Energy Needs for India

In News

• Recently, the officials stated that India is running out of options due to the relentless surge in international oil prices.

About

• India imports 85% of its crude oil needs and about half of its natural gas requirement. 
• While crude oil is turned into fuels such as petrol and diesel, gas is used as CNG in automobiles and fuel in factories.

Consequences

• With no respite from surging international prices, OMCs have started to increase the retail selling price of petrol and diesel.
• Unless international prices relent, oil companies will have no option but to continue passing on the increase to consumers

Indian Oil and Gas Industry

• Introduction:
  • 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.
  • India’s economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment.
  • The Government has adopted several policies to fulfil the increasing demand. 
    • It has allowed 100% Foreign Direct Investment (FDI) in many segments of the sector, including natural gas, petroleum products and refineries among others. 
      • Today, it attracts both domestic and foreign investment as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.
• IEA (India Energy Outlook) 2021:
  • According to IEA (India Energy Outlook 2021), primary energy demand is expected to nearly double to 1,123 million tonnes of oil equivalent, as the country’s gross domestic product (GDP) is expected to increase to USD 8.6 trillion by 2040.
• Market Size:
  • India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally. 
  • Crude Oil import rose sharply to US$ 101.4 billion in 2019-20 from US$ 70.72 billion in 2016-17.
• International Energy Agency (IEA):
  • According to the International Energy Agency (IEA), consumption of natural gas in India is expected to grow by 25 billion cubic metres (bcm), registering an average annual growth of 9% until 2024.
  • India’s medium-term outlook for natural gas consumption remains solid due to rising infrastructure and supportive environment policies. 
  • Industrial consumers are expected to account for ~40% of India’s net demand growth. 
  • The demand is also expected to be driven by sectors such as residential, transport and energy.
• Expected Statistics:
  • 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 increase by two-fold by 2035.
  • Crude oil consumption is expected to grow at a CAGR of 3.60% to 500 million tonnes by 2040 from 221.56 million tonnes in 2017.
  • India’s oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 5.05 million barrel per day in 2020.
  • Natural Gas consumption is forecast to increase at a CAGR of 4.18% to 143.08 million tonnes by 2040 from 58.10 million tonnes in 2018.
  • Diesel demand in India is expected to double to 163 million tonnes (MT) by 2029-30.
• Investments:
  • According to data released by the Department for Promotion of Industry and Internal Trade Policy (DPIIT), the petroleum and natural gas sector attracted FDI worth US$ 7.92 billion between April 2000 and March 2021.

Challenges

• Decreasing Ageing Wells:
  • There is no more easy oil and gas available in India. 
  • Producers would have to invest in extracting oil and gas using technologically intensive means from more difficult fields such as ultra-deepwater fields.
• Balancing Environment With Extraction:
  • Indian oil and gas industry leaders are faced with the twin challenge of responding to the changing environment while sticking to the commitment of reduction of fossil fuel consumption.
• Monopoly of 2 state-owned Companies:
  • Crude oil production in India is dominated by two major state-owned exploration and production companies, ONGC and Oil India. 
  • These companies are the key bidders for hydrocarbon blocks in auctions and were the only successful bidders in the fifth and latest round of auctions under the Open Acreage Licensing Policy (OALP) regime with ONGC bagging seven of the eleven oil and gas blocks on offer and Oil India acquiring rights for the other four.
• Import Dependent: 
  • The Indian economy is dependent on fossil fuels and there is no discernible end in sight to this dependence.
  • India imports approximately 85% of its crude oil requirements and is exposed to the volatility of the international oil market.
• International Conflicts:
  • A major chunk comes from the Middle East, predominantly Saudi Arabia, Iraq and Iran, which faces deep political and social fault lines and there is no knowing when our supply lines might get ruptured.
• Overseas’ interest:
  • Interest from foreign players in oil and gas exploration in India had been low. 
• Exploration: 
  • There have been few substantive commercial discoveries in recent years, in large part because the bulk of the reserves are in complex geological structures and harsh terrain (Himalayan foothills or deep waters offshore).
  • They are difficult to find but even when found, the costs incurred are often so high that except in market conditions of high prices, the discovery is not commercially viable.
• Low private participation:
  • Low private participation in India’s upstream oil and gas sector is due to delays in the operationalisation of hydrocarbon blocks due to delays in major clearances including environmental clearances and approval by the regulator of field development plans.
• Structural Challenges: 
  • In 2021 structural changes are brought by the Covid-19 pandemic. 

Government Initiatives

• Assam:
  • In February 2021, the government launched key oil & gas projects in Assam, such as 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 remotely from Dhemaji in Assam.
• Manali:
  • In February 2021, the government launched key oil and gas projects such as the Ramanathapuram – Thoothukudi natural gas pipeline and Gasoline Desulphurisation Unit at Chennai Petroleum Corporation Limited, Manali.
• Centre of Excellence:
  • In February 2021, IndianOil Corp. Ltd. signed a ‘statement of intent with Greenstat Hydrogen India Pvt. Ltd. to establish a centre of excellence for the Hydrogen value chain and other related technologies such as hydrogen storage, fuel cells, etc.
• LNG facility:
  • In July 2021, the Minister for Road Transport and Highways inaugurated India’s first liquefied natural gas (LNG) facility plant in Nagpur, Maharashtra.
• Crude procurement diversification:
  • In July 2021, India diversified procurement for crude by announcing its first shipment from Guyana. This move also indicates a future roadmap for the extended alliance with Guyana in the oil & gas sector.
• Boost Hydrocarbon Production:
  • In June 2021, the government announced that it will auction unmonetized large oil and gas fields of state-owned ONGC and OIL to boost hydrocarbon production.
• Extra funding:
  • In February 2021, Prime Minister announced that the Government of India plans to invest ~Rs. 7.5 trillion (US$ 102.49 billion) on oil and gas infrastructure in the next five years.
  • In Union Budget 2021, the government allocated funds worth Rs. 12,480 crore (US$ 1.71 billion) for direct benefit transfer of LPG (liquefied petroleum gas) and Rs. 1,078 crore (US$ 147.31 million) to feedstock subsidy to BCPL/Assam Gas Cracker Complex.
• PM Ujjwala Yojana: 
  • In Union Budget 2021, the Finance Minister announced to provide 1 crore more LPG connections under Pradhan Mantri Ujjwala Yojana (PMUY) scheme.
  • LNG Policy:
    • The Ministry of Petroleum and Natural Gas released a draft LNG policy that aims to increase the country’s LNG regasification capacity from 42.5 million tonnes per annum (mtpa) to 70 mtpa by 2030 and 100 mtpa by 2040.
  • Ethanol Blended Petrol (EBP) Programme:
    • The Ministry of Petroleum and Natural Gas released an ‘Ethanol Procurement Policy’ on a long-term basis under the ‘Ethanol Blended Petrol (EBP) Programme’ (October 11, 2019), which covers modalities for long-term ethanol procurement, proposed mechanisms for long-term procurement contracts, pricing methodology and other topics.
  • Kayakave Kailasa:
    • As per Union Budget 2019-20, Indian Scheme ‘Kayakave Kailasa’, the Ministry of Petroleum & Natural Gas has enabled SC/ST entrepreneurs in providing bulk LPG transportation. 
    • State-run energy firms, Bharat Petroleum, Hindustan Petroleum and Indian Oil Corporation, plan to spend US$ 20 billion on refinery expansions to add units by 2022.
  • Compressed biogas plants:
    • The Government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023.

Way Ahead

• The energy demand of India is anticipated to grow faster than the energy demand of all major economies on the back of continued robust economic growth. 
• The adoption and promotion of renewable energy in India from an economic and sustainability perspective is the need of the hour.
• India should concentrate on low carbon energy consumption for achieving these economic goals and development.

Source: TH