Oil’s role in India’s energy mix to be crucial for next 20 years: IOC chairman
Indian Oil Corp. is confident the share of oil in India’s energy basket won’t change drastically over the next two decades, although incremental demand will create room for new and cleaner forms of energy, its chairman Shrikant Madhav Vaidya told the India Energy Forum by CERAWeek Oct 21.
The state-run refiner, which caters to more than 40% of the country’s fossil fuel demand, said it would be investing billions of dollars to pursue refining expansion, while making inroads into the production of hydrogen and biofuels.
“When energy consumption will go up, I do not think it can displace oil,” Vaidya told the India Energy Forum. “Today, oil is about 28% of the energy mix and whatever forecast you read, you will see that oil will remain around this level for the next two decades.”
Since India’s per-capita energy consumption is about one-third the global average, demand is expected to rise exponentially, creating the need to push both refining expansion as well as clean energy initiatives, he said.
But Vaidya recently told S&P Global Platts that IOC would be looking to enhance its petrochemical integration to 15% of petrochemicals intensity index by 2030, from about 4.0%-4.5% currently.
That would provide a cushion for the future in the event demand for transport fuels slows due to the transition to cleaner forms of energy.
“We are poised for big growth in conventional fuels. I will be selling petrol for many, many decades to come. We are strengthening our core business of refining,” Vaidya said, adding that IOC was looking to boost its annual refining capacity to 105 million mt by 2024/25 from 80.5 million mt now.
But most of its refinery expansion projects won’t have captive power plants. Instead, they will have much lower carbon footprint because of the use of green power, Vaidya said.
Dark clouds clearing
Vaidya said domestic demand for both diesel and gasoline had bounced back to pre-pandemic levels, while jet fuel demand would be back on track once international travel opened up.
“Maybe in a quarter of a year’s time, we will be back at 100% capacity utilization of the refineries. Today, I am about 95%,” Vaidya said.
India’s demand for oil products in September rose 5.2% year on year to 15.92 million mt, or 4.2 million b/d, provisional data from the Petroleum Planning and Analysis Cell showed, reflecting a rise in demand for transportation fuels.
According to S&P Global Platts Analytics, India’s 2021 oil demand is forecast to grow 295,000 b/d year on year to 4.9 million b/d, which would still be well below 2019 levels. An improving economy will support consumption and push up fourth-quarter demand growth by 575,000 b/d quarter on quarter to 5.3 million b/d.
Platts Analytics expects overall oil demand to reach pre-pandemic levels only in 2022.
Changing gears, slowly
IOC has commissioned a plant that will produce hydrogen-spiked compressed natural gas, or H-CNG, to increase the country’s reliance on clean energy alternatives, Vaidya said.
CNG is passed through a reforming unit that converts part of the methane into hydrogen, with the byproduct resulting a hydrogen content of 17%-18%. Buses having Euro-4 equivalent engines would give Euro-6 emissions when they run on H-CNG, Vaidya said. “This is one good way to transition to a hydrogen economy.”
He said biofuels would also be a key priority for the company, as it would benefit both the energy and agriculture sectors.
In June, the government moved its target to achieve 20% ethanol blending with gasoline to 2025 from the prior target of 2030.
India’s fuel ethanol consumption is expected to reach nearly 3 billion liters in 2022 and 3.2 billion liters in 2023, up from an estimated 2.7 billion liters in 2021, according to Platts Analytics. That would equate to an ethanol blending rate of roughly 6.1% and displace 31,000 b/d of fossil fuels.
IOC has already installed 286 charging stations, including swapping stations, across the country, and the country has plans for 3,000 EV charging stations by the end of this decade. It has invested in solar and wind projects across India and would continue to allocate more funds in those areas.
“We are changing gears, but very slowly. There is no hurry. We will still remain a fossil fuel company for some time, but we are taking the right steps in other forms of energy,” Vaidya said.