India going big on refining capacity; may overtake Russia in capacity

HPCL is likely to increase its current 24.8-million-tonne capacity to 60 million tonnes by 2030

India's oil-refining capacity is currently the fourth-largest in the world and the country has a robust expansion plan for each of its three oil-marketing companies.

The capacity expansion will take place over the next few years. 

In spite of the slowing global oil demand, India's demand may prompt refiners to continue adding capacity, experts say. By 2022, India will have added significantly more to its 230-million-tonne capacity. 

Indian Oil Corporation looks to take its refining capacity to more than 100 million tonnes by 2022 from the current 80.7 million tonnes, and Bharat Petroleum Corporation Ltd (BPCL) will increase its capacity to 50 million tonnes by 2021. 

Hindustan Petroleum Corporation Ltd (HPCL), on the other hand, is likely to increase its current 24.8-million-tonne capacity to 60 million tonnes by 2030.
 

British energy giant BP’s 2017 energy outlook said for 20 years, oil demand would continue to increase although the pace of growth was likely to slow with vehicles becoming more efficient and technological improvements. 

According to International Energy Agency (IEA) officials, India is likely to overtake Russia as the third-largest oil refiner in a few years. The IEA says the Russian Federation had a refinery output of 283 million tonnes last year.

“India should invest in refining capacity at least to keep pace with the domestic petroleum demand, which is predicted to be one of the highest among the major economies in the next two decades. We are importing 80 per cent of crude oil and 50 per cent of gas requirements, and should not become a net importer of petroleum products,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India. Global fuel retailers are interested in increasing their retail presence in India and, in turn, servicing the market through fuel imports.

India's petroleum exports contracted in the last two financial years. According to the data available with the Petroleum Planning and Analysis Cell (PPAC), India's petroleum exports by quantity grew 31 per cent year on year in 2009-10. This growth rate declined to 7 per cent year on year in 2013-14 and then contracted by 6 per cent in 2014-15 and 5 per cent in 2015-16. The main reason for the decline in India’s petroleum exports, experts say, has been its increasing demand for petroleum 

products. 

"India needs to add more refining capacity because the country’s demand for petroleum products is growing," said Deepak Mahurkar, partner and leader, oil and gas industry practice, PwC India. For instance, petrol production in the first nine months of the current financial year grew 11.2 per cent and diesel 3.7 per cent.