The Indian energy sector is progressively becoming a key driver of global energy demand growth, especially as demand from China plateaus. At the India Energy Week in Goa Feb. 6-9, both Indian and foreign energy players appeared eager to capitalize on opportunities in the South Asian country, with conversations on and off stage providing a glimpse of what's in store for India's energy markets.
Russian energy flows remained a major geopolitical and economic elephant in the room even after two years since its invasion of Ukraine. It remains a secretive aberration in the mind space of the Indian refining system. In terms of agreements, this edition of India Energy Week did not see a lot of action beyond the long awaited Petronet-Qatar LNG deal extension, which happened at widely expected terms.
Here are the key takeaways from the four-day conference, attended by more than 30,000 participants against the backdrop of a buoyant Indian economy.
'All of the above' approach
During the inauguration, Prime Minister Narendra Modi spelled out India's energy ambitions: oil refining capacity of 450 million mt/year, 15% share of gas in energy and 500 GW of solar energy by 2030. While some energy pundits could find faults with the practicality of these aspirations, the focus on these three sources of energy highlights India's belief in an all-of-the-above approach to meet its energy needs.
Modi also highlighted the recently announced government scheme of sops for roof-top solar installations for 10 million Indian houses, taking energy transition to the masses.
Talk of cleaner energy by India's energy ministry was accompanied by voices hinting at the need for a gradual and just transition, further highlighting the all-of-the-above approach as the country focuses on availability without compromising affordability.
Sustainability equals security?
India has made huge strides in biofuels by way of increased blending of ethanol in gasoline from 1.53% in 2013-14 to 12% in 2022-23. This was mainly achieved by re-deploying India's sugar "problem of plenty."
Conversations at India Energy Week also focused on another biofuel: compressed biogas, or CBG. India plans to build thousands of small-scale processing plants for converting organic matter into natural gas. After all, India also has a problem of plenty when it comes to agricultural residues and solid organic waste.
The country's CBG plans were heavily discussed at the conference, where many established Indian energy players highlighted their commitment to CBG while many new and rising players showcased their plans for the sector.
India's goal of 1% CBG blending in the domestic gas market from financial year 2025-26 (April to March), rising to 5% by 2028-29, is fueling optimism around CBG. Taking cues from the ethanol blending program that compensates suppliers more than the open market, the procurement price of CBG is currently pegged at above $16/MMBtu, making it the most expensive molecule in the multi-tiered Indian gas ecosystem.
Besides CBG, the participants also discussed ethanol-to-jet based sustainable aviation fuel and the upcoming blending mandates.
Given all these, one cannot miss the theme of localizing energy sources in the guise of energy transition at a time when fossil fuel import bills remain a major contributor to India's trade deficit. Plans for the biofuels market also tie well with rewarding the agriculture sector, which has proven a politically difficult space for the Indian government to navigate.
Ambitious oil and gas plans
Modi's ambitious plan of 450 million mt/year (9 million b/d) of refining capacity by 2030 translates into a significant greenfield capacity and brownfield expansion over the next five to six years. This makes India one of the few countries in the world that still plans to set up new refineries.
While Indian oil demand remains buoyant, growing by more than 5% annually, India's planned aggressive biofuels expansion and electrification of fleet does slightly dampen the outlook for oil demand.
In the absence of pure domestic oil demand drivers, ambitious refining capacity plans are making way for increased petrochemical conversion and a focus on product exports. Crude-to-petrochemical conversion ratios of up to 15%, up from 4%-5% currently, were talked about at the event. Incumbent refining players were bullish about petrochemicals for the long term while reeling with margin pressures in the short run.
Looking at gas, the plan for a 15% share in primary energy was often mentioned. However, the plan, which has been around for many years, lacks details on how the 15% share would be achieved. Murmurs of complimenting gas-fired power with massive solar additions were heard, but the administration does not seem excited or concrete about the prospects of gas-based power. City gas networks are instead the showcase consumption sector put forward, but many in the audience were skeptical about its role in increasing gas demand.
All in all, India's plans for both oil and gas are ambitious, and could put the country at the center of the global incremental demand picture if they were to come to fruition.
Carbon: foe or friend?
Another key takeaway from India Energy Week was the Indian energy market's views on carbon. Besides the usual talks on net-zero pledges and steps toward achieving those goals, some discourses revolved around technical details. India's current vision of domestic carbon markets did, however, show signs of curious-but-unsure shrugs from energy professionals.
In an interesting conversation, India's energy major Reliance Industries Limited highlighted how carbon was a friend and a source of value along with green hydrogen, and not something to be stored away. Given RIL's reputation as a trendsetter, this thinking could be a sign of how India's energy sector deals with energy transition.
Participants at the India Energy Week were largely buzzing with optimism about the country's energy future and the economy in general as the event concluded in Goa. Many compared India's energy economy with China's in the early 2000s and saw a similar growth trajectory for it in the years to come.