Consumption of crude oil by refineries in the country is projected to grow at the rate of 4.5 per cent CAGR (compounded annual growth rate) and reach the level of 2,145.3 million barrels by 2021-22, says a report by Care Ratings.
The report, however, said there is a flip side for crude oil consumption on account of increasing use of natural gas as India is on the move towards a gas-based economy, natural gas being a cleaner and greener fuel alternative. Besides this, rapid adoption of electric vehicles by 2030 could cause oil demand to plateau.
"Domestic crude oil production is expected to further increase and become more stable by the end of FY 2018-19. With the introduction of Hydrocarbon Exploration and Licensing Policy where companies get to carve out their areas of interest to explore through the open acreage licensing coupled with the rise of crude oil prices globally, domestic production will rise steadily at a stable growth rate," the report said.
Indian economy is to grow by 6.5 per cent in FY18. With infrastructure and industry projects being an integral part of the investment cycle, demand for energy will increase. The Government has targeted to reduce import of oil and gas by 10 per cent by 2022. If the country plans to cut imports of oil & gas by 10 per cent by 2022, the oil imports for 2021-22 need to be 1,411 million barrels. Imports can only be reduced by either increasing domestic crude oil production or by curtailing consumption.
"The government needs to focus on increasing domestic production and attract more investments in the exploration & production sector. We believe that given the current circumstances India will be able to reduce import dependence by 10 per cent in a gradual manner but not by 2022, may be by 2030," said the report by Care Ratings.
The report termed the inclusion of US as a source for crude oil imports as a positive for India.
In terms of cost, it will be beneficial as the US crude oil is $2 per barrel cheaper than the imported Dubai crude which will help in reducing the import bill and help act as a soothing balm in reducing the current account deficit. Politically it will go a long way in avoiding the price hikes arising out of geopolitical disruptions which will help usher price stability and energy security. The sourcing of crude oil from the US is a step towards strengthening India-US ties in the hydrocarbon sphere. Having US in the picture helps India maintain diversity in the supply base”, he added.