India’s state-run oil companies are planning to set up new refineries while also expanding the capacity of their existing units, as the country’s energy demand rises amid robust economic growth.
The Indian government has been pushing to increase the country's refining capacity and commissioning new oil refineries to meet India’s growing energy requirements.
Moneycontrol takes a look at the new refineries being commissioned and the rising oil demand of the country.
Which oil companies are looking at setting up new refineries?
State-run Bharat Petroleum Corporation Limited (BPCL) is planning to set up a 12 MMTPA (million metric tonnes per annum) refinery at an estimated cost of Rs 50,000 crore. The oil marketing company is still evaluating the location of the unit, with Andhra Pradesh and Uttar Pradesh being the top runners.
According to media reports, India’s largest oil explorer ONGC is also planning to set up a new refinery and petrochemical project, along with BPCL. The company is looking at setting up a nine MMTPA unit at an estimated cost of Rs 70,000 crore.
In 2023, Hindustan Petroleum Corporation Limited (HPCL) also announced the setting up of a new oil refinery in Rajasthan’s Barmer with a capacity of nine MMTPA. The HPCL refinery is expected to be commissioned in January 2025.
What is the rationale behind the expansion?
The commissioning of new refineries would be a clear indication of the country’s continuing dependence on hydrocarbons in the coming years. Despite the boost to green energy initiatives including renewables such as solar and wind, and green hydrogen, India seems to be dependent on oil for meeting a large portion of its energy demand.
Crude oil constitutes around 22 percent of the country’s total energy mix. With strong economic growth, the country's energy demand is expected to grow exponentially in the future.
Large Indian oil players are therefore making huge investments to benefit from the potential of the petrochemical industry. Several organisations, including the International Energy Agency (IEA), have pointed out that crude oil would continue to remain a major energy source despite transition efforts.
What is India’s targeted refining capacity?
India aims to achieve a refining capacity of 450 MMTPA by 2030, up from around 250 MMTPA currently. In addition to commission new refineries, companies are also increasing the capacity of existing ones.
The state-run Indian Oil Corporation Limited (IOCL), which has the largest refining capacity in the country, is expanding the capacity of its Panipat refinery from 15 to 25 MMTPA at a cost of Rs 34,627 crore.
BPCL has also announced the capacity expansion of its refinery at Bina, in Madhya Pradesh, from 7.8 to 11 MMTPA. BPCL plans to invest Rs 1.7 lakh crore over the next five years in the core oil refining, fuel marketing, petrochemical, and clean energy businesses. Of this, the company has earmarked Rs 75,000 crore for refineries and petrochemicals.
Where is India’s oil demand headed?
India has witnessed robust fuel consumption in recent years, with the country’s demand for FY2023-24 reaching a record high of 233.27 million tonnes, up from 223.02 million tonnes in the previous year, an increase of about 5 percent. According to a recent report by S&P Global Commodity Insights, India's petrochemical demand is expected to grow around 8 percent in 2024, surpassing the country's economic growth rate.
According to the IEA, the oil demand of India — the world’s third biggest oil importer and consumer — is forecast to grow more than any other country between 2023 and 2030, thus becoming the driver of global oil demand.
The IEA also forecasts that India's oil consumption will rise from 5.4 million barrels per day (bpd) in 2023 to 6.7 million bpd by 2030, a growth of 3.2 per cent, or 1.3 million bpd.
What is the global oil refining capacity and where does India stand?
The global capacity for refining crude oil had reached 103.5 million bpd in 2023, with the United States having the largest refining capacity in the world.
The US can refine almost 19 million bpd of crude oil, followed by China, Russia, and India. China has the capacity to refine 17.5 million bpd, while Russia and India can refine 6.5 and 5 million bpd, respectively.
The IEA expects global refining capacity to increase to 105.2 million bpd by 2030 and 105.8 million bpd by 2050.
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