India's oil demand is expected to grow by 3.5 million barrels per day (b/d) from 2017 to 2035, accounting for one-third of global oil demand growth, Wood Mackenzie said in a statement on Monday.
According to the statement, rising income levels drive India's demand, along with an expanding middle class and the growing need for mobility.
"However, with only 400,000 barrels per day (b/d) of firm refinery capacity addition out to 2023, refinery supply will fail to keep up with demand growth," Wood Mackenzie highlighted.
Sushant Gupta, research director at Wood Mackenzie said in a statement that from the current balanced position, Indian public sector undertakings (PSUs) or refineries owned by national oil companies will become short on transport fuels at least until the 1.2 million b/d mega refinery, a proposed joint venture among Indian PSUs, Saudi Aramco and ADNOC, comes online.
"We think the most likely situation is that India would need between 3.2 million b/d and 4.7 million b/d of new capacity out to 2035 to remain self-sufficient in transport fuels," he said and added that Wood Mackenzie is talking about a future capacity, which is 1.7 times to twice that of the current volume.
"This is clearly an uphill task, unless domestic refiners can commit to their planned capacity additions," he explained.
- Challenges in oil sector
Wood Mackenzie views uncertainties around oil demand as the biggest risk to new refinery projects.
"Factors such as GDP growth, road infrastructure developments, electrification of the transport sector and fuel efficiency improvements could have very different implications for oil demand," the statement read.
Another challenge is in choosing the right refinery configuration.
According to Wood Mackenzie, new capacity in India needs to focus on increasing gasoline yields as gasoline to diesel demand ratio is expected to rise. Current refinery yields are highly weighted towards diesel.
By Gulsen Cagatay