India Ratings and Research (Ind-Ra) has published the June 2018 edition of its credit news digest on India's oil and gas sector. The report highlights the trends in the sector, with a focus on domestic production, import, consumption, refining and gross under-recovery, regulatory changes and recent rating actions.
India's crude oil dependency has increased, indicated by stagnant domestic production and increased imports since 2012. According to Petroleum Planning & Analysis Cell (PPAC), the average crude oil import dependency was 82.8% of the total crude oil consumption in FY18 compared with 81.7% in FY17. PPAC estimates crude imports of 227 million metric tons (mmt) for FY19 (FY18: 220mmt).
Crude imports increased 22.5% from a monthly average of 15.1mmt during 1QFY13 to a monthly average of 18.5mmt during the three months ended May 2018 due to sustained demand. On the other hand, domestic crude production has been stagnant at 3.0mmt-3.1mmt since 1QFY13. Crude imports continue to increase despite rising international crude prices since February 2016, thus indicating strong demand for crude and dependence on crude imports to fulfil the same.
Meanwhile, domestic natural gas (NG) production continuously declined during FY13-FY17 and grew 2.2% to 89.7 million metric standard cubic metres per day in FY18 (FY13: 111.4 million metric standard cubic metres per day). This has led to increased reliance on the import of re-liquefied natural gas, as domestic consumption has been gradually increasing.
Furthermore, India's crude oil production decreased 3.0% yoy in May 2018. During the month, the production volume of fields underproduction sharing contracts increased 0.6% yoy, while it declined for Oil India Limited and Oil & Natural Gas Corporation Limited by 1.0% yoy and 4.8% yoy, respectively.
In May 2018, refining throughput was 22.2mmt, up 6.8% yoy. The refining throughput was up 2.7% yoy in FY18. Public sector refineries processed higher volumes on a year-on-year basis, supporting the overall increase in the throughput. During the month, India's petroleum product output increased 4.9% yoy to 22.2mmt. On a cumulative basis, the production was 4.5% yoy higher in FY18.
In May 2018, NG production was 1.5% yoy lower and NG consumption was 6.2% yoy higher. During the month, Oil & Natural Gas Corporation's production volume rose 0.9% yoy, while that of Oil India and private/joint venture fields declined 7.1% yoy and 7.4% yoy, respectively. The increase in consumption was on account of an increase in domestic demand. Moreover, there was a 16.7% yoy increase in liquefied natural gas imports during May 2018. On a cumulative basis, liquefied natural gas imports were up 7.3% yoy in FY18.
Domestic NG price has been raised by about 6.0% to USD 3.06/million British thermal units (mmbtu) for April-September 2018. It was raised by about 17.0% to USD 2.89/mmbtu for October 2017-March 2018 after it was downwardly revised five times consecutively since the implementation of the domestic gas pricing formula in October 2014. The increase in the NG price is likely to affect fertilizer, power and city gas distribution entities, as they are primary consumers of NG.
