India's refining capacity to expand 20% by 2028 on robust run rates, demand growth

India's refining capacity is set to expand more than 20% over the next three years, as growing domestic and overseas demand for oil products is pushing existing refineries to run at over 100% capacity, the country's petroleum minister Hardeep Singh Puri said.

"Looking ahead, India's refining capacity utilization is set to rise from 256 million mt to 309 million mt by 2028. More than just infrastructure, this expansion is about creating an energy-secure and opportunity-rich future," he said, adding that the refinery runs in recent months remained as high as 103%.

S&P Global Commodity Insights estimates India's refining capacity to reach about 300 million mt by 2028, with 58% of the increase coming from brownfield expansions, while the remaining growth, totaling 18 million mt/year, from greenfield projects.

"This strategic move not only addresses domestic demand but also significantly enhances the nation's oil products export potential in the coming years," Commodity Insights said in a research note.

As part of expansion plans, major state-owned oil refiners are developing new refineries and petrochemical complexes to meet market demands.

Dubbed the "jewel of the desert," HPCL Rajasthan Refinery Ltd. (HRRL) -- an integrated refinery and petrochemical complex with a capacity of 9 million mt/year currently under construction in Pachpadra, Balotra district of Rajasthan -- has already put certain units into the pre-commissioning stage.

The complex, jointly built by state-run Hindustan Petroleum Corp. and the Rajasthan government, which have equity stakes of 74% and 26%, respectively, is poised to commence operations this year.

In addition, Chennai Petroleum Corp., a subsidiary of Indian Oil Corp., plans to establish a new 9 million mt/year refinery at the current site of the Cauvery Basin Refinery after dismantling the existing facilities. This refinery, designed to produce Euro-6 compliant fuels, will meet the rising demand in the southern region and nearby areas and is expected to be commissioned by the end of 2027, two years later than initially planned, owing to pending approvals, according to Commodity Insights.

Catering to domestic, overseas demand

"Indian refineries will continue to run harder, despite global surplus in refined products building up, mainly to satisfy domestic products demand," said Abhishek Ranjan, South Asia oil research lead at Commodity Insights.

Indian refineries processed 5.29 million b/d of crude in November, up 5% month over month, according to the oil ministry update.

Europe is increasingly turning out to be the bright spot for oil products exporters from India, who have capitalized on the shortages of diesel and other fuels due to geopolitical tensions and are shipping plentiful cargoes -- a trend that is set to spill over to next year.

India's gasoil exports to Europe eased from a high of 282,000 b/d in September to 215,000 b/d in October. Nearly 104,000 b/d was loaded in November out of Indian ports for Europe, according to data from S&P Global Commodities at Sea(opens in a new tab).

"Our high-speed diesel and motor spirit are powering global markets," Puri added.

India's oil product demand rose 9.3% year over year to 20.43 million mt (5.3 million b/d) in November, the latest oil ministry data showed.

Amid robust demand, refiners stepped up crude oil imports.

India's crude imports rose 2.6% year over year to 19.07 million mt (4.7 million b/d) in November, the government data showed.

In the first 10 months of 2024, China's oil demand rose 148,000 b/d year over year, lagging India's 180,000 b/d growth over the same period, according to data from Commodity Insights. In 2025, India is forecast to deliver oil demand growth of 3.2% year over year.