2024: Fuel price cut likely early next year, domestic oil & gas output may get a boost

With international crude oil prices cooling down in 2023 from high levels witnessed in the previous year, expectations are high for a price reduction of diesel and petrol in 2024 by the Oil Marketing Companies (OMCs).

The year 2024 could bring big relief to Indians as fuel retailers may finally slash prices which have been left unchanged since April 2022, industry experts expect.

With international crude oil prices cooling down in 2023 from high levels witnessed in the previous year, expectations are high for a price reduction of diesel and petrol in 2024 by the Oil Marketing Companies (OMCs).

Another major development in India’s oil and gas landscape would be the boost in domestic oil and gas production with the commencement of production from the state-owned Oil and Natural Gas Corporation's (ONGC) Krishna Godavari (KG) basin in 2024. India's oil and gas output remained muted in 2023.

Top things to watch out for in the oil and gas sector in 2024:

Fuel price revision: With Brent crude futures trading around $80 per barrel and the healthy performance of OMCs including Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd in the recent quarters, retail fuel prices of petrol and diesel are expected to be revised in 2024 after being left unchanged for around 20 months. Currently, petrol prices in the national capital stand at Rs 96.72 per litre.

Domestic production: The much-awaited commencement of production from ONGC’s KG basin is expected to boost domestic production in 2024. ONGC expects peak oil production of 45,000 barrels per day from the block. Reliance Industries Ltd (RIL) also plans to increase production next year.

CBG production: With the government’s push towards alternate fuels, compressed biogas (CBG) production is expected to increase in 2024. The Centre has also mandated the blending of CBG in compressed natural gas (CNG) and piped natural gas (PNG). RIL is targeting to set up 100 CBG plants in the next five years, consuming 5.5 million tonnes of agro-residue and organic waste.

E&P activities: In a bid to reduce the country’s dependency on oil and gas imports, the government is focused on increasing exploration and production activities. Bidding for the ninth OALP (Open Acreage Licence Policy) round is expected to begin in 2024 while the latest DSF (Discovered Small Fields) round could also be announced. Companies such as ONGC and Oil India Ltd are the major players which participate in these bids.

Ethanol blending: The blending of ethanol in petrol has currently reached 12 percent and the government intends to increase blending to 20 percent by 2025. Therefore, next year would be pivotal in determining if the target would be achieved in 2025. OMCs such as IOC, BPCL and HPCL have taken the lead in ethanol blending.

Energy transition plans: Oil and gas companies—one of the major sources of emissions—are at the forefront of reducing emissions and have set net-zero targets for their respective companies. In a bid to become energy companies, oil and gas companies are actively investing in renewable sources of energy.

Industry Outlook

Rajesh Mediratta, CEO, Indian Gas Exchange (IGX):

In 2024, we expect a major push for policies for increasing CBG production, and higher use of gas as cleaner fuels replace liquid fuels – some mandate to the industry replacing dirtier fuels with gas. We also expect a few regulatory reforms on the gas market side – namely Access Code, CGD Exclusivity Guidelines, GST for natural gas, and mandate on the creation of an Independent System Operator. We also expect the rollout of the CBG Certificate mechanism so as to align its launch on April 1, 2025, with the launch of CBG Obligation set out by the government.

Kapil Garg, Founder & Promoter, Oilmax Energy Pvt Ltd:

There will be an increased push on energy import substitution all across the energy landscape, including in oil and gas, which will lead to increased activity all across the E&P production value chain, including seismic exploration, drilling, and allied services. We might also see more rounds of privatisation initiatives like DSF and OALP.

Somil Gandhi, Analyst at HDFC Securities:

With crude oil prices declining, there is a high probability that both the government and OMCs are considering lower fuel prices. We can expect a price reduction of Rs 5 to Rs 10 in petrol prices. With elections approaching and the healthy performance of OMCs, there is a possibility of a price cut after mid-January. Crude prices have gone down and are expected to remain low in the coming months as well.