Indian refiners must shift focus from diesel: Official

An Indian government official has said the country's state-run refiners must reconfigure to target lighter products such as gasoline, naphtha and LPG and reduce the amount of diesel.

These changes will have to happen to match the country's needs, said oil ministry secretary Tarun Kapoor at an industry event today.

"Going forward the refining configuration will have to be different," said Kapoor, who is India's most senior oil bureaucrat. A change in focus from diesel to gasoline and LPG will happen in case of new projects and expansion programs, he said.

"The new refineries which we are planing they will have to have slightly different configuration and we will have to bring petrochemicals attached with refineries to keep the costs low and viability high," he said.

Indian state-controlled oil companies, which control around 90pc of the country's fuel market, plan to spend 2 trillion rupees ($27bn) to boost capacity by 1mn b/d to 6mn b/d by 2025, according to the oil ministry. Government estimates put capacity additions at 2mn-3mn b/d by 2030.

State-run refiners, which operate around 3.2mn b/d of capacity, or 64pc of India's capacity, have traditionally focused on diesel as it is India's biggest selling product with a 40pc market share. But Kapoor said diesel use is 7-8pc below pre-pandemic levels, while gasoline demand is 4pc above pre-Covid levels. LPG use has increased, but inadequate output from domestic plants forces India to import 55pc of its needs.

Kapoor said that refiners must focus on LPG and naphtha, which can be used to make petrochemicals, and reduce dependence on diesel. Private-sector refiners such as Reliance Industries have a more balanced product mix with a focus on lighter products and chemicals.

Provisional ministry data show that India's gasoline demand rose by around 2pc on the month in August to 734,000 b/d, and was higher by 13pc and 5pc respectively from the same time last year and in August 2019. Diesel consumption was 1.35mn b/d, down by 9pc on the month and lower by 8pc from pre-pandemic August 2019.

The IEA today estimated that India's 2021 demand for diesel will increase by 131,000 b/d year on year to 1.55mn b/d and gasoline use will rise by 69,000 b/d to 736,000 b/d.

By Dinakar S