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India’s crude oil production may show marginal increase by 2024: IEA
India’s domestic crude oil production is expected to increase marginally by 2024 with the country’s increased reliance on oil imports exposing it further to supply side disruptions, geopolitical uncertainties, and volatile oil prices, according to a report by the International Energy Agency (IEA).
“Its oil consumption of 4.4 million barrels per day in 2017 already represents 5 per cent of global consumption, and it is set to grow at a rapid pace of 3.9 per cent a year (well ahead of the global average of 1.2 per cent) in the medium-term, despite the market penetration of alternative fuels like biofuels and gas,” Paris-based IEA said in its report titled ‘India 2019 – Energy Policy Review’.
According to the report, the growth is expected to primarily come from government-owned Oil and Natural Gas Corporation’s (ONGC) KG-DWN98/2 deep-water oil and gas project with output starting in 2020 and reaching 78,000 barrels per day of oil at peak production.
IEA further added that India’s proven oil reserves are limited compared to the domestic needs and said that production is on a decline. Also, possible new discoveries in Rajasthan are unlikely to fully compensate for the depletion of existing fields.
The report citing data sourced from the oil ministry said that India’s proven reserves of crude oil and condensate as of April 2018 were about 595 mt (around 4.4 billion barrels), which could potentially sustain production for about 14 years at current levels.
Oil production in India comes primarily from three onshore states, Assam, Gujarat and Rajasthan, which together account for more than 96 per cent of oil from onshore fields, and from the aged offshore Mumbai High Field.
The report highlighted that the country’s increasing reliance on imports has left it exposed to various external risks.
“India’s strong dependence on oil imports, already at 83 per cent, is expected to increase. With an oil import bill of about 4 per cent of the gross domestic product (GDP) today, and 65 per cent of imports coming from the Middle East through the Strait of Hormuz, the Indian economy is and will become even more exposed to risks of supply disruptions, geopolitical uncertainties and the volatility of oil prices,” IEA said.
The report added that the country will have to expand its strategic petroleum reserves if it wants to keep up with its growing demand.
“Today’s Indian Strategic Petroleum Reserves storage capacity of 40 million barrels can cover around 10 days of present day net imports. But the same volume will cover only four days of net imports in 2040. It is therefore important to indeed pursue the announced second phase of the strategic stock holding policy and prepare future phases,” IEA said.
The report added that India does not have any policy to manage the demand for oil during an oil supply emergency, apart from general provisions under the Essential Commodities Act 1995, to maintain equitable distribution of petroleum products.
The agency advised that the existing contingency plan should be reviewed to ensure that in the case of a serious supply disruption, the emergency stocks are available and physically accessible for the large consumption centres across the whole territory.
The strategic petroleum reserves are proposed for construction with a capacity of 4 MT at Chandikhol in Odisha and 2.5 MT at Padur in Karnataka.
The construction and filling of the reserves are being explored under a public–private partnership model with a tender for building the second-phase stocks to be opened by the end of 2020. If fully-filled, this second phase would add another 11.2 days of net imports, based on the consumption pattern in FY19.
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