AUG 28, 2018 (BE2C2): India will pass China by the middle of the next decade as the country with the biggest appetite for oil and its refineries can’t keep up, Wood Mackenzie found.
The world renowned energy consulting group expects India will pass China as the country with the largest demand for oil by 2024, accounting for about 30 percent of total oil demand growth worldwide.
India has already surpassed Japan to become the world’s third largest oil consumer on a monthly basis.
For domestic capacity, that growth is a problem though. Refining capacity would need to maybe double in order to keep up with the demand for transport fuels alone, the energy consultant says.
“This is clearly an uphill task, unless domestic refiners can commit to their planned capacity additions,” stated Sushant Gupta, a research director at the group in a report emailed to UPI.
If the country can’t find ways to produce its own gasoline, it will have to look to imports. Countries with spare capacity are in the European Union or the United States, though Wood Mackenzie said the trade distances could create concerns for a growing India.
Year-over-year, Indian imports of petroleum, crude oil and petroleum products increased more than 40 percent.
Even if India can attract international companies to invest in upstream production, the country does not have the reserves to considerably slow the widening supply/demand deficit. India is taking over from China as the engine of global growth, and its exploding oil demand will mean that it becomes ever more dependent on oil, and especially oil imports.
Economists at the Organization of Petroleum Exporting Countries (OPEC) expect the Chinese economy to grow by 6.6 percent this year. India’s economy is on pace to grow 7.3 percent this year and 7.4 percent for 2019.
In April, Saudi Aramco announced a $44-billion deal to build a mega refinery-petchem complex in India with three Indian firms. Besides catering to domestic demand for transportation fuels and chemical products, the complex is expected to become a crucial new outlet in the region for the world’s biggest supplier.
Participating in this mega project will allow Saudi Aramco to go beyond crude oil supplier role to a fully integrated position. But the complex could take several years to equalize the skew in India’s consumption versus refining capacity curve.
Meanwhile, to balance its energy basket due to growing demand and rising oil prices, India’s Ministry of Power and the Ministry of New and Renewable Energy in June outlined incremental increases in renewable purchase obligations through 2022.