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Research Report


Jean-François Seznec
Ramesh Pallakonda
Copyright Date: Jan. 1, 2017
Published by: Atlantic Council
Pages: 29
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Table of Contents

  1. (pp. 2-3)

    India is rapidly becoming one of the largest importers of hydrocarbons in the world. It constitutes 17 percent of world’s population with over 1.3 billion people. It is the seventh largest country in the world in total land area and is the globe’s fourth largest consumer of energy after China, the United States, and Russia. Per capita usage has been growing by 5 percent every year.¹ In the 2015-16 fiscal year, India’s consumption of petroleum products rose by 10 percent to 183 million tons² or 3.9 million barrels per day (b/d).³ This trend is expected to continue in the coming...

  2. (pp. 4-5)

    It is expected that during 2015-2021, the states of Asia, mainly China and India, will continue to be major consumers of oil, with volumes expected to increase from 23.7 million barrels per day (b/d) in 2015 to 28.9 million b/d in 2021.⁸ The increase in consumption takes into account how the rate of growth is negatively affected by a reduction in subsidies and political efforts to reduce India’s carbon footprint. China and India will be central to this growth in demand, and both countries will also be building up strategic reserves during this time, with the former already taking a...

  3. (pp. 5-6)

    India is now a leading oil importer behind the United States and China and is on par with Japan (see table 2).

    While US imports have declined due to the increase in the domestic shale oil supply, countries like India and China, with higher levels of economic growth, have shown rapid increases in oil consumption and imports. Indian crude imports have more than doubled during the past decade.

    India imports small amounts of refined products but is a large exporter. This is due to a number of large refineries in India, which buy the crude oil from producers, refine it,...

  4. (pp. 6-8)

    The world is looking to both lower emissions and find lower-cost energy options. Natural gas has increasingly fulfilled the role of providing high British thermal unit (btu) content while producing substantially less pollution than coal or crude oil, especially within the production of electricity. In due course, renewable energy sources may displace carbon-based energy supplies, but until this happens, natural gas will increasingly be the fuel of choice for electricity production and continue to be the raw material used to make many chemicals and fertilizers. These trends, of course, have favored the producers of natural gas. Two of the largest...

  5. (pp. 8-9)

    India’s energy and trade policies are decided mainly at the federal level. The “Union List” details the central government’s energy responsibilities:

    Atomic energy and mineral resources necessary for nuclear energy production

    Shipping and navigation

    Trade and commerce with foreign countries; import and export across customs frontiers; definition of customs frontiers

    Regulation and development of oilfields and mineral oil resources, petroleum and petroleum products, and other liquids

    Issues and policies related to electricity are shared by both the central government and the states, with the former prevailing in case of any dispute.

    The main agencies that have relations with the Gulf...

  6. (pp. 9-11)

    RIL’s upstream business comprises the complete chain of activity, from exploration through appraisal, development, and production.

    Reliance entered the exploration and production business by becoming a 30 percent partner in an unincorporated joint venture with British Gas and the Oil and Natural Gas Corporation (ONGC) in the Panna Mukta and Mid and South Tapti blocks. Besides the Panna Mukta and Tapti (PMT) blocks, the domestic portfolio comprises five conventional oil and gas blocks in Krishna Godavari, Mahanadi, Cauvery Palar, Gujarat Saurashtra, and Cambay Basin, as well as two coal bed methane blocks in Sohagpur East and West in Madhya Pradesh....

  7. (pp. 11-14)

    India’s energy consumption profile has been changing at a rapid pace. The unique and inertia-ridden picture of India is transforming. At the household level, burning firewood for cooking in the rural areas and using kerosene stoves in the urban areas are making way for liquefied petroleum gas (LPG) cylinders. In some of the metropolitan cities, the new residential complexes have also started installing piped LPG for domestic consumption.

    The “bullock carts” (ox-driven wooden carts used in rural India mainly for transporting agricultural inputs, produce, and rudimentary equipment) are making way for increased use of tractors, harvesters, and thrashers. The Jugaad,...

  8. (pp. 14-17)

    Figures on Gulf reserves and production levels underline India’s import dependence on the GCC and Iran and thus speak to its relations with them. The GCC states together produce 24 percent of the world’s total crude oil.28 Saudi Arabia alone has 15.8 percent of global crude oil reserves.29 Qatar has the world’s third largest natural gas reserves at 13.3 percent, preceded by Iran at 18.2 percent and Russia at 16.8 percent. Qatar is the world’s biggest liquefied natural gas exporter and has the potential to augment its LNG production capacity should conditions demand it.

    India imports oil and gas from...

  9. (pp. 17-18)

    India is set to greatly increase its natural gas consumption and therefore will need to rely on foreign imports to meet demand. Iran, with its proximity and proven gas reserves, provides an excellent trade partner for India in oil and natural gas.

    Iran and India have maintained healthy bilateral relations; with increased output of Iranian crude oil, India will seek to partner with Iran in the commodities trade. Iran will also offer investment opportunities for many of the Indian oil and gas firms wishing to undertake development and exploration projects in Iran.

    India has already lined up investment worth $20...

  10. (pp. 18-20)

    To move away from the “Hindu growth rate”–afflicted economy, Prime Minister Narendra Modi’s emphasis is not just on “looking East” but also “linking West.” The Modi government wants to move away from “inclusive growth” and entitlement policies towards market-based economic policies, with an emphasis on infrastructure development and the creation of an investment-friendly environment. In pursuit of achieving faster growth in the petroleum and allied sectors, the Modi government has adopted the following measures, among others:31

    Urging all stakeholders to increase the domestic production of oil and gas to reduce import dependence from 77 percent to 67 percent by...

  11. (pp. 20-20)

    As can be expected, the Middle East imports mostly consumables and manufactured goods from India, whereas India imports oil and gas–based natural resources and downstream products, such as chemicals and fertilizers. The balance of trade is conveniently loaded in favor of the Gulf nations due to the critical demand of petroleum and chemical-based products in India.

    India’s exports to the Gulf totaled $262 billion for 2015-16, about 15.9 percent of India’s total exports as per figures available on the official website of the Indian Ministry of Commerce. Major exports to the Gulf include jewelry and precious stones, mineral fuels,...

  12. (pp. 20-22)

    The Gulf’s reliance on India as a critical export market in an era of low oil prices and, vice versa, India’s reliance on the Gulf as a reliable close-by energy supplier calls for close links.

    One of the critical projects India is presently working towards on energy security is the TAPI pipeline project. Should this project actually see the light of day the natural gas market scenario will change dramatically in India and create some competition for Qatar, presently the largest exporter of natural gas to India.

    India has a well-equipped navy and an active coast guard; each has a...

  13. (pp. 22-23)

    India greatly benefits from the lower energy prices worldwide. Between the limited growth of the economies of the Western world and competing interests among oil producers, it appears that this advantage is likely to continue for some time. The largest economies–the United States, Western Europe, and China–are not growing rapidly and are becoming more energy efficient. Furthermore, the producing countries are competing in production to protect their market shares.

    Cheaper oil imports also improve India’s fiscal deficit and current account deficit, which strengthen the rupee against the dollar while empowering the government to spend more on social and...