In oil-thirsty India, refiners lend unlikely help to gas
Mumbai/New Delhi: A push to use more natural gas by the world’s fastest-growing oil guzzler is getting a boost from an unlikely source: the nation’s gasoline and diesel makers.
India’s top three state-owned oil refiners are planning to use their gasoline and diesel fuel outlets to sell compressed natural gas for vehicles, increase investments in city-gas distribution projects and expand use of the fuel in their oil refineries, according to company executives.
“I have to ensure that the company is ready to meet the energy demand for the future,” said Sanjiv Singh, chairman of India’s largest refiner, Indian Oil Corp., which has more than 26,000 fuel stations in the country. “It is very easy for us to add gas to our existing retail outlets.”
The three state oil refiners—Indian Oil, Bharat Petroleum Corp. and Hindustan Petroleum Corp.— own a network of pipelines to ship fuels and control more than 90% of the nation’s gasoline and diesel retail market through over 54,000 outlets. These companies will be “key enablers” in raising the country’s natural gas demand 50% by March 2022, according to analysts at Morgan Stanley.
Indian Oil shares were little changed at Rs400.50 at 10:35am in Mumbai on Tuesday, after rising as much as 1.7% earlier. BPCL shares declined 0.2%, while HPCL fell 0.3%. The benchmark S&P BSE Sensex index rose 0.7%.
While global energy attention has been on India’s role as the world’s fastest-growing major oil consumer, Prime Minister Narendra Modi also aims to increase the share of gas in the country’s energy mix to 15% by 2020 from about 6.5% now to curb pollution and carbon emissions.
“There is a need to reduce oil imports and the second thing is that there are environmental concerns,” Bharat Petroleum Corp. chairman D. Rajkumar said on 12 September.
India’s gas goals rely on importing more of the fuel as liquefied natural gas. The country plans to increase its annual LNG importing capacity to 55 million tons over the next four years, while gas pipelines will expand almost 90% to 30,500 kilometers (18,956 miles) by 2020. Indian Oil, BPCL and HPCL have started importing LNG and are setting up terminals either on their own or through joint ventures.
BPCL, India’s second-largest fuel retailer, sold 344,000 tons of compressed natural gas in the year ended March, 7.3% more than the previous year, and handled 26% more gas overall, including volumes consumed at its refineries, according to its annual report. The company imported its first LNG cargo in October last year.
Indian Oil is setting up a 5 million ton LNG import terminal at Ennore in southern India, while HPCL is developing a similar-sized facility on the west coast through a joint venture. Indian Oil is also buying up to 50 % in a 5 million ton terminal at Mundra port in western India and has booked capacity at another terminal in Dhamra on the east coast.
Replacing fuel oil
“We are in talks to source gas for our own terminal on the west coast,” HPCL chairman M.K. Surana said in an interview on 15 September. The company is investing in three natural gas pipelines in addition to an LNG regasification terminal at Chhara in the western state of Gujarat. The company has recently been among the most aggressive bidders for city gas distribution licenses.
The refiners are also shifting to natural gas from fuel oil to power their refineries. Indian Oil, which uses as much as 9 percent of its oil internally, plans to reduce this gradually through upgrades and natural gas substitution.
“Our bullish view on gas adoption bodes well for oil refiners,” Morgan Stanley analysts Mayank Maheshwari and Rakesh Sethia wrote in a 18 September report. Indian processors have “the balance sheet, scale and more importantly the intent to support gas in many ways.” Bloomberg
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