India Oil and Gas Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

India Oil and Gas Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

The India oil and gas market is expected to register a CAGR of more than 3% during the forecast period (2022-2027). The COVID-19 pandemic negatively affected the market. The revenue of oil and gas companies declined due to unexpected lockdown. The demand for diesel, the most used fuel in the country, has fallen due to a significant reduction in traffic volumes on the roads. Factors such as the increasing natural gas pipeline capacity and the increasing demand for petroleum products are expected to drive the India oil and gas market during the forecast period. However, a huge dependence on imports of crude oil and natural gas for satisfying domestic demand and high volatility of crude oil prices are expected to hinder the growth of the Indian oil and gas market.

The refining capacity has been growing considerably over the recent past, owing to the expansion of several refinery projects. Therefore, the downstream sector is expected to witness growth during the forecast period.

There have been significant gas hydrate discoveries in the KG Basin. Economically feasible extraction of the gas hydrates may create immense opportunities for the companies, which may become a boom in natural gas production.

Owing to the increase in gas imports, the Indian government is increasing the investments in oil and gas pipelines and LNG terminals across the country. Therefore, the increasing investments in the midstream oil and gas sector are expected to drive the market.

Key Market TrendsThe Downstream Sector is Expected to Witness Significant Growth

The Indian energy demand is anticipated to grow by 50% in the next two decades. This growth in demand can be attributed to the growing world population and an improvement in living standards in developing countries. Even though new and renewable energy sources are gaining popularity around the world, petroleum fuel remains a major energy source globally. This trend is expected to continue for the next few decades and favor the growth of the oil and gas downstream market.

New refineries were set to be established in various parts of the country. For instance, in August 2021, Indian Oil Corporation Limited announced its plan to invest USD 15 billion to increase its refining capacity three times by 2025.

In January 2021, the state-run oil refiner Indian Oil’s board of directors approved setting up a new refinery in Nagapattinam in Tamil Nadu. The refinery is expected to have an annual refining capacity of 9 million metric ton and an investment of INR 31,500 crore.

In August 2021, the Indian Oil Group had a refining capacity of 80.2 MMTPA (million metric ton per annum), which accounts for 33% of the total national refining capacity (249.87 MMTPA). Moreover, the group announced that it will boost its annual oil refining capacity to 87.55 million ton by 2025.

Owing to several major upcoming projects, the downstream sector is expected to witness significant growth during the forecast period.

Increasing Investment in the Midstream Sector May Drive the Market

The pipeline is the most economical way of transporting natural gas, crude oil, and petroleum products over a long distance due to increasing investments in upcoming pipelines in the country. The midstream segment is expected to contribute a decent share in the Indian oil and gas market in the coming years.

In March 2020, the country had around 10,419 km of crude oil pipelines (onshore: 9,825 km and offshore: 594 km), 17,389 km of natural gas pipelines (onshore: 17,365 km and offshore: 24 km), and 14,729 km of refined products pipelines. In addition to the pipelines, India had 6 LNG terminals in March 2020.

As of June 31, 2021, the Gas Authority of India Ltd (GAIL) had the largest share of the country’s natural gas pipeline network, i.e., 32,718 km.

As of 2020, Indian Oil Corporation accounted for 50.88% (5,301 km) of India’s crude pipeline network. The Indian government is set to invest USD 9.97 billion to expand the gas pipeline network across the country, culminating in the growth of the market.

Moreover, in January 2020, the Indian government approved USD 774 million for a natural gas pipeline in the northeast region as part of a national gas grid being built to span remote locations in the country. The 1,656 km pipeline is expected to cost up to INR 92.65 billion to build and will be completed by 2023.

Hence, increasing investments in the midstream sector have driven the India oil and gas market. Pipeline coverage is expected to increase substantially during the forecast period, with the petroleum product pipeline expected to increase the most in the segment.

Competitive Landscape

The India oil and gas market is moderately consolidated. The major players are Oil and Natural Gas Corporation, Oil India Limited, Reliance Industries, Indian Oil Corporation Limited, and Punj Lloyd Limited.

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