic basin region. In 2023, India was the world's fourth-largest exporter of middle distillates (gasoline, diesel, and kerosene) and the sixth-largest exporter of refined oil products. With the embargo on Russian oil imports, India has played a key role in meeting Europe's demand for refined products.
a) Increasing dependence on Russia and the Middle East.
With a steady increase in refining capacity over the past decade, India has become the world's second-largest net importer (4.6 million barrels per day in 2023), behind China (10.6 million barrel days) and well ahead of South Korea, the third largest importer (2.8 million barrel days). In 2023, the Jamnagar refinery complex alone accounted for 25 percent of India's total imports, followed by Nayara Energy's Wadinar refinery (11 percent). India is the world's fourth-largest importer of heavy refining feedstocks, with the Jamnagar refinery complex, which is the world's largest import** refinery.
Before the outbreak of the Russia-Ukraine war, the Middle East accounted for more than 60% of India's imports. After the outbreak of the war, the share of imports from Russia in India's total imports rose from less than 3% in 2021 to almost 40% in 2023, from 61% to 45% in the Middle East, and from 12% to 4% in West Africa5%, Latin America from 45% to 3%.
The Middle East's exports to India are not all declining. From 2021 to 2023, Saudi exports to India remained stable and even increased slightly (to 710,000 barrel days), while Qatar's exports increased by 40,000 barrel days. However, UAE exports to India fell by 170,000 barrels per day to 260,000 barrels per day; Oman's exports fell by 100,000 barrels per day to less than 10,000 barrels per day; Iraq's exports fell by 80,000 barrels per day to 900,000 barrel days; Kuwait's exports fell by 750,000 barrels per day, down to 1.53 million barrels per day; Exports from the neutral zone fell by 260,000 barrels a day, down to 280,000 barrels per day. Other countries with larger cuts, including Nigeria (-180,000 b/d to 12.).50,000 barrel days) and the United States (down 210,000 barrel days to 20.).50,000 barrels per day).
With the change in imports, the share of medium and heavy sulphur** in India's import** mix rose sharply from 13% in 2021 to 62% in 2023, while light sulphur** fell by 5% to 24% and low sulphur** fell by 8% to 15%. Currently, 85% of India's imports are sulphur and 63% are medium and heavy (a mixture of sulphur-free and sulphur-la) imports, reflecting the flexibility of Indian refiners who have the ability to operate refineries with the worst grades and even favour those grades to maximise refining margins.
After the international embargo on Russian energy exports, the dramatic change in the direction of world oil flows** is not expected to be reversed in the foreseeable future. India quickly became one of the leading buyers of Russia**, increasing from barely to 1.7 million barrels per day in 2023 (2.2 million barrels per day in May 2023). In 2023, India accounted for 36% of Russia's total exports, while Russia accounted for 38% of India's imports. On the other hand, India's imports of petroleum products from Russia also doubled in 2023, from 70,000 barrels per day to 130,000 barrels per day (mainly fuel oil and feedstock oil), but only 5% of Russian oil export sales.
2) Oil products**: moderately imported but mainly exported.
India's refined product exports have remained at 1.2 million to 1.3 million barrels per day since 2017, while imports of finished and semi-finished products have been steadily rising, reaching 380,000 barrel days in 2023 (40% higher than in 2017). Imported refined oil, mainly naphtha (7. in 202320,000 barrels per day), lubricating oil (370,000 barrels per day) and gasoline (20,000 barrels per day), as well as some bitumen (140,000 barrels per day) and fuel oil (110,000 barrels per day). The steady growth in imports, reflecting the increased use of refinery feedstock for semi-finished products, will reach 210,000 barrels per day in 2023. Refiners offset the reduction in heavy quality by importing crack and straight-run fuel oil as feedstock for coking. In addition, India imports about 30,000 barrels of carbon black per day as a feedstock.
The increase in imports of semi-finished raw materials was mainly due to the increase in the use of heavy raw materials at the Jamnagar refinery complex of the Justnagar Oil Refinery of the Solid Industries. In January 2020, the global shipping industry began using low-sulphur fuel oils, significantly reducing the value of high-sulphur fuel oils, but increasing their role as feedstock for coking units. India's imports of semi-finished feedstock doubled to 140,000 barrels per day in 2020 and 210,000 barrels per day in 2023 as OPEC+ producers cut** to balance the market in April-May 2020 as the pandemic led to a sharp decline in heavy quality*** volumes.
Since 2017, India's total exports of refined and semi-finished feedstock have remained stable at around 1.2 million to 1.3 million barrels per day. Of the total 1.25 million barrels per day of oil exports in 2023, 890,000 barrels per day were accounted for by the Jamnagar refinery, 130,000 barrel days by the Wadinar refinery and 100,000 barrel days by the Mangalore refinery. By product, the volume of middle distillate exported by India in 2023 was 730,000 barrels per day, including 290,000 barrels of diesel, 270,000 barrels of light diesel and 17 barrels of kerosene50,000 barrels per day). In addition, gasoline and blending components averaged 320,000 barrel-days (24.d., respectively).50,000 barrels a day and 750,000 barrels per day), naphtha 1230,000 barrels a day.
The embargo on Russian oil exports by the G7 and the European Union came into effect at the end of 2022 and the beginning of 2023, and the flow of world oil has changed dramatically. Before the embargo, Russia had a large share of European imports of naphtha, diesel and fuel oil, as well as raw oil from the United States. In the wake of the embargo, substitutes in these markets have come from further afield, including the Middle East and Asia (especially India), with Russian oil exports shifting east of the Suez Canal, Turkey, Africa and Latin America.
As a major exporter of middle distillates, India played a key role in meeting European demand in 2023 after Russian oil was banned from imports. In 2023, Europe imported 22India's 50,000 barrels of petty diesel and diesel averaged only about 120,000 barrels per day in the first five years, compared to 140,000 barrels per day in 2022. In addition, India also exported about 40,000 barrels of fuel oil and 30,000 barrels of heavy feedstock oil per day to Europe in 2023.
3) India will play a greater role in the global oil market.
In the medium term, the world** and refined oil products will continue to expand, and India will play an important role. During the period, continued growth in demand in Asia will far outpace the growth in exports from the Middle East. Asia's ** and condensate import demand is expected to increase by 4.8 million barrels per day to 28 million barrels per day in 2028. The growth of global production and exports will be dominated by the Atlantic basin, excluding Russia. The Western Hemisphere's ** and condensate surplus will increase by about 4.5 million barrels per day due to increased oil production in the United States, Brazil and Guyana, as well as refining activity falling as demand for transportation fuels shrinks. Because of the above reasons, the growth of demand for OPEC*** will slow, coupled with the expansion of refineries in the Middle East, the growth of the number of ** and condensate exports in the Middle East is expected to be limited. Therefore, during the period, the Atlantic basin will play a key role in meeting the needs of Asia, especially India. On the oil demand side, middle distillates will flow from Asia to the Atlantic basin, while light oils, especially naphtha and LPG, will flow in the opposite direction.
Asian refineries need to expand from the Middle East to Russia, but demand will still increase in the coming years, which is expected to lead to an increase in imports from the Atlantic Basin. Most of the Atlantic Basin production is medium and low sulphur, which will dominate future global growth, while heavy production will decline. This change in the world's largest categories will have a negative impact on the profitability of complex refineries and may affect Indian refiners, which will bring Indian refineries to continue to import more semi-finished feedstock to meet the demand of refinery units.
In 2023, exports of condensate from the Middle East** were 17.7 million barrels per day, about 1.7 million barrels per day lower than their peak in 2018. In 2030, production cuts and the construction of new refinery capacity will have an impact on the growth of the region's ** exports, especially the region's heavy-weight, sulphur** exports. In 2030, the Middle East's ** and condensate exports are expected to remain at 2022-2023 levels. In 2023, refineries in the Atlantic basin imported about 10% of Middle East** exports. Complex refineries in the Atlantic Basin will be closed over the next few years, sustaining heavier, sulphur** demand for Middle East exports.
In 2030, Asia's condensate gap is expected to increase by about 5 million barrels per day, with demand increasing by 3.9 million barrels per day (1.1 million barrels per day in India) due to the expansion of refining capacity, while condensate production in the region is declining (India is 120,000 barrels per day short). As a result, the shortfall between India and condensate is estimated to be about 1.2 million barrels per day (bpd) during the period.
From 2023 to 2030, India's ** demand will increase by 1.05 million barrels per day to a total of 6.2 million barrel days as new refining capacity is put into operation, while India's ** production is expected to decline by 13 per day during the same period50,000 barrels. As a result, India's imports will increase by 1.2 million barrels per day during this period.
Over the past 10 years, due to the increase in imports from the Russian Urals, intermediate, sulphurous imports have accounted for most of India's imports. Since 2019, India's medium, sulphur** processing (1.4 million barrels per day) has outpaced the increase in imports (200,000 barrels per day). Because of this, almost all other varieties of India** imports have declined, and the import volume in 2023 is also lower than in 2019.
It is expected that in 2030, India's increasing imports will be maximized in the existing range in the medium and heavy sulphur content. However, current data suggests that the increase in production of these types is likely to be limited, and that Indian refineries will move to other more types such as light, sulphur and light, low sulphur. Since 2019, India's imports of light, sulphur and light, low-sulphur** have fallen by 700,000 barrels per day. However, the final choice of refinery will depend on whether a certain type of refinery can bring better profits to it, and if the surplus depresses light, sulfur and light, low sulfur, then even the most complex refineries may choose these types of products for economic reasons.
As the world's most populous country and the country with the fastest growth in energy consumption in recent years, India's energy and oil situation has been one of the key areas of our research and focus, and we have written and published a number of articles on India's energy and oil situation. As people in the energy industry and concerned and researchers of the world's energy issues, we are very fortunate to have experienced the development of China into the world's largest energy consumer, the largest energy importer, and more importantly, the whole process of China becoming the world's largest oil and gas importer. Since entering the 21st century, China is the world's fastest growing oil consumption country, for a long time, the world's oil consumption increased by more than one-third, ** in our country, we are the largest engine of consumption growth in the international oil market, at present, this growth engine is translocation. What we have experienced for a long time is being repeated in our neighbouring countries. However, no matter how we view India as a country, no matter how we judge the future energy and oil situation in India, no matter what position we hold on this report from the International Energy Agency, we believe that this repetition will bring opportunities and challenges to our petrochemical industry, and as the world's largest oil and gas importer, what impact will this repetition have on the global oil and energy market and us. It is a major matter that we should pay close attention to and closely follow!