APPEC: India’s refining expansion far from over despite energy transition: IOC chairman

15 Sept. 20-India’s exponential growth in energy demand in coming years will mean the country will still need to expand oil refining capacity, while embracing cleaner fuels like natural gas, hydrogen and renewables, Shrikant Madhav Vaidya, chairman of Indian Oil Corp, told the S&P Global Platts Asia Pacific Petroleum Virtual Conference Sept. 14.

While the world could witness peak demand for transportation fuels by 2035, India’s demand growth for those fuels would continue for a much longer period, creating the need to pursue both greenfield and brownfield refinery expansions, Vaidya said.

“India will be the growth center for oil in the long run. Post COVID-19, we are revisiting the numbers but I can say that the peak is yet to come. The Indian subcontinent will need more refineries to fulfill the appetite of transportation fuels. For IOC refineries, we have planned brownfield expansions. We will also have a couple of grassroots refineries,” he added.

But Vaidya added that with oil product cracks remaining low, having a model integrated with petrochemicals is the only way forward. “Over the long term, the focus will be on capacity augmentation, and getting into the areas of niche petrochemicals with further forward integration into textiles.”

IOC has annual petrochemicals capacity of 3.2 million mt and the ongoing projects would enhance it by more than 70% by adding another 2.3 million mt, he added. “Crude-to-chemicals is a technology frontier to capture the opportunity presented by the immense potential in petrochemicals demand, but it comes with very high capex demand. IOC is carefully evaluating various options to take forward our oil-to-chemicals ambition,” he added.

The comments from India’s biggest state-run refiner on pursuing refinery expansion come at a time when many of the world’s top oil companies are looking to cut their oil portfolio while embracing cleaner forms of energy to reduce the carbon footprint.

Vaidya added that with India’s energy consumption being just about one-third of the world average, their would be room for all kind of fuels. “It’s not a question of this fuel versus that fuel.”

He said although the world had witnessed an unprecedented oil price crash, contraction in energy demand, steep cuts in energy investments, asset restructuring and bankruptcies, the need for digitalization and the thrust on green initiatives could potentially accelerate the pace of energy transition.

“Lower prices of fossil fuels, eagerness for a faster recovery, consumer preference for personal vehicles over public transport, increased use of disposables, deterioration in the geopolitical backdrop and overall reduction in energy sector investments could act as reverse forces,” Vaidya said.

He added that natural gas would play a key role in India’s energy transition process as the country aims to increase the share of the cleaner fuel in the energy mix to 15% by 2030, from around 6.2% currently, although it was a challenging task at hand.

“Natural gas is the most promising in the Indian context in the short term, given that it is the only option that can be scaled up in line with India’s growing energy demand. We are also eyeing opportunities like small-scale LNG dispensing and mobile CNG dispensing for promoting gas as a greener transportation fuel,” he said.

Historically, limited domestic gas resources, the absence of transnational pipeline imports and lack of domestic cross–country pipeline infrastructure had constrained the natural gas sector, Vaidya said.

India’s domestic gas production, which had stagnated for many years, is expected to double by 2030. LNG storage and regasification capacity of 42.5 million mt is already available in India, which is likely to go up to 63.5 million mt by 2024, Vaidya said.

Vaidya said there was an ongoing global momentum to usher in the hydrogen economy across various sectors, with Asia-Pacific taking a leading role in that segment.“For a country like India, hydrogen has unique advantages in terms of higher energy density, flexibility of production pathways, wide range of applications and higher fuel cell efficiencies, making it a promising option to meet the energy demands in the future,” Vaidya said, adding that IOC was pushing ahead with its hydrogen research program.

“Hydrogen-spiked compress natural gas is one of the patented technologies. IOC has undertaken extensive research on fuel cells to offer low cost solutions. With refineries presenting a very attractive case for acting as the hydrogen production and supply centers, IOC is going to pioneer deployment of fuel cell technology in the country,” Vaidya added.

IOC is working on technology to develop hydrogen-spiked CNG, or H-CNG, which would involve partly reforming methane and CNG, Vaidya said. Under this process, the entire CNG of a station passes through this new reforming unit and part of the methane gets converted into hydrogen, with the outlet product having 17%-18% hydrogen.

In addition to hydrogen, IOC was stepping up efforts to expand into biofuels, such as compressed biogas and 2G ethanol, Vaidya said. “I see IOC in the next 5-10 years having a more diversified fuel offering bouquet for sure, with growing space for transition fuels.”