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India To Remain The Third Largest Consumer Of Crude In The Next Decade: Ind-Ra

The growth in crude oil consumption in India has been driven by the strong demand for the end product in the country, with demand growing by 11.2 per cent in FY16 with a strong growth recorded by petrol, diesel, LPG, and Naptha sales at 14.3%, 7.5%, 8.8% and 22.5% respectively

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India will remain the third largest crude oil consumer in the world, since India is unlikely to overtake the crude consumption levels in US and China over the next decade, says India Ratings and Research (Ind-Ra). As per the latest BP statistical review, India has emerged as the third largest consumer of crude oil, after US (19.39 mbpd) and China (11.96 mbpd) and displacing Japan (4.15 mbpd) from the third position. Ind-Ra believes India will remain third, even if Indian consumption grows at a CAGR of 10 per cent (double the rate of crude consumption growth of 4.8 per cent over 2005-2015) in the next decade.

Globally, crude continues to be largest provider of primary energy. The overall primary energy consumption in India measured in million tonnes oil equivalent (mtoe) has grown by 5.9 per cent CAGR to 700mtoe over 2005-15. China’s overall energy consumption grew by 5.3 per cent to reach 3014mtoe, while US and Japan’s energy consumption contracted by 0.3 per cent and 1.5 per cent respectively. Though India has moved to the third position, this growth presents a problem of energy security, as India continues to import bulk of its crude needs. With domestic gas production is also dwindling, the gas requirements have also been met from imported re-gasified liquefied natural gas. While a growing population will lead to higher energy consumption, India needs to look at lowering its overall energy consumption by bringing in greater efficiency in the usage of end fuels, namely coal (through better boiler efficiency, scrapping old plants, greater focus on renewable energy generation and demand side energy management), petrol and diesel (higher efficiency in vehicles and higher usage of solar power electric vehicles and strengthening of public transport system).

During CY15 India’s crude oil consumption grew by 8.1 per cent to 4.2 mbpd compared to a contraction of 3.7 per cent registered by Japan. Over the last ten years (2005-2015) Japan registered a CAGR of negative 2.5 per cent compared to 4.8 per cent for India during the same period in crude oil consumption.

The growth in crude oil consumption in India has been driven by the strong demand for the end product in the country, with demand growing by 11.2 per cent in FY16 with a strong growth recorded by petrol, diesel, LPG, and Naptha sales at 14.3 per cent, 7.5 per cent, 8.8 per cent and 22.5 per cent respectively. The demand for petrol has been driven by strong passenger vehicle sales, while diesel demand is driven by strong commercial vehicle sales and the rise of taxi aggregator apps which has resulted in an increase in the overall diesel run passenger vehicles on the road. Also the resumption of mining activities has pushed up demand to some extent. The consumption of LPG and Naptha was driven by the switchover by the industrial consumers from natural gas, due to the cost advantages of both these fuels compared to natural gas.

The decline in the crude consumption by Japan has been on account of a drop in Japanese population, switch to more fuel efficient cars, new cars being electric-gasoline hybrids, a slowing Japanese economy and the closure of oil fired power stations. Moreover, the demand for fuels like petrol and diesel is projected to fall by 1.3 per cent annually up till FY20 as per Japan’s Ministry of Economy, Trade and Industry. Therefore, Japan is unlikely to show a pick-up in oil consumption over the next two to three years.


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