Why is India Increasing Its Oil Refining Capacity?

In a proactive move to meet growing national consumption, India is pledging to boost its oil refining capacity to a huge 450-500 million tonnes per annum by 2030. The figure will double the country’s existing refining capacity, with Union Minister for Petroleum and Natural Gas Dharmendra Pradhan saying the upgrades will start with the construction of a state-of-the-art refinery in the port city of Ratnagiri. When completed, the new processing plant will add 60 million tonnes per year to India’s refining capacity.

"Our refining capacity will increase from about 250 million tonnes per annum now to 450-500 million tonnes in next 10 years," says Pradhan.

India set to guzzle 472 million tonnes a year by 2040

Currently, India refines around 250 million tonnes of oil per year. This more than meets domestic consumption, which sits at around 214 million tonnes. Of course, India’s population is continually growing and by 2030 the country expects to have 1.51 billion people. Combined with economic growth, this correlates with an oil consumption increase of 335 million tonnes per year by 2030. By 2040 the government estimates it will consume 472 million tonnes a year.

To meet the insatiable thirst of its economy and population, India needs to boost its refining capacity or increase imports. Pradhan has confirmed the country is committed to the first option, confirming both brownfield and greenfield projects on the cards.

Saudi Arabia and UAE key investors

The Ratnagiri refinery has already won funding from Saudi Arabia and the UAE, with both Saudi Aramco and ADNOC investing in the project. Together the pair own a 50% share in the refinery. The remaining 50% will be co-owned by Indian Oil, Bharat Petroleum d and Hindustan Petroleum, three of the largest Public Sector Undertakings (PSUs) in India.

The Rajasthan government is also fast-tracking a joint venture with Hindustan Petroleum that will see a 9 million tonne per annum refinery constructed in the Barmer district. Existing refineries in Paradip, Panipat and Koyali will also undergo major expansions to increase capacity. While many PSU projects have encountered major delays in the past due to land acquisition issues and environmental concerns, Pradhan is optimistic the latest ventures will go ahead.

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