Robust demand and rising investments fuel India's energy sector

SNAP ANALYSIS
Robust demand and rising investments fuel India's energy sector
Branded oil tanks at Saudi Aramco oil facility in Abqaiq. Global oil and gas giants such as ExxonMobil, Saudi Aramco and ADNOC are exploring further investments in India.Courtesy: Reuters

Country to witness operational commencement of 647 oil and gas projects between 2021 to 2025 as global oil and gas giants are exploring further investments in India

As the energy sector around the world undergoes a recalibration in the aftermath of the coronavirus pandemic, the prospects have brightened for India in the near to medium term – with the country accounting for the operational commencement of a massive 647 oil and gas projects between 2021 to 2025.

Those projects will form the backbone of the energy sector value chain in the Asia-Pacific (APAC) region, accounting for 33 per cent of the total upcoming project starts, and come at a time when global oil and gas giants such as ExxonMobil, Saudi Aramco and ADNOC are exploring further investments in India.

“Some of the major global investors are very interested. BP, Total, and Shell are already in India,” Dharmendra Pradhan, Indian Minister of Petroleum and Natural Gas, said recently. “We are talking to ExxonMobil. Aramco and ADNOC are scouting their possibility in India,” he said.

Union minister of petroleum, natural gas and steel Dharmendra Pradhan believes that India will account for the operational commencement of a massive 647 oil and gas projects between 2021 to 2025.
Union minister of petroleum, natural gas and steel Dharmendra Pradhan believes that India will account for the operational commencement of a massive 647 oil and gas projects between 2021 to 2025.ANI

Mix of projects

According to GlobalData’s ‘Asia Pacific Oil and Gas Projects Outlook to 2025’ report, out of the 647 projects to commence operations by 2025, upstream projects would be 80, midstream would be at 123, refinery at 85, and petrochemicals would be the highest with 359 projects.

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India is one of the largest consumers and importers of oil and gas in the world due to its economic growth. Though India is taking steps to increase oil and gas production, the focus is more on the development of midstream, refineries and petrochemicals infrastructure for greater imports, processing, transport and storage,” said Soorya Tejomoortula, Oil & Gas analyst at GlobalData.

“We have planned to spend around $143 billion on energy infrastructure. India is consciously moving towards a gas-based economy: more LNG terminals, more reformist policy for more domestic gas production, more pipelines, CGD networks, more fertiliser plant revival, and more refineries.” - Dharmendra Pradhan, Indian Minister of Petroleum and Natural Gas.

While downstream (refineries) and petrochemical projects together constitute about 69 per cent of all upcoming oil and gas projects in India between 2021-25, the 180,000-barrels per day capacity Barmer refinery has emerged as one of the key projects with a total cost of $4.5 billion – with the project currently under construction and expected to start operations in 2025. In petrochemicals projects, the Haldia Petrochemicals Balasore Xylene Plant (SBR) Plant is one of the key projects with a capacity of 1.6 million tonnes per annum (mtpa) and costing $1.9 billion. The project has already received approval and is expected to start operations in 2024.

India plans to spend billions on energy infrastructure and Indian Oil and Exxon Mobil are setting up a joint venture firm under the MoU signed recently to develop LNG as a long-haul transport fuel.
India plans to spend billions on energy infrastructure and Indian Oil and Exxon Mobil are setting up a joint venture firm under the MoU signed recently to develop LNG as a long-haul transport fuel.ANI

Moving to a gas-based economy

“We have planned to spend around $143 billion on energy infrastructure. India is consciously moving towards a gas-based economy: more LNG terminals, more reformist policy for more domestic gas production, more pipelines, CGD networks, more fertiliser plant revival, and more refineries,” said Pradhan.

A notable step in that direction includes Indian Oil and Exxon Mobil setting up a joint venture firm under the MoU signed recently to develop LNG as a long-haul transport fuel.

Further midstream projects would also constitute around 19 per cent of all oil and gas projects starts in India during the said period.

But the rapid growth in the sector is not only limited to boosting production capacities and new projects. In the midstream sector, pipeline segment alone constitutes 47 per cent of all projects followed by oil storage and LNG with 36 percent and 14 percent respectively. In pipelines, the focus is on development of natural gas pipelines with Jagdishpur–Haldia Phase II being one of the key projects with a length of 1,900 km and costing $1.4 billion. The pipeline is presently in the construction stage and is expected to start operations in 2022.

A technician works inside the Oil and Natural Gas Corp (ONGC) group gathering station on the outskirts of Ahmedabad. ONGC saw its contribution to the national production jump to more than 70% from under 53% a decade back.
A technician works inside the Oil and Natural Gas Corp (ONGC) group gathering station on the outskirts of Ahmedabad. ONGC saw its contribution to the national production jump to more than 70% from under 53% a decade back.Courtesy: Reuters

Role of energy giants

The role of stellar PSUs in the sector – such as state-owned ONGC – have also contributed immensely to the oil and gas industry’s robust contribution to the Indian economy. ONGC has actually seen its contribution to the national production jump to more than 70% from under 53% a decade back, petroleum ministry data showed.

Its standalone production at 47.51 million tonnes of oil and oil equivalent gas in 2010-11 was 52.8% of a total of 89.91 million tonnes of oil and gas produced in the country that year. Despite having the majority of fields where natural decline has set after being in operations for more than 40 years, ONGC maintained production throughout the last decade thereafter and had an output of 44.57 million tonnes of oil and oil equivalent gas in 2019-20, which was 70.3% of India's total production of 63.353 million tonnes.

With such concerted efforts, expansion strategies and investments from global giants, India’s energy sector is thus set for a journey of solid growth and consolidation ahead.

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