Indian PM sets new refining, gas targets

India's prime minister Narendra Modi seeks to grow the share of natural gas in the country's energy mix to around 25pc by 2030, quadruple the current level of a little over 6pc and nearly twice the previous 15pc target.

Modi also announced over the weekend plans to double the country's refining capacity to around 10mn b/d by 2025 and reduce India's carbon footprint by 30-35pc, without providing a specific timeline.

Modi just last month outlined to investors at CeraWeek India Energy Forum an ambitious goal to grow the country's refining capacity by 60pc to 8mn b/d by 2025, while oil minister Dharmendra Pradhan announced at a separate event in October plans to increase the country's refining capacity to 7mn b/d by 2030. These targets have been sharply raised in a month even as the Covid-19 pandemic continues to erode demand for fuels.

Both the gas and refining targets seem unachievable. India may not even achieve its earlier 15pc target to grow its gas share by the end of this decade. Demand for the fuel is rising at a slower rate, according to state-controlled Petronet LNG, with current growth rates only around 53pc of levels required for the country to meet a 15pc gas use target. Gas demand by 2030 will only reach 326mn m³/d at current 4-5pc growth rates, much lower than the 611mn m³/d of consumption needed to meet the 15pc energy mix goal.

The addition of 5mn b/d of refining capacity over the next five years is also not attainable, especially as state-controlled refiners led by IOC have started reviewing greenfield projects. The Covid-19 pandemic has also postponed the commissioning of expansion projects, with the proposed 1.2mn b/d Ratnagiri refinery on the west coast delayed indefinitely. India's Covid-19 infections have exceeded 9.1mn, despite poor and spotty testing rates.

Only two greenfield projects are at the launch stage in Nagapattinam on India's southeast coast and Barmer in Rajasthan, which have a combined capacity of 400,000 b/d and are expected to be ready by 2025. Refiners are instead focusing on upgrading plants and adding petrochemical units to boost sagging fuel margins.

In Modi's previous term, the ruling BJP government said it aimed to cut crude imports by 10pc by 2022. But India's reliance on imported crude has increased by three percentage points to around 85pc in the last five years.

By S Dinakar