Landscape of India’s Oil and Gas Sector

India, the world’s third-largest consumer of oil and gas, has a dynamic and evolving oil and gas sector that is integral to its economy. As of 2023, India consumed 222.3 million metric tonnes (MMT) of petroleum products, with crude oil production standing at 29.16 MMT. Assam, Gujarat, and Rajasthan are the major oil-producing states, contributing over 96% of the country’s output. India’s extensive crude pipeline network spans 10,941 kilometers with a capacity of 153.1 million metric tonnes per annum (MMTPA). The country has 23 refineries, with a combined capacity of 256.8 MMTPA, making it the second-largest refiner in Asia.

Market Size and Segments

The Indian oil and gas market is estimated to be 38.12 billion cubic meters in 2024 and is projected to grow to 49.12 billion cubic meters by 2029, at a compound annual growth rate (CAGR) of 5.20%. The market is segmented into upstream, midstream, and downstream sectors. The upstream segment involves exploration and production, the midstream segment focuses on transportation, and the downstream segment covers refining and distribution. The refining sector is particularly significant, with private companies holding about 35% of the total refining capacity.

Growth Drivers

Several factors are driving growth in India’s oil and gas sector:

1. Increasing Energy Demand: India’s energy demand is expected to grow faster than any other major economy, driven by robust economic expansion and rising urbanization.
2. Government Investments: The Indian government plans to invest ₹7.5 lakh crore (approximately USD 102.49 billion) in oil and gas infrastructure over the next five years.
3. Strategic Petroleum Reserves: India aims to commercialize 50% of its Strategic Petroleum Reserves (SPR) to fund additional storage facilities.
4. Rising Natural Gas Consumption: Natural gas consumption is expected to grow at a CAGR of 12.2% by 2030, driven by expanding infrastructure and favorable policies.

Challenges

Despite the growth prospects, India’s oil and gas sector faces significant challenges:

1. High Import Dependency: India imports over 80% of its crude oil and nearly 40% of its natural gas, making the economy vulnerable to global price fluctuations.
2. Environmental Concerns: The sector faces increasing pressure to reduce carbon emissions, particularly with the global shift towards renewable energy sources.
3. Infrastructure Bottlenecks: Although the government is investing heavily, infrastructure limitations, particularly in pipeline networks, continue to hinder sectoral efficiency.
4. Regulatory Hurdles: Complex regulatory frameworks and delays in project approvals can slow down investments and growth in the sector.

Market Players

The Indian oil and gas market is fragmented, with key players including Oil and Natural Gas Corporation (ONGC), Oil India Limited (OIL), Reliance Industries, Indian Oil Corporation Limited (IOCL), and Punj Lloyd Limited, among others

1. Oil and Natural Gas Corporation (ONGC): A leading public sector company involved in exploration and production.
2. Indian Oil Corporation Limited (IOCL): The largest domestic refiner, with a capacity of 70.1 MMTPA.
3. Reliance Industries: A major player in both upstream and downstream segments.
4. Oil India Limited (OIL): A key player in exploration and production.
5. Punj Lloyd Limited: An important player in the infrastructure and engineering services for the oil and gas sector.

Key Trends

Several trends are shaping the future of India’s oil and gas sector:

1. Refining Capacity Expansion: India plans to double its refining capacity to 450–500 million tonnes by 2030.
2. Pipeline Expansion: The pipeline network is expected to grow significantly, with the government investing USD 9.97 billion in gas pipeline expansion.
3. LNG Infrastructure Development: The setting up of LNG stations across the country is expected to bolster natural gas usage.
4. Adoption of Euro VI Standards: State refineries have upgraded their facilities to comply with Euro VI emission standards, reflecting a move towards cleaner fuel.

Conclusion

India’s oil and gas sector is a vital component of its economy, with strong growth potential driven by increasing energy demand and significant government investments. However, challenges such as high import dependency and environmental concerns need to be addressed. With key players actively expanding their capacities and the government’s focus on infrastructure development, the future of India’s oil and gas sector looks promising.