Informist, Friday, Sep 27, 2024

MUMBAI – India’s oil marketing companies are expected to add 35-40 mln tn of crude oil refining capacity by the end of fiscal 2030, which will take the country's total capacity to about 295 mln tn, according to CRISIL Ratings. This will help to meet the expected growth in consumption as the current capacities are already being optimally used, the agency said in a release.

The creation of additional capacity would require a capital expenditure of about 1.9 trln rupees to 2.2 trln rupees, with most of the capacity addition coming from brownfield expansion, the agency further said.

CRISIL also pointed out that the project risk in the investment is expected to be low. This, coupled with expectations of steady returns on investment, will support the credit risk profiles of the oil marketing companies.

In the decade to 2024, India’s crude refining capacity increased by 42 mln tn to 257 mln tn, primarily to cater to the growing domestic consumption, as annual exports remained range-bound at 60-65 mln tn over this period.

Noting that India’s consumption of petroleum products in the past ten years rose by a compounded annual growth rate of 4%, the release noted that consumption of transport fuels, accounting for about 56% of the country's total consumption, grew 4% over this period whereas that of naphtha, accounting for 7% of consumption, grew 2%. The rest of the consumption pie, comprising liquefied petroleum gas and bitumen, among other products, cumulatively grew almost 4%.

“We expect overall petroleum product consumption to slightly moderate and register about 3?GR over the next six years, primarily due to slower growth of 2-3% in transport fuel consumption,” Anuj Sethi, director, CRISIL Ratings, said, per the release. “This will be caused by improving fuel economy, rising share of vehicle sales with alternative cleaner fuels, and 20% ethanol blending target proposed by the government of India,” he said.

CRISIL further said that amongst transport fuels, 75% of diesel sales are linked to commercial vehicle usage in India, and a move towards electric vehicles or usage of natural gas by buses would lower demand for the fuel, thereby moderating its growth to about 2-2.5?GR over the next six years.

As for petrol, the release said two-wheelers using internal combustion engines account for 75% of consumption in India, with the balance led by passenger vehicles. The rising share of electric two-wheeler sales, expected at 12-15% by fiscal 2030 from negligible levels currently, and compressed natural gas (CNG) passenger vehicle sales, expected to reach a share of 17-19% in the same period, will rein in petrol consumption. Blending ethanol with petrol will further reduce the petrol requirement as India aims to achieve a 20% blending target by 2026.

On the other hand, naphtha demand will see a healthy CAGR of 6-7%, supported by increased demand from planned petrochemical capacity additions in India, CRISIL Ratings said. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Abhijit Doshi

Edited by Rajeev Pai

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