India is poised to augment its crude oil refining capabilities substantially in the coming seven years, with a planned addition of 56.6 million tonnes per annum (mtpa) of capacity. An impressive 84 percent of this expansion is anticipated to be achieved through brownfield expansion efforts. Currently, India stands as the world’s fourth-largest refiner, boasting a cumulative refining capacity of nearly 254 mtpa, equivalent to just over five million barrels per day (mb/d).
According to the Ministry of Petroleum and Natural Gas (MoPNG), India will usher in nine mtpa of refining capacity through greenfield expansion. A retrospective look reveals that between 2014 and 2023, India augmented its refining capacity by a total of 38.9 mtpa, with 39 percent stemming from greenfield projects and the remaining 61 percent from brownfield expansions. In the preceding years from 2010 to 2014, India added 29.7 mtpa capacity through brownfield expansion, showcasing a continued commitment to refining growth.
The Centre for High Technology (CHT), a technical arm of MoPNG, predicts that Indian refineries’ capacity will grow by around 56 mtpa by 2028, emphasizing the nation’s resolve to enhance its refining capabilities further.
In fiscal year 2023, Indian refineries impressively processed 5.13 mb/d of crude oil, amounting to 255.2 million tonnes, compared to 4.85 mb/d or 241.7 mt in the previous year. August 2023 recorded crude processing at 5.28 mb/d or 21.9 mt (provisional data), while in the initial months of fiscal year 2024 (April-August), the crude processing stood at 5.25 mb/d or 109.5 mt.
As of September 2023, India boasted a total crude oil transportation pipeline spanning 10,938 km with a capacity of 153.1 mtpa. The refined products transportation pipeline extended over 22,973 km with a capacity of 149.3 mtpa.
The government’s drive to expand the refining sector is spurred by India’s burgeoning demand for crude oil, propelled by the growth of its industrial, construction, and manufacturing sectors. Furthermore, following the Russia-Ukraine conflict, Indian refiners have emerged as pivotal destinations for refining activities.
CareEdge Ratings highlighted that fiscal year 2023 was a remarkable period for Indian refiners, marked by exceptionally high gross refinery margins (GRMs). These impressive results were primarily due to disruptions in supply and demand dynamics resulting from the Russia-Ukraine war in February 2022.
The rising refining capacity in FY23 was attributed to robust domestic and export demands for refined products, the availability of cost-effective Russian crude, limited global additions to refining capacities, a substantial post-pandemic surge in refined product demand, and geopolitical disruptions. These factors collectively contributed to Indian refiners consistently achieving significantly higher GRMs than the benchmark Singapore GRMs over the past three years. As a result, the credit profiles of Indian refiners improved.
Hardik Shah, Director of CareEdge Ratings, noted that in the first quarter of fiscal year 2024, Indian refiners maintained healthy GRMs, ranging from $7 to $12 per barrel, depending on the complexity of their respective refineries. Looking ahead to the remainder of FY24, despite higher crude prices and potential constraints on the availability of Russian crude, GRMs are expected to remain in the range of $9 to $10 per barrel. This expectation is based on the anticipation of declining margins when processing Brent crude, contrasted with substantial margin expansion when processing Russian crude.
