INTERVIEW: India's insatiable demand surge necessitates crude diversification, upstream push: Puri

India's appetite for transport fuels, including gasoline and gasoil, is expected to remain strong for at least two decades, making it imperative to tap new crude oil suppliers, pursue refinery expansions, and increase domestic upstream production, Petroleum Minister Hardeep Singh Puri said.

In an interview with S&P Global Commodity Insights ahead of the India Energy Week, Puri said non-OPEC suppliers -- such as the US, Canada, Guyana, and Russia -- will increasingly have bigger footprints in India's crude oil basket in the foreseeable future, but the country's upstream push is also starting to yield results.

"When you talk of petrol and diesel, then India is the place where the world's attention is focused now. India now has a consistent growth story, and this is happening at a time when demand in China is slowing down. How we feed that demand growth will be extremely crucial for us," said Puri, a former diplomat who represents India at the United Nations.

India's oil products demand grew by nearly 4% year over year to 240 million mt, or 4.82 million b/d, in 2024, data from the Petroleum Planning and Analysis Cell of the oil ministry showed. According to Commodity Insights, India will be one of the leading drivers of future oil demand growth. In 2025, the country is forecast to deliver relatively faster growth in oil demand of 3.2%, compared with China's 1.7%.

Expanding import basket

"We are fast diversifying our crude sources. I've been on record saying that instead of 27 countries, we are now importing from 39 countries.

A delegation from Argentina was there to see me recently to explore possibilities. So, in the future, many countries -- Brazil, Guyana, Canada, as well as the US -- they will all play bigger roles in supplying oil to India," Puri said.

In the financial year 2023-24 (April-March), crude imports from the Middle East took a bit of a hit, while Russian imports rose to 38% of India's total crude imports, which reached about 4.7 million b/d, according to data from the government. In calendar year 2024, data from S&P Global Commodities at Sea Insights showed that Russian imports were about 35% of India's total crude imports, which reached about 4.9 million b/d until the end of December 2024.

Imports from the US have eased from as high as 413,000 b/d in 2021-22 but they are now close to levels 2018-19 levels of 121,000 b/d.

While India continued to receive relatively smaller volumes from regions like Latin America and Africa, the Middle East and Russia together accounted for nearly 80% of India's crude imports, according to Commodity Insights.

Puri said India was watching the situation closely after the US and the UK announced a fresh package of sanctions on Russia's energy sector in January, including curbs on two major Russian oil producers, adding that any business dealings on Russian oil in India would be done within the purview of sanctions.

"We are not averse to the price cap. I don't like to anticipate what's going to happen and I also don't want to speculate. There is more than enough oil available in the world market. But let me tell you that the West does not want a situation where India doesn't buy Russian oil because if India were to stop buying Russian oil, large Indian purchases from other centers would shoot the prices up. What they want us to do is to buy at reasonable prices," Puri said.

Refining growth story

Puri said that India's refining capacity is set to expand more than 20% over the next three years, as growing domestic and overseas demand for oil products is pushing existing refineries to run at over 100% capacity.

"It will be not very long when our refining capacity will reach close to 310 million mt, rising from 256 million mt. There will be very few refining hubs left in the world, and we will be one of them -- not only for ourselves but for our neighborhood and the larger region. A big refinery is coming up in Rajasthan and we are looking at setting up a new refinery in Andhra Pradesh," Puri added.

Dubbed the "jewel of the desert," HPCL Rajasthan Refinery Ltd. -- an integrated refinery and petrochemical complex with a capacity of 9 million mt/year currently under construction in Balotra district of Rajasthan -- has already put certain units into the pre-commissioning stage.

Commodity Insights estimates that by 2028, close to 58% of the refinery capacity increase would come from brownfield expansions, while the remaining growth will come from greenfield projects.

Outlook for upstream sector

In recent years, India has implemented a series of upstream reforms – from granting producers greater marketing freedom to allowing companies to designate areas for oil and gas exploration under the Open Acreage Licensing Policy, which enables year-round expressions of interest and subsequent auctions for earmarked areas.

Last December, the upper house of Parliament passed a bill seeking to amend the Oil Fields (Regulation and Development) Act of 1948, broadening its scope to include shale oil, shale gas, and coal bed methane, while also proposing changes like allowing international arbitration for disputes and offering a longer lease period.

"The good story in India now is that E&P is actually beginning to take off," Puri said.

According to Commodity Insights, India's crude oil output in 2024 was approximately 586,000 b/d, largely unchanged from the previous year, while gas output grew by 1.8% year-on-year to about 3.5 billion cubic feet per day, reflecting a notable 29% increase from 2.7 billion cubic feet per day in 2020.

"As a result of the policy changes, companies like BP are now happy to collaborate. We are conscious of the fact that nobody wants to commit big sums because of the past experiences. So, we are telling them -- don't commit yourself. You come in, and we'll compensate you for the technical assistance you're giving us. If we strike oil and gas, you have the right to first refusal. So that appeals to them, and that is working."

State-run Oil and Natural Gas Corporation Limited said on Jan. 8 that it had tied up with a subsidiary of BP for technical services to boost oil and gas output from its Mumbai High oil-producing field. Recently, Oil India Limited also inked a deal with TotalEnergies, under which the global energy major will provide technical expertise to the state-run producer to pursue exploration in offshore waters.

Puri said that while India was making steady progress toward its ambition of raising the share of gas in its energy mix, it was actively embracing new energy initiatives, such as green hydrogen and biofuels -- fuel which would play a much bigger role in India's energy basket in the future.