Fuel for thought: Oil remains indispensable in India’s energy security, transition journey

A key takeaway for the thousands who attended India Energy Week was that, despite the country’s energy evolution, which will undoubtedly see cleaner fuels like gas, biofuels, and hydrogen play a bigger role, the shift does not mean a diluted focus on oil, at least for the foreseeable future.

Although clean fuels would meet a large part of the incremental demand growth, the alternatives available are not enough to replace fossil fuels, which account for more than one-third of India’s energy basket.

While much debate at the conference, which was held Feb.11-14 in New Delhi, centered around India’s energy security and energy diversity, policymakers and energy company CEOs were unapologetic about highlighting India’s surging oil demand growth and its role in the road ahead.

“I recognize that the very notion of energy transition requires a nuanced understanding,” Petroleum Minister Hardeep Singh Puri told the conference. “It is not an outright replacement, but more shifting the primacy of one energy source over another.

The transition isn’t about eliminating hydrocarbons overnight but leveraging them strategically while scaling renewables to mitigate emissions.”

This argument holds significance as India overtakes China as the global oil demand growth driver. According to Platts, part of S&P Global Commodity Insights, India is forecast to deliver 3.2% growth in oil demand in 2025, compared with China’s 1.7%.

Oil story intact

Prime Minister Narendra Modi set the tone for the conference, saying India’s energy growth roadmap includes expanding the refining sector, pushing toward deepwater exploration, increasing the share of gas, and expanding the footprint of cleaner fuels as New Delhi looks to meet its sustainability goals.

“On the oil side, we are one of the largest refining hubs, and India will look to expand its refinery capacity by 20% in the foreseeable future,” Modi said.

However, the unanimous view at IEW was refinery expansion would come with a pronounced shift toward petrochemicals. Vartika Shukla, chairman and managing director of state-run Engineers India, strongly believes Asia, the Middle East, and particularly India will continue to pursue refining expansion.

“However, we are likely to see a significant increase in petrochemical intensity of Indian refiners,” Shukla said. “The government and refining companies are prioritizing expansion of petrochemical capacity as part of a broader strategy to enhance competitiveness.”

The country’s refinery buildout is already underway. Indian Oil Corp. is expanding its Panipat, Paradip, Gujarat, and Barauni refineries. BPCL is expanding its Bina refinery. HPCL Mittal Energy has also expanded its refinery capacity and integrated petrochemicals, increasing the petrochemical intensity to around 20%. HPCL Rajasthan Refinery is developing a 9 million mt/year refinery and petrochemical project in Rajasthan, which would have a petrochemical intensity of around 26%, one of the highest in India.

Platts estimates that by 2028, close to 58% of the refinery capacity increase will come from brownfield expansions, with the remaining growth from greenfield projects.

As India’s refining capacity grows, refiners and policymakers are ramping up efforts to diversify the crude import basket, aiming to reduce overreliance on supplying countries or regions.

For instance, Modi’s maiden visit to Guyana last year has bolstered expectations that the country’s refiners are nearing long-term crude oil import agreements with the relatively new supplier.

With growing oil diplomacy, non-OPEC suppliers such as the US, Canada, Guyana, and Russia are expected to play a larger role in India’s crude oil basket. India Energy Week witnessed Bharat Petroleum Corp. signing term crude import deals with Petrobras and TotalEnergies.

Upstream dream

During the conference, India launched the 10th round of the Open Acreage Licensing Policy (OALP X), marking the largest bid round by acreage offered. The 25 blocks cover an area of 191,986 sq km across 13 sedimentary basins. Six of these blocks are located in shallow water, six on land, one in deepwater, and the remaining in ultra-deepwater areas.

Upstream companies can now carve out areas for oil and gas exploration under OALP, which allows explorers to express interest in any area throughout the year. The areas earmarked are then auctioned.

This comes immediately after Parliament’s upper house, Rajya Sabha, passed a bill seeking to amend the Oilfields (Regulation and Development) Act of 1948 by expanding its scope to include shale oil, shale gas, and coalbed methane, in addition to oil and gas, while proposing a series of other changes such as freedom to pursue international arbitration in the event of disputes, as well as offering a longer lease period. The amendment still needs to be passed in the lower house of Parliament, Lok Sabha, to become law.

Upstream output in India has declined at an average annual rate of 1.1% over the past decade due to natural declines in mature fields and a reduced number of new discoveries, according to Platts data. In addition, attracting foreign interest in exploration bidding rounds has so far proven to be challenging.

Delegates at IEW were somewhat upbeat on upstream policy changes while highlighting some recent business, including ONGC’s tie-up with BP and Oil India’s partnership with Petrobras and TotalEnergies, as examples of growing overseas interest in India’s upstream sector.

“One of the major issues historically slowing down activities was slow clearance and issues with land acquisition, which have been significantly mitigated now,” said Rahul Patel, CEO of US-based Transcontinental Energy Services. “In this regard, we are also looking forward eagerly to the proposed reforms in the Oilfields Act, which has some extremely beneficial changes over the vintage act, and which I am sure will radicalize investor attention.”