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India reappoints Puri as oil minister in push for energy diplomacy, upstream growth


Puri gets second term as India's petroleum minister

Analysts expect policy continuity on oil diversification

Ensuring affordable energy, upstream growth among priorities

  • Author
  • Sambit Mohanty
  • Editor
  • Aastha Agnihotri
  • Commodity
  • Crude Oil Natural Gas Upstream

India's newly elected government named former diplomat Hardeep Singh Puri as the petroleum minister for a second term -- a move aimed at ensuring policy continuity on oil diplomacy and upstream fronts, as the country eyes top spot for oil demand growth.

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Puri, who took reins of the petroleum ministry for the first time in 2021 when the pandemic was in full swing, will be aiming for polices to ensure that domestic oil and gas prices remain under check, analysts and trade sources reckoned.

Puri has said in the past that there is a need for an orderly transition to cleaner energy without vilifying fossil fuels.

"For oil and gas multi-national companies, the appointment of Puri again as the petroleum minister provides the comfort of continuity of policy and renewed focus on energy sector reforms," said a senior official at a leading oil multi-national based in India.

According to the International Energy Agency, 1 million b/d of new refinery distillation capacity would be added in India over the next seven years -- more than any other country in the world outside of China. According to S&P Global Commodity Insights, Indian oil demand is expected to grow to as high as 5.54 million b/d in 2030 from about 4.5 million b/d in 2023.

Oil diplomacy a key priority

Prior to the Russia-Ukraine conflict, more than 60% of the Indian crude basket was made up of Middle Eastern crudes, with North America, West Africa and Latin America being the other major contributors. But in 2023, Russia contributed about 40% of India's total crude imports, rising from as low as 5% in 2019, and snatching away market share from other leading supplying regions, according to Commodity Insights.

But Puri has defended India's crude import diversification, including purchases from Russia and other new suppliers, adding that it had helped to ease the pressure on other mainstream oil producers and keep world prices in check, while also helping to keep fuels affordable in the domestic market.

"Continuity of policies and good governance seems to be core feature of Modi's third term, which aligns with the broader vision of developing India as one of the most progressive and top three global economies. Hence, it's pleasing to see that most of the senior leadership teams of the government remains unchanged and it augurs well with regards to the continuity of vision and seamless execution," said a former Indian oil industry CEO.

"Having ably steered India through the critical energy crisis especially post the pandemic, ushering in more of the green initiatives and diversity to the energy portfolio and deeper economic molecule penetration will be key focus for Puri during the third term," he added.

Evolving energy landscape

Puri new tenure comes with some familiar challenges of keeping energy supply affordable, reliable and clean -- all of which underpin the goal for natural gas to have a 15% share of the country's primary energy mix by 2030.

The government first set the 15% target in 2017 when the share of gas was just over 6%, but in the years since the needle has not moved much. While the 15% target has remained unchanged, the energy landscape has evolved rapidly during that period, raising questions among analysts on how soon India can move towards that target.

Another key priority for Puri will be to revive the upstream segment.

Upstream output has been declining nearly 1.1% on a compound annual rate over the past 10 years due to a natural drop in mature fields as well as the lack of monetization of existing discoveries and a reduced number of new discoveries, according to Commodity Insights.

The fossil fuel industry in India will be also closely watching Puri's policy move on bringing oil and gas prices under the Goods and Services Tax regime, traders and analysts said.

Their inclusion will be a tough task for the bipartisan GST Council as that will require complex consensus-building across states in a federal political system, according to Dharmakirti Joshi, India chief economist at CRISIL, part of Commodity Insights.