India Expected To Drive The Global Oil Refining Expansion in Coming Years

31 Jan 2024 , 02:05 AM

As India expands its capacity to meet the nation’s growing need for fossil fuels, the globe is poised for what is probably the final great refining boom.

In an effort to increase output of conventional transportation fuels like gasoline and diesel, the South Asian country has launched a building spree at its oil refineries. Over the next five years, this could increase capacity by more than 20%. The estimated cost of additions is $60 billion, according to Rystad Energy.

It’s a rare boost for the global refining business, which is in decline in the US and Europe while China’s vast sector, which has developed over years to become a processing powerhouse, is adjusting to Beijing’s green aims. On the other hand, India’s expanding transportation needs combined with the country’s sluggish adoption of electric cars will prolong the country’s desire for gasoline and diesel.

‘There are no expansions in the West,’ stated Giovanni Serio who is the head of research at Vitol Group to Reuters. ‘Expansions are still concentrated in areas with increasing demand. India is the country where we anticipate growth of more than 200,000 barrels per day over the next four to five years to continue.

Junior Oil Minister Rameswar Teli stated last month that India’s refining capacity is expected to rise by 56 million tons by 2028, without providing further details. This corresponds to a 22% increase in total capacity, or 1.12 million barrels per day.

The government hasn’t said how it plans to accomplish those high goals. Based on computations by Bloomberg, state-owned refiners have declared approximately 50 million tons of additions, which may align with Teli’s schedule. Projects totaling about 37 million tons are scheduled for commissioning in 2024 or 2026. The remaining capacity will be completed through planned additions that are currently in the execution stage and under discussion, but the exact timing of this work is unknown.

The largest is at the Panipat plant of Indian Oil Corp. in the state of Haryana, which is expected to be put into service at the end of next year and is adding 10 million tons. The second-largest refinery, at 9 million tons, is the new Barmer refinery of Hindustan Petroleum Corp. located in the northwest state of Rajasthan. The project is anticipated to operate at maximum capacity by 2025, with development slated to be finished in 2024.

Refineries at Visakhapatnam, Gujarat, and the Barauni facility in Begusarai, Bihar state, are all undergoing smaller expansions.

Nevertheless, 56 million tons is not an insane figure, according to Vitol’s Serio. Having said that, I believe that, from our perspective, the likelihood of these initiatives is currently about half as high.

Most of the burden will probably fall on state-run refineries. To capitalize on the shift to cleaner energy, Reliance Industries Ltd., the largest private oil processor and owner of the massive Jamnagar complex, is attempting to replace gasoline and diesel with clean fuels.

In addition to satisfying its own needs, the Asian country is crucial in supplying gasoline to other areas, including Europe, where supply was affected by Russia’s invasion of Ukraine, particularly with regard to diesel.

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