Finding greener crudes

Finding greener crudes

10:53 AM, 19th July 2018
India is the third-largest oil consuming nation in the world and the fourth-largest Liquefied Natural Gas. (File photo)
India is the third-largest oil consuming nation in the world and the fourth-largest Liquefied Natural Gas. (File photo)

India is the third-largest oil consuming nation in the world. Is the country feeling the heat of crude imports? Is it time already to look for better alternates to meet our energy demands?

By Debarati Das

The oil & gas industry is undoubtedly the lifeline of any economy and the slightest fluctuation can have some of the biggest repercussions to various other industries dependent on it. India is the third-largest oil consuming nation in the world and the fourth-largest Liquefied Natural Gas (LNG) importer after Japan, South Korea and China.

India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally, according to India Brand Equity Foundation (IBEF). In October 2017, oil imports saw a sharp rise by 27.89 percent to reach $9.29 billion while oil consumption grew 8.3 percent to 212.7 million tonnes in 2016, as against the global growth of 1.5 percent.

The country’s domestic LNG demand is expected to grow at a CAGR of 16.89 percent by 2021 and the gas production is expected to touch 90 billion cubic metres (BCM) by 2040. To meet this humongous demand, the country is gearing up with setting gas pipeline infrastructure across the country.

According to BP Energy Outlook, India is expected to overtake China as the largest growth market for energy by late 2020s with the country’s energy consumption growing by more than 4.2 per cent per annum. This growth is expected to be the fastest among all major economies of the world.

Demand for renewables will see the highest growth of 1,409 percent to 256 Mtoe in 2040 from 17 Mtoe in 2016, with an annual growth of 12 per cent. The renewable energy share in India’s energy mix is also slated to increase to 13 per cent in 2040 from 2 per cent in 2016.

The report estimates that the demand for natural gas will grow by 185 percent to 14 billion cubic feet (Bcf ) per day in 2040 from 5 Bcf per day in 2016. However, while the demand for oil, including petroleum products, will grow by 129 per cent, oil’s share in the country’s total energy mix will decline to 25 percent in 2040 from 29 per cent in 2016. Overall, fossil fuels will only own 82 percent of energy demand in 2040 down from 93 percent in 2016.

“The Indian oil & gas industry is growing dramatically and we are expecting to see a much faster growth in the future. However, there would be a paradigm shift towards gas verticals rather than liquid fuel and this is where the future scope of the industry lies,” said Aloka Sahoo, GM, WRPL, IOCL.

Import Barometer: The country heavily depends on crude import and it constitutes onethird of the country’s import. India’s oil import bill rose by 49 percent to $115 billion in May 2018 as compared to $76 billion recorded in the corresponding month last year. Even though India is trying to cut down its oil import by 10 percent, the demand for crude oil is expected to grow at 5 percent per annum till 2020. According to S&P Global Platts report, oil products’ demand is expected to grow by 7 to 9 percent annually in the next 10 years, making crude import inevitable.

“There is a huge import burden on India and this pressure is more because we do not have gas reserves and many of our existing oil wells have dried up. We currently have an oversupply of refineries but less supply of the crude oil. Encouraging explorations alone will not solve the problem as 80 percent of our crude demand is met by imports. We can never be self-sufficient unless we reduce the crude oil demand by using alternative methods,” said an oil & gas industry expert.

While domestic production cannot meet the surging demand, India has become a potential ground for several international companies who are entering India by means of expansion joint venture opportunities to strengthen their presence. Recently, companies such as Shell, BP, Rosneft, Trafigura and Saudi Aramco have marked their presence in the country with various.

Fluctuating crude prices: The upward trajectory of crude oil prices cannot be ignored as this is adding to the woes of country’s policy makers. The crude oil fluctuations not just have an impact on the domestic oil demand but also has bigger implications of various other end user industries. There is a need for the policy makers to create an economic shield that can minimise the impact of sudden global crude fluctuation and protect the industry from the pressure.

Alternate route: It is high time that the country works towards finding alternatives to crude oil to minimize the impact. In order to diversify its supply sources and cater to the local energy demands, India recently begun importing liquefied natural gas (LNG) from Russia to become the fourth-largest buyer of LNG diversifies in the world.

“Since the consumption is rising, the dependence on import is going to remain. But there is a thrust from every corners of the industry, even from the government, to reduce the import dependence. This has led to a shift towards non-fossil fuels and alternate fuel sources. For this, meeting the environmental norms is becoming a very important criteria today,” said Sahoo.

The country is also planning to switch to alternative fuels in its transport sector by blending ethanol into 5 percent of its gasoline. For this India plans to start 15 factories to produce second generation ethanol from biomass, bamboo and cotton straw to make way for cost effective, pollution free substitute.

“The industry needs to diversify its energy sources and look towards alternate modes to meet the energy demands. Alternate source of energy like solar power has a huge scope in the future. However, despite having been proven successful in small scale, these options need to be economical in large scale applications. Government regulations, industries’ will and public support are equally needed to make alternate energy a reality,” said the expert.

Given the various implications, it is imperative for the Indian oil and gas industry to rise up from the oil dependence and the steps need to be taken before it’s too late!!

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