Nov 10, 2020
India’s twin ambitions to pursue refining expansion while increasingly embracing cleaner fuels is poised to provide global oil majors an enticing opportunity to grow their core businesses and a new-energy customer base needed to make a strategic shift to become integrated energy firms.
The country’s energy plan was the underlying tone at the recent India Energy Forum by CERAWeek, where nearly every global oil major attending the event said the cocktail of opportunities both in the traditional fossil fuel space and in new energy makes the South Asian nation, where energy consumption is far below the world average, an attractive proposition.
At the recently concluded three-day event, Abu Dhabi National Oil Co. pledged to expand participation in India’s strategic petroleum reserves; Petronas said India was high on its list of priorities, both in the fossil fuel and new energy space, such as solar; Saudi Aramco made its intentions clear that India could be a potential market for its blue ammonia trial shipments in the future; and BP reiterated it was planning to play a much bigger role across India’s energy transition, including in renewables.
“India is set to nearly double its energy consumption over the long-term,” Prime Minister Narendra Modi told the virtual forum. “Our energy sector will be growth-centric, industry friendly and environment-conscious.”
Modi said plans are in place to grow the country’s refining capacity from about 250 million mt/year currently to 400 million mt/year by 2025.
The comments on oil sector growth echoed views from Petronas CEO Tengku Muhammad Taufik, who said the company will be pursuing most of its oil and gas projects using more cost-effective and cleaner processes, as it strongly believes the fuels will have a major role to play for at least the next three decades.
“Even in the most green of scenarios, oil and gas will still constitute half of the energy basket,” he said. “We still believe there is life in this business; and not only life, there is promise in it. The only harsh thing is that we need to produce it more cost effectively and cleaner.”
While some analysts doubt India will be able to expand its refining capacity at the pace highlighted by Modi, they were unanimous in the view the country’s refining expansion was far from over, which could provide an opportunity to global oil firms not only to sell incremental crude volumes but also to consider taking stake in projects.
For India to achieve its overall energy ambitions, Modi said India will need to accelerate the move toward gas, promote cleaner use of fossil fuels such, boost reliance on domestic resources for driving biofuels, and embrace fuels such as hydrogen.
Go deeper: India’s oil and gas regulator on policy reform and energy transition fuels
While oil suppliers bet India will remain a promising market for their crude for decades to come, they are getting increasing aware a bigger pace of growth will happen in areas other than oil, such as gas, renewables and hydrogen. And as India tries to recover from the COVID-19 crisis, officials said the pandemic has presented India an opportunity to prioritize its transition toward a low-carbon economy.
There’s expectation India could attach green growth conditions to recovery packages, while offering increased policy support for investments in infrastructure, fuels and technology that would accelerate energy transition while creating growth and jobs.
As a result, it’s getting increasingly tough for the oil companies to ignore the new energy space.
Bashir Dabbousi, director of technology strategy and planning at Saudi Aramco, told the forum India provided a solid business opportunity to expand cooperation in the hydrogen space.
The first blue ammonia cargo of 40 mt was recently shipped from Saudi Arabia to Japan to be used for power generation. Japan has started a series of test runs to burn the blue ammonia, beginning with co-burning at a gas turbine as part of a pilot project.
India also provided a solid potential to ship similar cargoes, Dabbousi said, a sign Aramco will be looking at India to expand its footprint beyond oil.
“This is very important for Saudi Aramco as India is a very important customer of Saudi Aramco and provides similar opportunities to grow our business there,” Dabbousi said.
At the forum, BP CEO Bernard Looney praised India’s gas market reform progress as the company prepares to start up some of its gas projects in which Reliance Industries is a partner.
While BP expects to reduce its upstream oil and gas production by 40% globally in the coming decade, Looney said its KG D6 gas investments fitted with a strategy of maintaining “resilient” hydrocarbon activity, noting India’s plans to increase the share of gas in its energy mix from 6% currently to 15% by 2030.
But Looney said more needs to be done to remove internal barriers, echoing views of some analysts who have said authorities will have to go further to deliver on plans to reduce the economy’s carbon intensity, for example, by removing gas price ceilings and introducing a unified pipeline tariff structure.
Petronas’ Taufik said the company saw gas as a transition fuel.
“We believe that LNG will play a key role,” he said. “The reality is that Asia-Pacific is still going to be energy intensive in its growth. And LNG, particularly where prices are right now, appears to be a very compelling substitute. India is also a prospective market, with more and more policy leading to switching to LNG.”
Taufik expects India to be one of the largest LNG importers globally by 2030, a proposition attractive enough to build a business model and portfolio in the country to grab a piece of the pie.
Petronas has also made investments in the solar sector in India and is looking for opportunities in other Asian countries in that space. Additionally, India’s push toward embracing electric vehicles had created an opportunity to growth the company’s lubricant business.