Sanjay Sah, Oil and Gas Consulting Leader, and Payal Goel, Director, Technology and Transformation, Deloitte
The oil and gas sector is one of the eight core industries driving the nation’s economy. As of 2024, the country remains the world’s third largest consumer of oil, underscoring the strategic importance of this industry.
Upstream sector
In 2023-24, crude oil production increased marginally, from 29.2 million metric tonnes per annum (mmtpa) to 29.4 mmtpa, while natural gas production increased from 33.7 billion cubic metres (bcm) to 35.7 bcm, mainly due to higher output from the Krishna-Godavari (KG) basin. Oil and Natural Gas Corporation Limited (ONGC) accounts for approximately 62 per cent of oil and 50 per cent of gas production in India, while Oil India Limited and a few private players such as Reliance Industries Limited (RIL) and Cairn India account for the remaining. In 2024, ONGC began production on the KG-DWN-98/2 block in the Bay of Bengal and made two major discoveries – Utkal and Konark – in the Mahanadi basin. RIL’s commissioning of the MJ field has increased gas production from KG-D6, and the company acquired a new block in the KG basin under the Open Acreage Licensing Policy VIII. Most exploration and production (E&P) companies are employing enhanced oil recovery techniques to enhance production. Cairn launched India’s first commercial alkaline-surfactant-polymer flooding in the Mangala field to boost oil recovery by up to 60 per cent.
A joint working group was established in July 2024 to improve the ease of doing business, streamline approval processes and promote self-certification for field development and annual plans. The Ministry of Petroleum and Natural Gas has focused efforts on increasing the sedimentary basins under exploration to increase acreage to 1 million square km by 2030 and offer a $100 billion investment opportunity in the E&P space. The sector faces challenges such as maturing fields, low technology adoption, ageing workforce, complex taxation and funding constraints due to environmental, social and governance concerns. Companies are exploring digital interventions to help address these issues, with an increasing focus on decarbonisation initiatives using carbon offset technologies such as carbon capture, utilisation and storage, and electrifying operations using renewable sources.
Expanding pipeline and LNG terminals
India is expanding its gas and petroleum product pipeline to meet the rising energy demand. The gas pipeline network stands at about 25,000 km as of 2023-24, with 10,789 km under construction.
The petroleum product pipeline spans 22,494 km, with 3,430 km of liquefied petroleum gas (LPG) and 855 km of other products under construction. Key upcoming projects include the commissioning of the Kandla-Gorakhpur and Kochi-Coimbatore-Erode-Salem LPG pipelines. Further, Rs 410 billion is planned for developing gas networks in Jammu & Kashmir and the Northeast.
The gas and petroleum product pipeline segment faces challenges such as right-of-use issues and the viability of pipeline projects due to flows on dedicated pipeline routes, tanker movements and low-demand areas. However, policy reforms, such as delinking petroleum product pipeline tariffs from railway tariffs and announcements of new products and gas pipelines will spur investment. To increase the share of gas in primary energy share and enhance infrastructure, efforts should focus on enabling gas usage in the power sector, improving last-mile connectivity for city gas distribution (CGD) and mandating vehicle conversions.
LNG imports and terminal utilisation are expected to increase, and Hindustan Petroleum Corporation Limited’s (HPCL) Charra terminal will add 5 mmtpa of capacity by the end of 2024, raising the total LNG capacity to 52.7 mmtpa. Additionally, midstream players are diversifying into petrochemicals and leveraging digital tools for asset monitoring and maintenance.
Downstream sector
India’s crude oil refining capacity stands at 256.8 mmtpa as of 2023-24, with about 56 mmtpa of capacity expected to be added by 2028 to meet the growing domestic and export demand. These additions are largely driven by public sector undertakings, with Indian Oil Corporation Limited planning to increase capacity by 10 mmtpa from the Panipat refinery and HPCL developing a 9 mmtpa greenfield refinery in Rajasthan. In addition to refining, players are also expanding into petrochemicals through integrated complexes. Installed petrochemical capacity in India is projected to grow from approximately 29 mmtpa in 2023-24 to 35 mmtpa by 2029-30.
In the CGD sector, the number of authorised CGD geographical areas has increased threefold, from 97 in 2017-18 to 307 in 2023-24, covering approximately 99 per cent of India’s population. To enhance gas accessibility, companies are using small-scale LNG to improve last-mile connectivity.
There is substantial scope for using LNG in transportation to supply gas to regions with limited pipeline access. Companies are set to contribute to achieving India’s targets of 5 per cent compressed biogas blending in compressed natural gas and piped natural gas by 2028-29, 5 mmtpa of green hydrogen by 2030, and a 20 per cent ethanol blending ratio in petroleum by 2025.