India’s Import Dependency on Crude Oil to Increase in FY25
India is facing a challenging scenario in terms of its crude oil production, as domestic exploration and production companies are struggling to maintain output levels from mature fields. This natural decline in production is expected to result in a 2-3% decrease in crude oil production in FY25. This trend is likely to continue in the near future, with only low single-digit growth projected for FY26.
As a result of this decline in domestic production, India’s import dependency on crude oil is expected to increase in FY25. The country’s crude oil import dependency stood at 88.1% in the first seven months of FY25, with Russia being the largest supplier of oil to India. This increase in import dependency is driven by faster growth in petroleum product demand compared to domestic production.
On the natural gas front, Fitch Ratings expects India’s total gas consumption to rise by around 10% in FY25, supported by increasing demand from key sectors and policy measures promoting cleaner fuels. However, the growth in natural gas production is expected to be modest, with a low single-digit increase projected for FY25. This growth is partially attributed to ONGC’s development projects in the KG Basin field.
In terms of gas prices, CGD companies may raise prices for piped natural gas (PNG) and compressed natural gas (CNG) due to a shortfall in domestically produced gas. The government’s decision to reduce the allocation of domestic natural gas to CGD companies has also contributed to this price hike. This situation is expected to continue as companies rely on more expensive deep-water offshore fields and LNG imports to meet demand.
Overall, the future of India’s energy sector seems to be in flux, with challenges in crude oil and natural gas production posing a threat to the country’s energy security. Efforts to boost domestic production and explore alternative energy sources will be crucial in addressing these challenges and reducing import dependency in the long run.
