With a population of around 1.4 billion, India is the world’s second-largest nation. However, according to a new U.N. study, the country is projected to become the world’s most populous within a decade. Together, India and China account for about 37 percent of the world’s population, so their energy consumption trends are major factors for the world oil market.
India has been heralded as one of the most important drivers behind oil demand growth. India has 1 billion more people than the United States but only consumes a quarter the amount of oil, underpinning its potential. And India’s primary energy consumption is projected to grow exponentially through 2050.
“We see India definitely as a key driver for oil demand growth,” IEA Executive Director Fatih Birol told Reuters. IEA projects India’s oil demand to reach 6 million barrels per day (bpd) by 2024 from 4.4 million bpd in 2017, but its domestic production is expected to rise only marginally.
And so it may be surprising that India is projecting it will reduce its oil imports by 10 percent by 2022. “We are very much on track. We will achieve the target,” Petroleum Minister Dharmendra Pradhan recently told reporters. In fact, it appears crude imports may have already topped out.
Speaking at a conference in March 2015, Prime Minister Narendra Modi had said that India needs to bring down its oil import dependence from 77 per cent in 2013-14, to 67 per cent by 2022. Further, the dependence can be cut to half by 2030, he said.
The government is focusing on increased use of biofuels and raising domestic crude oil and gas production to reduce imports. Pradhan said blending of ethanol in gasoline has risen to 6% at present and the blending would rise further to 10% by 2022. Also, 5,000 compressed biogas plants are being set up that will convert agriculture and municipal waste into fuel.
India is also seeking to diversify its sources of imported crude oil to achieve a greater security of supply. The country had reduced its purchases from Iran to near zero due to the U.S. sanctions. And Iraq has replaced Saudi Arabia as its top source of imports.
India plans to double crude oil imports from the U.S. and Russia has become an important ally.
Prime Minister Modi and President Vladimir Putin met at Vladivostok last September. The two signed a plan for cooperation in hydrocarbons for 2019 through 2024. Modi and Putin said they would cooperate in joint development of oil and gas onshore and offshore oil fields in Russia and India, develop ways to deliver energy resources from Russia to India, and finalize a long-term agreement for sourcing Russian crude.
Electricity and Renewables
Ensuring access to electricity and clean cooking has been at the top of the country’s political agenda. Around 700 million people in India gained access to electricity between 2000 and 2018. India’s coal supply continues to be the largest domestic source of energy supply and electricity generation, but that is changing rapidly.
India is one of the world’s leaders in renewable energy development. The government had a target of installing 20 GW of solar power by 2022 but met the goal four years ahead of schedule.
Recent IEA analysis shows that in 2018, India’s investment in solar PV was greater than in all fossil fuel sources of electricity generation together. By December 2019, India had deployed a total of 84 GW of grid-connected renewable electricity capacity, about 23% of India’s total generating capacity of 366 GW in 2019. In September 2019, Modi announced that India’s electricity mix would eventually include 450 GW of renewable energy capacity.
India has improved energy efficiency, avoiding an additional 15% of annual energy demand and 300 million tons of CO2 emissions over the period 2000‑18, according to IEA analysis. And it intends to increase the share of natural gas in its energy portfolio to 15% by 2030 from 6% today.
India is expected to become the world’s most populous nation and one of its priorities is to enable access to electricity to its people. However, its future source of energy is going to be primarily renewables, specifically solar. It intends to reduce its oil imports and is on track to do so.
Analysts typically point to China and India as the sources of future oil demand growth. And the IEA is still forecasting gains in India’s oil imports. But India’s minister says the country is on track for a 10% reduction by 2022.
I am putting more weight on India’s forecast than the IEA’s. I think they must have better data than the IEA. If their numbers are correct, this is a major shift in world oil import assumptions going forward.
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