NEW DELHI: India, which is the world’s third-largest consumer of crude oil, is expected to end 2024 with an oil demand growth rate surpassing that of China — a trend that is expected to continue in the coming year as well — making the South Asian country one of the fastest-growing major oil consumption centres globally, according to S&P Global Commodity Insights (SPGCI).
This is expected to further accelerate Indian refiners’ capacity expansion plans and provide a fresh impetus to their efforts to widen crude diversification by importing more from an expanding slate of source markets.
“India will be the leading driver, along with Southeast Asia and other parts of South Asia, of the region’s future oil demand growth,” said Kang Wu, global head of macro and oil demand research at SPGCI.
According to Wu, in 2025, India is forecast to deliver a relatively faster growth of 3.2 per cent in oil demand vis-à-vis China’s 1.7 per cent. In January-October of 2024, China’s oil demand rose by 148,000 barrels per day (bpd), or 0.9 per cent, year-on-year, lagging India’s growth of 180,000 bpd or 3.2 per cent, per SPGCI data.
China is the world’s second-largest consumer of crude oil behind the United States (US), but is the commodity’s biggest importer globally. But oil demand growth in China has been subdued in the post-pandemic era due to a combination of factors. These include a slump in sectors like real estate and construction, investments shifting to sectors that are not oil intensive, declining population, and growing adoption of vehicles powered by electricity and other alternative fuels.
India, on the other hand, is still seen as a growth centre for oil demand given the future potential in energy-intensive industries, growing vehicle sales, a rapidly expanding aviation sector, expected growth in consumption of petrochemicals, and a still growing population with relatively low per-capita energy consumption. In fact, India is among the few markets where refinery capacity is expected to expand substantially over the coming years.
In February, Paris-based International Energy Agency (IEA) had said that India’s oil demand growth was expected to overtake China’s by 2027, making the former the biggest driver of global oil demand growth through the remainder of the decade “underpinned by strong economic and demographic growth”. According to the IEA’s projections, India is on track to post an increase of nearly 1.2 million barrels per day (bpd) in oil demand by 2023, accounting for more than a third of the projected global demand growth of 3.2 million bpd by the end of this decade.
India’s growing crude diversification: India is intensifying efforts to diversify its crude import basket to reduce reliance on a few supplying countries. For instance, the Indian government as well as refiners are understood to be in active discussions with new source markets like Guyana for oil purchases. Currently, India relies heavily on Russia and West Asian oil exporters for its oil imports, although it has a fairly extensive slate of source markets from which oil can be bought to suit local refinery configurations.
New Delhi depends on imports to meet over 85 per cent of its oil requirement for meeting domestic demand. The country’s leadership had time and again stated that Indian refiners will continue to buy oil from the cheapest available sources.
“Recent diplomatic visits will help bring in crude oil from Africa and Latin America, but the growth in absolute volume would depend on the overall crude market…The share of Middle Eastern crude shipments to India’s basket is likely to drop by a few percentage points due to the diversification,” said Abhishek Ranjan, South Asia oil research lead at SPGCI.
Expanding refining capacity: India is set to see significant refining capacity growth in 2025, SPGCI said. The country is only months away from launching its first greenfield integrated refinery and petrochemicals complex (HPCL Rajasthan Refinery project in Barmer) in nearly a decade.
By 2030, India aims to expand its refining capacity to 450 million tonnes per annum (mtpa) from the current capacity of almost 257 mtpa, even as it expands its renewable energy capacity, apart from pushing other transition, alternate, and future fuels.
Source: The Indian Express
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