India says oil demand and supply imbalance crucial for recovery

Strong points

Soaring prices are a wake-up call to invest more in the oil and gas sector

Rising oil import bill adds pain to country’s finances

Biofuels, hydrogen and gas will play a key role in India’s energy future

India said on October 20 that soaring oil prices could potentially create obstacles to a post-pandemic economic recovery, and urged the world’s major producers to take steps to possibly correct current supply and supply imbalances. demand.

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Speaking at the Indian Energy Forum by CERAWeek, India’s Petroleum Minister Hardeep Singh Puri said the sharp rise in prices was a wake-up call that investment needs to flow consistently into the sector oil and gas.

“I’m sure our friends at OPEC+ will heed the sentiment expressed in forums like these. We’re trying to ensure economic activity, but if high prices undermine that economic activity, economic activity will slow down. and the demand for oil and gas will also go down,” Puri told the India Energy Forum.

Saudi Energy Minister Prince Abdulaziz bin Salman told the forum that OPEC and its allies see no shortage of crude oil in the market, rejecting calls from consumer countries to increase supplies to rein in the rise. prices.

Dated Brent prices have more than doubled over the past year, with S&P Global Platts valuing the benchmark at $85.03/bbl on October 19.

OPEC+ members are currently in a deal to boost crude production by 400,000 bpd each month, but key customers including India, the United States and Japan have complained that the The alliance is still holding back supply too much.

“Energy markets today are characterized by imbalances. We must accept that the world needs a reliable supply of oil and gas until we can build new energy infrastructure,” said Pure.

India’s oil demand in 2021 is expected to increase by 295,000 bpd to 4.9 million bpd, which would still be well below 2019 levels. The country is expected to reach a pre-pandemic level of demand of oil in 2022, according to S&P Global Platts Analytics.

Adding to the pain

Puri said India’s crude import bill, which accounts for about 20% of the country’s overall import bill, rose to $24 billion in the quarter ended June from $8.8 billion. dollars in the same quarter a year earlier.

“These facts speak for themselves. Due to this extreme volatility, fuel prices, such as gasoline and diesel, have reached some of the highest levels in the country,” he added.

Domestic gasoline consumption rebounded strongly above even pre-pandemic levels, while diesel also saw robust growth, Puri said.

“If prices do not remain predictable, stable and affordable, the economic recovery could prove fragile.”

Platts Analytics expects India’s overall oil demand to pick up after the monsoon season, with the festive season ahead and an improving economy supporting consumption and pushing demand growth in the fourth quarter from 575,000 b/d quarter-on-quarter to 5.3 million b/d.

He said one of the government’s priorities would be to find ways to boost domestic oil and gas production. “We are taking steps to increase the exploration area.”

Energy transition focus

India’s per capita energy consumption was about a third of the world average, creating the need to invest in building a wide variety of fuels to meet the projected growth in consumption, said Pure.

“India is focused on moving towards cleaner energy and developing a gas-based economy, while meeting the target of 450 GW of renewable energy by 2030. There will be a large reliance on domestic resources, such as biofuels, and the move towards energy products, such as green hydrogen,” Puri said.

New Delhi in June advanced its goal of achieving 20% ​​blending of ethanol with gasoline by 2025 from the previous target year of 2030.

India’s political decision to more than triple the blending rate of ethanol in gasoline in less than five years seems like a step in the right direction, but for many market experts and industry leaders industry, this looks like an ambitious overhaul.

“Biofuels will provide opportunities that would be a win-win situation for all of our partners. We are reasonably confident of achieving the goal,” Puri said.

In addition, the government would intensify its efforts to come closer to Prime Minister Narendra Modi’s vision of becoming a gas-based economy, under which the country would aim to increase the share of gas in the overall energy mix to 15%. by 2030 from the current level of 6%.

An estimated $60 billion investment has been planned in gas infrastructure development, which includes pipelines, town gas distribution and LNG regasification terminals, Puri said.

“Accelerating the gas initiative would also mean initiatives to strengthen our city gas distribution network to expand the use of cooking fuels, as well as initiatives such as LNG trucking,” he said. -he adds.

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Felix J. Dixon