Oil imports set to rise amid sluggish output

New Delhi: India's rising oil consumption will support its investments in refining capacity additions and upstream production, but imports will keep growing amid stagnant production, Moody's Investors Service said on Monday.

The country's dependence on imported crude oil to meet its needs has risen to 83.7 per cent in 2018-19 fiscal year from 82.9 per cent in 2017-18. Import dependence was 80.6 per cent in 2015-16.

In a report on regulatory and security policies in emerging markets, Moody's said all petroleum products in India are now sold at prices linked to international or regional market rates, which has opened up the fuel retail market.

But national oil companies - Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) continue to enjoy over 90 per cent market share in petroleum product distribution, it said.

The three oil refining and marketing national oil companies (NOCs) control 57,944 petrol pumps out of a total of 64,624 petrol pumps in the country.

India consumed 211.6 million tonnes of petroleum products in 2018-19, up from 206.2 million tonnes in the previous year. Fuel consumption was 184.7 million tonnes in 2015-16.

Though the country is short in producing crude oil, which is turned into fuel at refineries, it manufactures surplus petroleum products.

In 2018-19, production of petroleum products was 262.4 million tonnes. Also, two upstream national oil companies, Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) produce about 70 per cent of India's oil and 80 per cent of its natural gas.

The government continues to set the selling price of natural gas in the country.

This is, however, linked to international benchmarks, it said adding that oil and gas companies in India are largely exposed to the same level of price volatility risks as most international oil companies.

"India's oil and gas consumption will support its investments in refining capacity and upstream production, but crude imports will keep growing amid stagnant production, and government pressure for shareholder returns will temper NOC credit quality," Moody's said.