India’s oil & gas demand to keep rising: Fitch
New Delhi, India – India's downstream oil and gas sector is poised for continued growth in the financial year ending March 2024 (FY24), with demand for petroleum products expected to rise by a mid-single-digit percentage, according to Fitch Ratings.
According to Fitch Ratings, this follows a robust 5% yearon-year increase in the first nine months of FY24 and a noteworthy 10% post-pandemic recovery witnessed in FY23. The surge in demand for petroleum products has been fuelled by a range of factors, including heightened economic activities in the agriculture and power sectors, a surge in holiday travel, and increased auto sales.
Notably, both petrol and diesel sales recorded robust 46% increases in the first nine months of FY24, reflecting the country's economic resurgence.
Looking ahead, Fitch expects Indian refiners' gross refining margins ( GRM) to moderate during FY25 from the strong levels anticipated in FY24, albeit remaining above mid-cycle levels.
By FY26, a gradual shift closer to mid-cycle levels is foreseen, buoyed by escalating demand for end-products.
Despite the anticipated normalisation of the crude supply mix away from Russian imports, Fitch projects GRMS to remain robust, supported by the rising demand for endproducts.
In the upstream segment, domestic oil and gas production has witnessed a modest increase, driven particularly by a 5% rise in gas production during the first nine months of FY24.
Fitch anticipates production to continue to rise moderately, with technological investments in enhanced oil recovery techniques expected to offset natural declines.
The surge in demand for petroleum products has been fuelled by heightened economic activities, a surge in holiday travel, and increased auto sales
The oil and gas sector's high capital expenditure (capex) intensity is expected to persist in the medium term, especially with upstream companies focusing on production enhancement initiatives.
Overall, Fitch's outlook underscores the resilience and growth potential of India's downstream oil and gas sector, driven by rising demand and strategic investments across the value chain.