Industrial development and population growth has led to a surge in energy demand, which continues to be a major headache for the Modi Government, reports Gibson Research.
In terms of energy consumption, in 2015, India overtook Russia to become the third biggest consumer after China and the US with around 5.2% (BP statistics) of the global share.
While the nation pursues ambitious targets for renewable energy use, such as solar and wind power and increasingly LNG, India still remains very reliant on coal and oil imports.
For example, the International Energy Agency (IEA) reported that India will account for 25% of global crude oil growth and will be the fastest growing crude oil consumer through to 2040.
In September, India’s petroleum minister announced a plan to raise its oil storage capacity to take advantage of low oil prices. The first phase to set up a strategic petroleum reserve (SPR) is already at an advanced stage in three locations,
Visakhapatnam, Mangalore and Padur, with a combined capacity of 5.3 mill tonnes.
Filling at these three sites has already commenced and is expected to be completed later this year. However, the minister also stated that the ministry had finalised plans to set up two new larger SPRs, each with a 5 mill tonnes capacity, one in the eastern State of Odisha with the second in the western State of Rajasthan.
Participation to set up new storage facilities would be open to both private and foreign concerns, with a plan to take overall storage capacity to more than 15 mill tonnes over the next five years.
Last month, India imported 17.2 mill tonnes per day of crude oil, as refiners stepped up purchases to meet record domestic fuel consumption. Bloomberg estimated that India imports more than 80% of its crude oil requirements and demand continued to grow through the increased use of trucks, cars and motorbikes.
Domestic refineries are struggling to keep up with gasoline and diesel demand, despite additional capacity being added. According to the latest government statistics, India’s product demand grew 8.5% year on year in 2015 to 3.81 mill barrels per day. Figures covering January/August this year show product demand was up by 10% to 4.13 mill barrels per day.
Indian refiners continue to add capacity, spending billions of dollars in an attempt to keep up with domestic consumption. However, an even stronger growth in internal demand has at times necessitated product imports.
At a time of concern over the prospects for the tanker market going forward, India remains a ‘Jewel in the Crown’ for tanker owners.
Last week’s announcement that a Rosneft controlled consortium had taken a 98% interest in Essar Oil is likely to stimulate more longer haul barrels from Venezuela to Vadinar. Venezuela already accounts for around 12% of India’s total crude imports.
Growing oil demand for both domestic requirements and to fill the SPR will continue to support short haul imports from the Middle East and from further afield with cargoes from the Atlantic Basin.