• India reassessing future oil demand projections and refinery capacity due to pandemic

    India is reassessing its future oil demand projections and refinery capacity needs in the wake of the pandemic that severely hurt fuel demand, shook many industry assumptions and triggered calls for accelerated transition to cleaner energy.

    “The demand in the country is growing and some energy transition is also taking place. The Petroleum Planning and Analysis Cell (PPAC) is preparing a report on the country’s future oil demand and refinery capacity needs,” petroleum secretary Tarun Kapoor told ET. The PPAC, an arm of the oil ministry, is responsible for regular industry analysis and forecasts.

    An oil ministry panel, comprising PPAC officials and industry executives, had undertaken a similar exercise in 2016 and spent nearly two years to ready a report that forecast that diesel demand would rise threefold and petrol three-and-a-half times by 2040 in the country. The panel considered multiple scenarios and offered different projections for oil demand growth in each case. The forecast assumed 8.2 per cent of compounded annual economic growth and 0.8 per cent per year growth in population up to 2040 for the country.

    The pandemic has tossed out these assumptions, driving policymakers back to the drawing board. Globally, analysts are now predicting faster transition to cleaner energy and a plateauing of oil demand quicker than that thought possible before the pandemic. Many analysts believe oil demand has already peaked and it would never return to the 2019 level.

    The oil ministry panel had also said the country’s refining capacity was set to rise to 439 million tonnes per annum by 2030 from the then 245 million tonnes, an 80 per cent rise. The refining capacity was expected to reach 259 million tonnes by 2020, and 415 million tonnes by 2025.

    As of October 2020, India’s capacity is 250 million tonnes, already reflecting the deviation from projections.

    The projection was based on “firm plans and the projects already conceptualised and accepted in principle till year 2030 only”, the report had said.

    Since India is a major exporter of refined fuels, the planned refinery expansion to 439 million tonnes was way higher than the capacity of 363 million tonnes needed to meet the local needs in 2030.

    The pandemic has forced a rethink among oil companies globally about owning refineries. Super majors like BP and Shell want to produce and process less oil and have set themselves a roadmap for that. Lower oil prices and demand uncertainty have also translated into capex cuts by oil companies.

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