Surveying India’s Seaborne Energy Trends
A key driver of seaborne trade growth over the last two decades has been the spectacular economic rise of China. With the Chinese economy likely to gradually mature, the idea of the “next China” for shipping has been often discussed, and India has often been put forward in this context. There are many factors to consider, but in any evaluation of this possibility, trends in India’s energy sector are highly significant.
In 2016, Indian total primary energy consumption reportedly exceeded 720m toe, accounting for almost 10% of non-OECD energy demand. In comparison, Chinese energy demand in 2016 represented 40% of non-OECD energy demand. Evidently India has significant catch-up potential. To an extent, this is being realised: while Chinese primary energy demand rose with a CAGR of 3.5% in the decade to 2016, India’s grew with a CAGR of 4.9%. Indian seaborne fossil fuel imports, meanwhile, grew with a CAGR of 7.7% in the ten years to 2016, to account for 40% of Indian energy consumption, up from 30% in 2006. However, the government has initiated a raft of reforms aimed at enhancing energy independence by raising domestic coal, gas and oil production, with potential implications for shipping.
King Coal Usurped?
Indeed, Indian steam coal imports fell by 13% y-o-y to 145mt in 2016 (still 16% of global steam coal imports though), as Coal India began moving towards a government output target of 1,000mt in 2020. Indian coal imports as a share of demand fell (to 24%). That being said, Coal India has missed targets before, the government is pursuing an ambitious electrification agenda, and private miners are still looking abroad for new reserves (for example in Australia’s Galilee Basin). The future of Indian seaborne coal imports is thus still very much subject to debate.
A Fuel For The Future?
LNG trends appear encouraging. In 2016, India became the fourth largest LNG importer globally, with volumes rising by 30% to 19mt and imports equating to 50% of gas demand, up from 20% a decade ago, in part reflecting domestic production issues (see graph). India has vast reserves of gas (including 104 untapped offshore gas fields) that reforms aim to utilise. But even so, domestic output may struggle to keep pace with expected rapid demand growth. Moreover, Indian LNG import capacity is set to expand by 70% by end 2018, helped by FSRU projects.
The Mirage Of Self-Sufficiency?
In 2016, India was the world’s fourth largest seaborne oil importer and accounted for 5% of global refinery capacity. Imports have tended to be modulated by Mumbai High offshore oil output rates but have usually met 70-80% of consumption. Many fields are yet to be developed but given firm Indian oil demand trends, it is not clear that reform-led oil output growth could outpace demand growth.
So the precise trajectory of India’s future seaborne energy mix remains subject to some debate. But it does appear that, despite government reforms, potential for healthy growth in India’s imports remains. As far as a new star in the East is concerned, trends in India’s energy sector are clearly worth watching closely.