India is expecting big investments in its oil and gas sector this year, with international oil majors such as Chevron, Exxon, and TotalEnergies showing interest.
This follows the diversification of its oil imports in 2022, which helped India to boost its low-cost crude supplies to be refined across the country. Its significant refining capacity is already attracting interest for its petroproducts, and foreign oil companies investing in India’s oil sector may have the benefit of access to both new crude supplies and widescale local refining capacity.
India continues to be the world’s third-largest oil consumer, and with a population of over 1.4 billion – and climbing – its oil demand is expected to continue rising. The Indian government has made the country a favorable space for investment from foreign companies, welcoming FDI into its oil industry to spur growth. India has also benefitted from greater crude imports from Russia, as many Western countries sanctioned Russian energy products, meaning that Russia was able to offer other states oil, gas, and coal at highly discounted prices. This helped India purchase higher quantities of oil to be processed across its many refineries.
Shifting its focus to Russia and the U.S. for its oil imports allowed India to reduce its reliance on OPEC-controlled Middle Eastern oil, which made up around 60 percent of its crude imports before the Russian invasion of Ukraine. Sumit Ritolia, a refinery economics analyst at S&P Global, stated of this shift: “Indian refiners have continued to diversify their crude sources, especially after the OPEC+ cut, with a share of Russian crude staying at around 20%–25% of Indian crude imports.” Ritolia added, “They have been aggressively making attempts to diversify by entering into term purchase deals with suppliers in the Americas and Latin America. SPR releases from the US have also widened the WTI-Brent spread, making North American crudes more appealing.”
But India is not merely exploring ways to diversify its oil supply but is also looking at how to boost domestic production levels through foreign investment. India currently imports around 85 percent of its crude oil demand, which threatens its energy security. Prime Minister Modi set a 2015 target of reducing the country’s energy import dependency by 10 percent by 2022, from 78.5 percent in 2014-15, which it has failed to achieve. India also imports 54.3 percent of its natural gas consumption. But this month, India’s oil minister Hardeep Singh Puri stated in a speech that oil majors including Chevron Corp, Exxon Mobil Corp, and TotalEnergies have all shown interest in India’s oil exploration and production sector.
India has largely untapped oil reserves that it wants to develop rapidly, while oil demand remains high. But it will require a significant amount of FDI to achieve this. If successful, India could reduce its reliance on foreign powers for its oil supply and enhance its energy security. Revenues from the sector could also support the development of a strong renewable energy industry, for which the government has already established a strategy. Singh Puri stated of the potential for development: “India is ready to explore opportunities for joint development production of oil and gas assets for mutual benefit and also invites investment in our domestic E&P (exploration and production) sector.” He highlighted the government’s aim to double the country’s oil exploration to 500,000 km2 from the current 250,000km2, by 2025. According to Singh Puri, India can expect an investment of $58 billion in its E&P sector this year.
The Asian giant is also attracting interest thanks to its massive refining capacity, particularly as the west looks to diversify its energy and petroproduct supply, as it faces fuel and fertilizer shortages. Of the 23 refineries in operation in India, there are 18 in the public sector, 2 under a joint venture, and 3 in the private sector. India has a refining capacity of 248.9 MMTPA and is the fourth-largest refining power globally after the United States, China, and Russia. It has come a long way over the last decades, from a refining deficit in 2001 to becoming self-sufficient and exporting a large quantity of petroleum products today.
In November, the U.S. became the top importer of India’s refined petroleum products, despite much of the crude acquired to produce these goods coming from Russia. The U.S. imported $588 million of Indian petroproducts in November. This reflects a higher annual import rate for refined petrol goods in the U.S., up by 23 percent on 2021, totaling a value of $3.62 billion from January to November 2022.
India has big plans for its oil industry. Having increased its low-cost crude imports over the last year to support its massive oil refining capacity, it is now seeking to develop its domestic oil supplies to boost the country’s energy security. Some oil majors have already shown interest in establishing exploration and production developments in India, with the potential to use India’s refineries to process any crude discoveries. In addition, the U.S. has come to rely heavily on India for its petroproducts, having shifted reliance away from Russia, a trend that is likely to continue through 2023.