RoydadNaft –  India’s downstream oil and gas sector is on the rise, with increased demand and strategic investments driving its growth. The shift from Russian crude imports and a focus on enhanced oil recovery techniques signal a promising future for the industry and the nation’s economic recovery.

India’s downstream oil and gas sector is poised for continued growth in FY24, with a projected mid-single-digit percentage increase in demand for petroleum products. This positive outlook follows an impressive 5% growth in demand during the first nine months of FY24 and a significant 10% recovery in FY23, post-pandemic.

The Pulse of a Recovering Economy

The factors driving this increased demand are varied and significant. They include heightened economic activities, particularly in agriculture and power sectors, a surge in holiday travel, and a rise in automobile sales. Both petrol and diesel sales have witnessed a 4-6% increase in the initial nine months of FY24, signaling an economic revival.

Fitch Ratings anticipates that Indian refiners will experience a moderation in gross refining margins (GRM) in FY25 from the highs of FY24, but they are expected to remain above mid-cycle levels. By FY26, GRMs are likely to align closer to mid-cycle levels, supported by continued demand growth for end-products.

The Shift from Russian Crude Imports

Despite a shift from Russian crude imports, GRMs are expected to remain robust. On the production side, India has seen an uptick in domestic oil and gas output, with gas production increasing by 5% during the first nine months of FY24.

Production is expected to continue growing modestly, with new technological investments in enhanced oil recovery techniques to counteract natural declines.

Investments and Capex Intensity

The sector’s capital expenditure (capex) intensity is likely to remain high, with companies like Hindustan Petroleum Corporation Limited (HPCL) and its subsidiary HPCL Rajasthan Refinery Limited planning significant investments. HPCL-Mittal Energy Limited, having completed their expansion projects, is expected to have lower capex needs.

Fitch’s outlook reflects its confidence in the resilience and potential for growth in India’s downstream oil and gas sector, buoyed by rising demand and strategic investments.

As the world watches India’s economic recovery, the growth in its downstream oil and gas sector serves as a beacon of resilience and progress. The sector’s continued expansion, driven by increased demand and strategic investments, underscores India’s potential to shape the global energy landscape in the coming years.