India will overtake China as the world’s oil demand driver by 2024.
According to Wood Mackenzie, India’s oil demand is expected to grow by 3.5 million barrels per day from 2017 to 2035, accounting for one-third of global oil demand growth.
This demand is driven by rising income levels, an expanding middle class and a growing need for mobility.
However, the country only has a project 400,000 b/d of firm refinery capacity addition to 2023, which suggests that supply will fail to keep up with demand growth.
Sushant Gupta, research director at Wood Mackenzie says that Indian public sector undertakings 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 JV among India PSUs, Saudi Aramco and ADNOC, comes online.
‘We think 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. So, we are talking about a future capacity which is 1.7 to 2.0 times the current.
‘This is clearly an uphill task, unless domestic refiners can commit to their planned capacity additions.’
However, there are several risks to these new refinery projects, namely uncertainties around oil demand. Factors such as GDP growth, road infrastructure developments, electrification of the transports sector and fuel efficiency improvements, could have very different implications for oil demand.