In 2020, India was the third-largest consumer of oil, accounting for ~5.3% of the global oil consumption. Oil and gas jointly accounted for ~35% of the country’s overall energy mix in 2020. Consumption of oil and gas industry in India stood at 4,669 thousand barrels per day in 2020 and is projected to reach 6,132.28 thousand barrels by 2026, expanding at a CAGR of 4.4% during the 2021 – 2026 period.

Production insights

As of 2020, there were 4.5 Bn barrels of proven oil reserves and 1.33 Trn cubic meters of proven natural gas reserves in India. In 2020, India accounted for ~0.9% of the global oil production and ~0.6% of the global natural gas production. The production of oil and natural gas has fallen since 2018. The low productivity of aging oilfields and falling prices have led to a decline in production volumes.

Production slumped further in 2020 in the wake of the COVID-19 pandemic. Unavailability of workers, restrictions on mobility, low offtake from key consumers, and closure of offshore gas fields had a massive impact on production in 2020. However, the government’s impetus to increase the share of natural gas in the energy mix and to reduce import bills is expected to foster the production of natural gas during the forecast period.

Consumption insights

A rapidly growing population, industrialization, and urbanization contributed to the steady increase in oil and natural gas consumption. India is heavily reliant on imports to meet its demand for oil and gas – ~80% of oil demand and ~50% of natural gas demand are met through imports.

In 2020, mainly in the second quarter of CY 2020, stringent lockdowns because of the pandemic impacted the demand for oil and gas in the transportation and industrial sectors.

Market influencers

The growth of the Indian oil and gas industry has been driven by an increasing population, rise in per capita income, and rapid urbanization. A significant development in infrastructure, coupled with the ease of doing business, has motivated the entry of key foreign players such as BP plc, Saudi Aramco, Abu Dhabi National Oil Company (ADNOC), and Total SA.

The positive outlook of the Indian transportation sector played an instrumental role in supporting the growth of the oil and gas industry. Light-duty and heavy-duty vehicles are the leading consumers of oil and gas, followed by aircraft, marine, and rail.

Exploration of novel and unconventional sources using frontier oil-producing technologies will boost production. However, factors such as reductions in domestic production, heavy reliance on imports, dominance of state-owned companies, and limited infrastructure investments are impeding market growth.

Impact of COVID-19

The oil and gas industry has been experiencing massive difficulties because of the international price war on one side, and the pandemic on the other. These will have a substantial impact on the domestic market, both in the short and long term.

The nationwide and state-wise lockdowns led to a sharp dip in mobility, transportation, and industrial activities, resulting in a slump in oil consumption. Low demand for oil, gas, and refined products will result in a supply-demand imbalance and a consequent price drop in the near future.

In the long run, the market is predicted to gain momentum. However, excess supply is likely to be predominant in the global market. Laying off of workers because of the pandemic is likely to result in labor shortages during the revival phase.

The focus of the industry is expected to shift towards low-cost and short-cycle sources over the forecast period. Expansion of innovative segments like shale oil and shale gas, adoption of new business models, and market consolidation are projected to be the long-term trends in the market.

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In 2020, China’s natural gas production reached 192.5 billion cubic meters, a year-on-year increase of 9.8%, of which coal-to-gas production was 4 billion cubic meters; coal-bed methane production 6.5 billion cubic meters; and shale gas production exceeded 20 billion cubic meters. In China, conventional natural gas reserves and production are insufficient to meet the growth in demand. With limited room for growth in China’s domestic natural gas production, importing natural gas is necessary.

As of the end of 2020, the total receiving capacity of China’s LNG terminals reached 87 million tonnes/year, a year-on-year increase of 14.2%, with an additional annual receiving capacity of 10.85 million tonnes/year. Besides, the potential of ongoing and upcoming projects is huge. If these projects are completed as scheduled, it is estimated that by the end of 2025, China’s LNG receiving capacity will be close to 180 million tonnes/year.

In 2020, There were 24 LNG import sources for China, among which Australia ranked first with 46% of imports and Qatar ranked second, followed by Malaysia and Indonesia. The top 5 import sources of pipeline gas were Turkmenistan, Uzbekistan, Kazakhstan, Myanmar and Russia.

In 2020, China imported 101.66 million tonnes of natural gas (about 140.3 billion cubic meters), a year-on-year increase of 5.3%. Among them, the import volume of LNG was 67.13 million tonnes, a year-on-year increase of 11.5%. The import volume of gaseous natural gas was 34.53 million tonnes, a year-on-year decrease of 4.9%. According to CRI, impacted by the increase of domestic gas production and the COVID-19 pandemic, the growth of China’s natural gas imports slowed down in 2020. China’s degree of dependence on imported natural gas was about 43% in 2020, 2% lower than in 2019.

In the first half of 2021, China’s natural gas imports increased significantly. According to China Customs, from January to June 2021, China imported 59.82 million tonnes of natural gas, an increase of 23.8% over the same period in 2020, and the import value was CNY136.24 billion, an increase of 9.5% over the same period in 2020.

During the first half of 2021, the growth of China’s natural gas imports mainly happened in LNG sector. The January and February of 2021 was the winter season in China, which was much colder than the same period in 2020. Temperatures in most parts of China plunged, so residents’ demand for LNG for heating rose sharply, prompting a significant increase in China’s LNG imports. As the temperature rose in March 2021, residents’ demand for heating weakened, and thus natural gas imports decreased. However, as the “coal-to-gas” project continued, industrial and commercial demand for natural gas kept growing, prompting China’s natural gas imports to increase again. On the whole, China’s natural gas imports increased significantly in the first half of 2021.

Regarding import sources, in the first half of 2021, China’s LNG imports were from 24 countries, of which Australia still ranked first in, accounting for 39% of imports. Malaysia ranked second, accounting for 12%, followed by Qatar, the United States, and Indonesia. China’s import sources of pipeline gas are relatively fixed. They are Turkmenistan, the Russian Federation, Kazakhstan, Myanmar, and Uzbekistan.

According to CRI, considering natural gas extraction in China, non-state-owned capital is subject to many restrictions. But private enterprises and foreign capital can invest in shale gas, coalbed methane, LNG, and terminal gas supply. These fields are currently encouraged by the Chinese government and enjoy certain preferential policies. For a long time, China’s LNG import companies were only China’s three state-owned petrochemical companies: CNPC, Sinopec and CNOOC. With the easing of Chinese government’s restrictions on LNG import, some non-state-owned enterprises have also gradually been allowed to import LNG and build LNG terminals.

According to CRI’s forecast, with the development of China’s economy, industry and urbanization, as well as its increasingly stringent environmental protection policies, the substitution of natural gas and LNG for coal is continuing. It is expected that China’s demand for natural gas and LNG will continue to rise in the next few years. In China, more than half of households still use wood or coal as their main fuel, which means that there is huge room for the expansion of natural gas and LNG market. As China’s domestic natural gas production has limited room for growth, it is expected that from 2021 to 2025, China’s LNG imports will continue to rise.

Topics Covered:

• The impact of COVID-19 on China’s LNG import
• China’s LNG production and consumption
• Analysis of China’s LNG imports, 2016-2021
• China’s main sources of LNG import
• Analysis of prices of domestic and imported LNG in China’s market
• The key influencing factors of China’s LNG import
• Forecast on China’s LNG import, 2021-2025

Related Report: Global Small Scale Lng Market Report- Global Strategic Analysis, Size, Share, Trend, and Forecast (2022-2029)
Related Report: Research Report on China’s Liquefied Natural Gas (LNG) Import 2023-2032

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