Oil PSUs IOC, HPCL, BPCL betting on natural gas as next big thing

India’s state oil refiners are planning an aggressive push into natural gas in coming years to meet Prime Minister Narendra Modi’s goal of making the fuel a bigger part of the country’s energy mix.

State-owned oil companies - Indian Oil, Bharat Petroleum and Hindustan Petroleum - are planning to raise gas contributions to between 5 and 15 per cent of their incomes over the next few years, up from nearly none now, company executives said.

This in line with a government target to raise the natural gas portion of India’s primary energy mix to 15 per cent by 2030, up from 6.5 per cent now, to help meet climate targets and rein in rampant pollution.

The increase would come mostly at the expense of coal, which is dirtier than gas and is India’s most-used energy source. Liquefied natural gas (LNG) imports will cover the greater part of the growth, although the government also hopes to recover untapped domestic reserves off its east coast.

“Gas is an important part of our portfolio going forward,” M.K. Surana, chairman of HPCL told Reuters, noting that the government push was expediting the development of gas in India.

With China, Pakistan and Bangladesh also increasing gas use, the surge in Asian demand is expected to help eat up a global glut of LNG supplies by 2021-2022.

BPCL, another leading Indian refiner, sees natural gas pulling in 5 to 10 per cent of its overall revenue in less than a decade, from barely any now, its director of refineries, R. Ramachandran, told Reuters.

The state oil companies’ plans involve building LNG import terminals and domestic pipelines, and bidding to set up urban gas networks across potential major demand centres, particularly in the eastern part of the country.

India’s natural gas consumption is expected to rise to 70 billion cubic metres (bcm) by 2022 and 100 bcm by 2030, according to a government think tank and the Oxford Institute of Energy Studies, up from 50 bcm now. India burns just 7 per cent of what top user the United States consumes in a year with about a quarter of India’s population.

At 100 bcm, India would move into the top 10 of global natural gas consumers at current consumption figures.

Indian Oil Corporation

Hindustan Petroleum Corporation Ltd.(HPCL)

Bharat Petroleum