Can India become the Net Exporter of Oil?

“From trade deficit to a net exporter of oil – Does India have what it takes?” It is a colloquial topic at industry conferences, oil forums and even on dinner table these days, the import of oil in India. For how much longer will India keep importing oil in such big quantities? Can it ever stop importing oil? If yes, then how?

The Past

India, being the world’s fourth-largest oil importer, meets 80% of its petroleum needs through imports. Through the years, the quantity of oil imported has only increased. From 184.795 million metric tons in 2012-2013 to 213.932 million metric tons in 2016-2017, India imported a record of 4.83 million barrels per day of oil in September 2017 to meet its rising local fuel demand. Total oil imports rose 4.24 per cent year-on-year to US$ 86.45 billion in 2016-17. As the Indian economy grows, it raises the demand for energy along with it, increasing the need for oil and gas. OPEC has estimated that India’s demand for oil will reach 10 million barrels per day by 2040.

Talking of rising imports can’t go without screaming ‘Trade Deficit’. In the April to November period, the country’s trade deficit shot up to USD 99.9 billion from a USD 67.9 billion from last year as imports jumped 21.9% while exports rose at a slower 12%. Purchases of petroleum, crude and other products went up and constituted 39.1% of total imports. But that’s just one side of the trade. Moving onto the country’s sales, exports jumped 30.6% year on year to USD 26.2 billion, boosted by sales of petroleum products (47.7%).

But talking about what we can say a short-term vision, we ask, can India at least balance its oil imports and exports? Can it achieve oil import independence soon?

The Present: A promising time

The answer may have been lying under the country’s nose this entire time. Prime Minister Narendra Modi has conveyed that the nation’s dependence on imports for the country’s energy requirement should see a downward spiral, decreasing by 10 per cent by 2022, and 50 per cent by 2030. Let’s see how.

The country has proved to hold 206 billion barrels of oil as reserves of which merely 67 billion barrels are being put to use. Less than 25% of India’s basins are explored. The rising demand for oil will have to be met and can be achieved by increasing India’s refining capacity. To support this movement, several Indian companies are investing in research and development of technology that can fulfill the growing demand.

One such technology identified is the Super Wave Technology. In this, shock waves are used to initiate fractures in shale reservoirs located in the depth of 1000-1500 meters. Such innovations lead to cost-effectiveness and efficiency, especially now that oil is becoming harder to find and drill. As India’s energy future remains hidden in unexplored, difficult-to-access basins across the country, the amount spent daily on foreign energy sources must be reinvested in such efforts to narrow India’s energy imbalance.

The Question stands– Can India ever be a net exporter of oil?

Union Petroleum Minister Dharmendra Pradhan said that India will increase its refining capacity to 600 million metric tons from the present 230 million metric tons to feed the growing local demand. Refineries that can fulfill local demands and, thereafter, prove to be export-oriented can help India become a net exporter.

The government will need to seriously rethink and plan its efforts towards making India more than self-sufficient. India also need not worry about making capital investments in such projects as it will attract the benefit of external finances. Just like China was transformed into a manufacturing and an export heaven, FDI will do the same magic in India as well.

Quoting PwC “the challenge before Indian companies are to take effective measures for enhancing the exploration and production of petroleum resources. Simultaneously, the infrastructure for refining, distribution, and marketing, import, export, and conservation of petroleum products must be improved.” If planned and implemented perfectly, not only can there be a trade surplus but a picture of India as a net exporter of petroleum and petroleum products can be seen clearly in the near future. It would be interesting to see the transition of an energy-dependent economy into a net exporter. But when and how it will happen remains a question.