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Indian energy import dependency rises despite industrial output declines

21st November 2019

By: Ajoy K Das

Creamer Media Correspondent

     

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KOLKATA (miningweekly.com) – The Indian energy market is showing dichotomous trends with falling industrial output in line with lower demand for oil and natural gas, but import dependency on imported fossil fuels rising at the same time.

Government data shows that Indian oil and natural gas demand declined 1.4% during April to September 2019, against a growth of 3.5% during the corresponding period of 2018. This is in line with overall declining economic growth and de-growth in industrial output, as reflected by an index of industrial production, which contracted 4.3% during September – the sharpest fall since 2012.

But despite the fall in demand for fossil fuel energy, India’s dependency on imported oil and natural gas increased to 84.5% during April to September, up from 83.3% during the corresponding period of the previous year, largely owing to a sharp fall in domestic production.

Imported natural gas accounted for 51.2% of domestic demand during the period, up from 48.7%, during April to September 2018.

The increase in import dependency, despite declining economic growth and industrial output, comes in the wake of government’s ostensible aim of lowering imported crude oil and natural gas dependency to 67% by 2022.

India’s total crude oil production during April to September 2019 has been recorded at 16.37-million tons, down 5.96% over the corresponding period of the previous year. State-run ONGC, the largest domestic exploration and production (E&P) major, produced 10.25-million tons, down 4% over levels achieved in the corresponding period during the previous year.

Another State-run E&P company, Oil India Limited, recorded production of 1.61-million tons during the period, down 4.24% over the corresponding previous year period.

Fields operated by private E&P operators recorded a much sharper fall in output of 74%. Total natural gas production by all operators was down 1.5% at 16-billion cubic meters.

The situation is no different in the case of thermal power generation input, coal.  Electricity generation contracted 2.6% during September, but coal imports during April to September 2019, were up 9.3% at 126.91-million tons.

The combined impact of increasing energy import dependency, changing geopolitical dynamics and sanctions on Iran, has forced India to aggressively step up sourcing from till now non-traditional countries like the US.

Indian imports of crude oil, liquefied natural gas (LNG) and coking coal from the US have been forecast to increase 42% to $10-billion by the close of the current financial year.

“During 2018/19, India’s total imports of crude oil, LNG and coking coal were $7.2-billion and this is expected to increase to $10-billion in view of mounting geopolitical uncertainties, rising US production and domestic appetite for energy and opportunities to increase energy cooperation between India and US,” Indian Petroleum and Natural Gas Minister Dharmendra Pradhan said in a statement against the backdrop of India-US strategic energy partnership signed in 2016.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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