TLTP
LONDON
India is gearing up to become a major player in seaborne oil demand, offering a valuable boost in the tanker market.
In its latest weekly report, shipbroker Gibson said that “like most nations, Indian oil demand has come under considerable pressure in 2020 as Covid-19 derailed the country’s continual demand growth. Nevertheless, the longer-term prospects for Indian oil consumption are good with demand already rebounding even as covid-19 continues to impact the wider economy”.
According to Gibson, “this rebound in demand is evident in both refinery and crude buying activity. Indian refinery runs gained 10% month on month reaching 86% in September, with further gains expected for November and December.
Government sources have suggested that oil demand could be back to pre-covid levels in the first quarter. Furthermore, official data showed that September gasoline demand recovered to 2.45 million mt, the highest since February and 3% up YOY.
Crude imports have also shown a strong recovery, reaching 4.2mbd this month, the highest since March and up 550kbd on September according to Kpler. The question now going forwards is can this trend be sustained?”
“Ultimately this will depend on the country’s recovery from covid-19 and government policy towards containing the virus; however, it is more a question of when, not if, Indian oil demand recovers. The country is expected to contribute the largest share of demand growth over the next 10 years as car ownership continues to rise and aviation demand expands”, said the shipbroker.
Gibson also noted that “to match this continual demand growth, the nation will need to expand its refining capacity, which has seen slower growth rates in recent years, with most projects focused on expanding/debottlenecking existing plants, opposed to new greenfield developments. Nevertheless, crude processing capacity is expected to increase by 600kbd between 2019-2025, supported in part by the start-up of HPCL’s 180kbd Barmer refinery in March 2023 in addition to upgrades and expansions.
Beyond the HPCL project, CPCL plans to launch a new 180kbd facility in Nagapattinam, although it may take until the second half of the decade to come onstream. The most notable development, however, is the planned 1.2mbd project in Maharashtra in partnership between domestic players IOC, HPCL and BPCL, and foreign investment from Saudi Aramco and ADNOC. Yet, with a price tag of $70b and uncertain market conditions, FID is yet to take place”.
