Energy transition

India on Track To Supplant China as Biggest Energy Consumer

India is on a global hunt to tap all colors of fossil fuel and renewables as the country prepares to overtake China as the world’s most populous nation.

Energy and Power icons set with India flag. Sustainable energy generation and heavy industry. 3D rendering
Credit: Evgeny Gromov/Getty Images/iStockphoto.

India is on track to overtake China within the next year or two as the world’s most populous nation, pandemic or not. So, while near-term forecasts suggest that the current health crisis has slowed industrial growth, and thus muted the expected rise in demand for energy, India’s baseline metrics are not likely to change, nor will the country’s impact on global energy markets.

By 2040, India will be the world’s biggest energy consumer, and the country is betting on natural gas, developed in parallel with renewable energy, to reduce its carbon footprint, which, in 2020, saw India ranked third in greenhouse gas (GHG) emissions after China and the United States, according to the International Energy Agency’s (IEA) India Energy Outlook 2021.

Consider these facts:

  • India is the world’s second­ biggest coal market after China, with coal accounting for a 44% share of India’s primary energy mix, the third ­highest in the G20.
  • Coal is used to produce 65% of India’s electricity, which is in short supply, resulting in stymied growth in industrial production even before the pandemic.
  • In terms of oil, India is the world’s third­ largest crude consumer after China and the US.
  • The country imports 75% of its oil, and those imports are rising. Only China imports more oil than India.

Gas demand is growing, too, as the Indian government sees gas as critical to controlling carbon emissions while it develops renewables in parallel to provide energy to a population that is forecast to grow to 1.6 billion by 2040.

Now fast-forward to 2040 when India is projected to account for 25% of the growth in world energy demand, more than any other country, according to the IEA’s Sustained Energy Policy Scenario outlined in its 2021 outlook.

“By 2040, India’s power system eclipses the European Union’s and becomes the world’s third largest,” the IEA predicted, adding that “India will become the second largest growth market for renewable energy after China (and) a world leader in battery storage.”

India is a leader already in solar photovoltaic energy production and, like other emerging economies, is embracing all components of the energy mix: coal, oil, gas, solar, wind, geothermal, and whatever else can produce enough energy to satisfy the demands of industry and an increasingly urbanized population (Fig. 1).

Fig. 1—This graph shows total primary energy demand in India by fuel and scenario. India leads global energy-demand growth in every World Energy Outlook scenario, although the way the demand is met depends on the interaction of policies, technologies, and market forces.
Credit: IEA Energy Outlook 2021.

India must balance its use of fossil fuels vs. renewables to reduce the country’s carbon footprint while it catches up in only a few decades to the industrialized world that rose to dominance on the back of energy produced by coal and petroleum over the 200 years since the start of the Industrial Revolution.

Urbanization, industrialization, and global climate change are key drivers here, and they interject a multitude of variables into what is not a simple equation.

By 2040, another 270 million Indians will have moved into urban areas, the equivalent of creating a new city the size of Los Angeles each year. The resultant growth (possibly as high as fivefold) in per-capita car ownership will drive India’s growth in oil demand to No. 1 in the world as the country also becomes the world’s fastest growing market for natural gas. Even demand for coal will remain strong, largely for industrial use.

The Relentless Hunt for More Oil and Gas
India’s state owned Maharatna Oil and Natural Gas Corporation (ONGC) controls 71% of domestic Indian crude oil production and is at the center of a tangle of companies that comprise the country’s midstream and downstream industries, including refining, petrochemicals, pipelines, liquefied natural gas (LNG), logistics, and inhouse oilfield services.

India does produce some of its own oil and gas, though it is, and will remain, a net importer. In April, BP and India’s Reliance Industries announced the start of production from a second ultradeepwater gas field in the Krishan Godavari (KG) basin off India’s east coast. Reliance and BP expect to develop about 3 Tcf of gas from an integrated cluster of three new projects in Block KG D6. Once fully developed, the $5 billion investment is expected to add 1 Bcf/D of gas to the domestic Indian market over a buildup period phased over 2020–2022, BP reported on its website.

Domestic Indian resources, however, are in decline. According to the BP Statistical Review of World Energy 2020, India’s domestic crude oil production fell to −4.9% year on year in 2019. India’s oil production, in fact, has been in decline since 2011 when it peaked at 937,000 B/D.

Production in 2019 was 826,000 B/D. In 2019, India’s oil consumption rose 3.1% year on year while the growth rate per annum in consumption rose 5.1% over the period 2008–2018, BP’s review reported.

Similarly, the country’s gas production has declined steadily since it peaked at 47.4 billion m3 in 2010. Production in 2019 was 26.9 billion m3, representing a year on year decline of −2.1%. Its gas consumption meanwhile grew 2.7% year on year in 2019 and 3.8% per annum over the period 2008–2018.

Charged with exploring and producing oil and gas in projects outside of India, ONGC’s daughter company, ONGC Videsh, is tackling this disbalance on two fronts.

First, ONGC Videsh is finding sources of future oil and gas imports (including LNG) by taking participating interests so far in 37 oil and gas assets in 17 countries in regions including the former Soviet Union, South and Southeast Asia, the Middle East, Africa, and Latin America, according to the company’s website.

Secondly, ONGC Videsh is facilitating technology transfer, bringing home new technologies and know-how to apply to oil and gas exploration and production projects on India’s own continental shelf by participating in complex projects in deep water and LNG with partners such as Exxon, Total, Shell, BP, Petrobras, and Qatar Petroleum.

In South America, for example, ONGC Videsh has a significant presence in oil and gas in Brazil and Colombia. It holds stakes in seven exploratory blocks. In addition, the firm is the joint owner of the oil-producing company Mansarovar Energy Colombia Ltd. along with its partners Sinopec of China. In Brazil, ONGC Videsh holds a 27% participating interest in the offshore BC10 block.

In Russia’s Arctic Far East, ONGC Videsh has 20% of the Sakhalin-1 project (Fig. 2). Operated by Exxon Neftegas, Sakhalin-1 has set major technology records, including drilling of the longest extended-reach (ERD) well from onshore to an offshore target. Other partners include Russia’s state-owned major, Rosneft, and Japan’s SODECO consortium.

Fig. 2—ONGC Videsh has a 20% interest in the Sakhalin-1 Project, which uses the drilling rig Kreche to drill extended-reach wells from land to tap offshore targets.
Credit: Exxon Neftegas.

The current record for the longest measured depth ERD well is Sakhalin-1’s Chayvo Z-42, with a measured depth of 41,667 ft and horizontal departure of 38,514 ft. The record was set in 2013.

Exxon Neftegas has included in its development plan eventual construction of a new LNG plant across the Tartar Strait from Sakhalin Island to the Russian mainland (Khabarovsk Krai), in which India may play a role. While unveiling a new gas pipeline in February, Indian Prime Minister Narendra Modi announced that the Indian government had set a new target to raise the percentage of natural gas in the country’s energy mix from the current 6% to 25% by 2030.

A good deal of that new gas will come in the form of LNG, and ONGC already has taken its first foray into the LNG industry with a 16% stake (10% direct and 6% through a controlling interest in another partner, BREML) in Total’s $20 billion Mozambique LNG project on East Africa’s Afungi peninsula.

In April, Total declared force majeure and suspended the Mozambique project following terrorist attacks near its partially constructed onshore facilities, but the decision is thought to be only temporary to give Mozambique time to restore order with the help of troops from the South African Development Community.

JPT reported that sources speculate Total will restart work within a year, though the move will certainly push forward by a year or two the original plan to drop first LNG in 2024. Likewise, ExxonMobil most likely will delay its investment decision on a similar LNG project involving the Rovuma basin, where world-class gas reserves have been discovered in waters ranging in depth between 500 and 2000 m.

Indian companies have invested $8 billion in oil and gas assets throughout Africa, which is also the second largest market for Indian refined fuels, India’s Oil Minister Dharmendra Pradhan told a recent industry summit organized by the IEA, the Organization of the Petroleum Exporting Countries, and the International Energy Forum. Of India’s current oil imports, 15% come from Africa, including the nations of Nigeria, Angola, Algeria, Egypt, Equatorial Guinea, Cameroon, Chad, Ghana, and Côte d’Ivoire, Pradhan said, adding that “as India seeks to further diversify sourcing of crude oil and LNG, Africa has a central role.”

Regarding gas, Africa is on track to becoming the third largest source to feed growth in global gas demand over the next 20 years, the IEA said. And Senegal may soon be added to the list if an agreement ONGC Videsh entered in autumn 2020 to acquire participating interests in projects in the Senegalese offshore is confirmed.

A Renewables Strategy To Cope With GHG
But, while India has no choice but to embrace fossil fuels—including coal—to power its rapidly changing economy and burgeoning population, it cannot ignore the GHG emissions that will result. Today, India ranks third behind China and the US as the worst of GHG emitters. In 2019, the government announced it would budget $60 billion to modernize existing gas infrastructure to build on natural gas as a baseload fuel while developing renewable energy in parallel, hence Prime Minister Modi’s pledge to raise the percentage of natural gas in the energy mix to 25%.

India has been commended for making progress in providing access to electricity and clean cooking while implementing a range of energy market reforms and integrating a high share of renewable energy sources (particularly solar) into the grid (Fig. 3).

Fig. 3—This graph shows changes in coal and solar capacity and share of power generation in India in the Sustained Energy Policy Scenario from 2000 to 2040. India’s power sector is on the cusp of a solar-powered transformation that will challenge the long-established position of coal as king of India’s power sector.
Credit: IEA India Energy Outlook 2021.

Since 2000, 700 million more people in India have received access to electricity and 80 million new liquefied petroleum gas connections for clean cooking were created, the IEA notes. Also, the government has created one national power system and has made significant investments in clean energy.