Home / Industry / Energy /  Global energy price trend positive for India: Crisil

Mumbai: Crisil Research, a unit of India’s largest credit rating agency Crisil Ltd, expects global energy prices to either ease or rise at a much slower pace in the next five years as supplies increase and consumers increasingly move towards alternative fuels.

As a result, India’s energy bill may rise at a much slower pace, allowing the government to curb the money its spends on oil subsidies, it said.

Crisil expects brent crude to decline to $90-100 per barrel by 2018 from $109 in 2013, (and $101 per barrel currently) while thermal coal is seen at $77-82 per tonne compared with $84 in 2013.

Liquefied natural gas (LNG) on the spot exchange is expected to fall to $13-14 per million metric British thermal units (mmbtu) from $15 per mmbtu in 2013 because of improved supplies and relatively subdued demand.

“This is a huge blessing for India, since energy imports accounted for 36% of its total imports last fiscal," Crisil said.

The research agency pointed out that India’s energy import bill had increased 14% between fiscals 2009 and 2014, to $161 billion.

“We now expect this to rise only 1.6% annually to $175 billion by 2019 because prices of the three commodities are forecast to decline. Subdued prices will also help curb oil subsidies," Crisil said.

The agency expects increase in supplies of oil from the US, Canada, Iraq and Brazil in the next five years, while coal supplies are expected to rise from Australia and Indonesia.

Oil supplies are expected to increase by 6-7 million barrels per day or about 8% of the demand in 2013 while coal supplies are likely to increase by 1,000 million tonnes which makes up 17% of the global demand in 2013.

At the same time, demand for oil is likely to increase at a subdued 0.8-1% between now and 2018, slower than the 1.2% increase seen in the last five years because of energy efficiencies in North America and Europe and slower growth together with a shift towards alternative fuels in China.

“Slowing economic growth in China and India will mean global demand for coal staying subdued at 3.2% over the next five years (against 3.9% in the last five years), leading to pressure on prices. Similarly, LNG demand is also expected to be muted due to lower requirement in Japan and India," Crisil said.

Mukesh Agarwal, president of Crisil Research said increased investments in oil and gas in the last 15 years have led to higher reserves accretion in the sector.

“Globally, investments in oil & gas exploration and production more than doubled to $5.7 trillion between 1998 and 2013, vis-a-vis the previous fifteen years. This led to reserve accretion increasing by 1.6 times to 626 billion barrels of oil equivalent over 1998-2013 period" Agarwal said.

“With Opec (Organisation of Petroleum Exporting Countries) spare capacity projected to more than double to 8 mbpd over 2013 to 2018, the impact of geopolitical tensions on oil prices will be even lesser and this is a seismic shift," said Prasad Koparkar, senior director - industry and customised research, Crisil Research.

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