India will overtake China as the biggest driver of global oil demand by 2027, according to a new report presented at the India Energy Week 2024.
Transportation and industry consumption in the world’s fastest-growing major economy would drive growth despite a big push for clean energy and electrification, the International Energy Agency (IEA) said on Wednesday.
The Paris-based agency, in a special ‘Indian Oil Market Outlook to 2030’ report released at the India Energy Week in Goa, said that the country’s oil demand would rise from 5.48 million barrels per day (bpd) in 2023 to 6.64 million bpd in 2030.
China currently is the biggest driver of oil demand and India ranks No. 2 in growth.
The numbers given by the IEA in the report seem to talk of crude oil processed into fuel for domestic sale as well as for exports. The domestic consumption, as per oil ministry data, is around 5 million bpd.
“India’s oil demand will grow at a rapid pace by 2030 despite accelerated green energy moves,” said IEA Director of Energy Markets and Security Keisuke Sadamori. “Growth in India will surpass that of China in 2027.”
But this is the projected demand growth. In absolute terms, demand in India will still lag China’s even in 2030.
“As oil demand slows in developed countries and China, India becomes the largest source of growth,” said Toril Bosoni, Head of Oil Industry and Markets Division, IEA.
India currently is the third largest consumer of oil behind the United States and China. It imports 85 per cent of its oil needs and this dependence is likely to rise as domestic production falls.
Diesel, she said, accounted for about 50 per cent of Indian gains and 20 per cent of global demand growth to 2030.
The demand growth in India will come despite the push for electric vehicles (EVs), which make up a small fraction of the automobiles on the road, at present.
The EV push will see greater adoption in two- and three-wheelers, while their penetration in the four-wheeler segment would be around 5 per cent. “More than 500,000 barrels per day of oil demand will be avoided due to increased EV penetration, energy efficiency improvements and biofuels growth,” said Bosoni. Of this, around 200,000 bpd would be because of EV penetration.
The IEA official said that refinery expansions would ensure India met its domestic needs and maintained its position as a key exporter of transportation fuel to Asia and the Atlantic Basin.
Indian energy companies were targeting an additional 1 million bpd of refinery capacity, she added.
Domestic oil production drop expected
On biofuels, the IEA said that raising ethanol blending in petrol from current 12 per cent to 20 per cent might be a challenge, given feedstock constraints.
Lack of major discoveries would see domestic production fall to 540,000 bpd by 2030, she said, adding that imports would rise from 4.6 million bpd in 2023 to 5.8 million bpd in 2030.
India holds oil stock equivalent to meet 66 days of requirement. This includes 7 days requirement stored in underground strategic reserves and the rest in depots and tanks in refineries and other locations.
IEA member nations maintain a stockpile equivalent to 90 days of their demand. India is an associate member of the IEA.
“India will become the largest source of global oil demand growth between now and 2030, while growth in developed economies and China initially slows and then subsequently goes into reverse in our outlook,” said the IEA.
“India is on track to post an increase of almost 1.2 million bpd, accounting for more than one-third of the projected 3.2 million bpd global gains, to reach 6.6 million bpd by 2030,” predicted the agency.
- The massive industrial expansion means that diesel is the single largest source of oil demand growth, accounting for almost half of the rise in the nation’s demand and more than one-sixth of total global oil demand growth till 2030.
- Jet-kerosene demand is poised to grow strongly, at around 5.9 per cent per year on average, but from a low base compared to other countries.
- Petrol will grow by 0.7 per cent on average, as the electrification of India’s vehicle fleet avoids a more substantial rise.
- Liquefied petroleum gas (LPG) rounds out the growth picture, as petrochemical industry investments in production facilities boost feedstock demand.
As a relatively small oil producer, and with limited potential for near-term growth, India’s domestic production accounted for just 13 per cent of the country’s supply needs. In 2023, domestic oil production averaged around 700,000 bpd.
“Despite renewed efforts by the government to attract foreign upstream investment, domestic crude oil production is expected to see continued declines over the medium term,” the IEA said.
India’s spectacular economic growth story brought myriad challenges for its security of energy supplies, said the agency.
“India was already the world’s second-largest crude oil net importer in 2023, having boosted imports by 36 per cent over the past decade to 4.6 million bpd to meet rising refinery intake. Increased refining processing will lift crude oil imports further, to 5.8 million bpd by 2030, with major implications for India’s security of supply.”