premium
  • Report
  • Energy Equipment & Services
  • Refining and Marketing
  • Premium
  • CRISIL Research
  • Energy and Natural Resources
September 01, 2019

Sector Report: Refining and Marketing

This report is available to users in India for ₹40,000 + applicable taxes

 

Table of Contents

 

  • Summary
  • Overall demand
  • High-speed diesel
  • Liquid petroleum gas
  • Motor spirit
  • Naphtha
  • FO/ LSHS
  • Superior kerosene oil
  • Aviation turbine fuel
  • Bitumen
  • Petcoke
  • Domestic supply
  • Global demand
  • Global supply
  • GRMs
  • Under-recoveries

 

Summary

 

Petroleum products demand to grow at ~3.6% CAGR until fiscal 2024

 

Over the next five years, demand for petroleum products is expected to log ~3.6% CAGR to reach 250-252 million tonne per annum (MTPA) by fiscal 2024, compared with 5.6% CAGR during fiscals 2014-2019, largely driven by motor spirit (MS) and jet fuel.

 

The demand for MS is expected to grow at 6.5-7.0% CAGR against a growth of over 10% witnessed in the past five years. This moderation in demand would be on account of higher competition from compressed natural gas and emerging technologies such as electric vehicles (EVs). The government intends to shift three-wheelers and two-wheelers running on fossil fuel to electric vehicle in a phased manner. This is likely to impact petrol consumption from fiscal 2023 or 2024 onwards. We expect petrol consumption to further moderate towards the end of fiscal 2024.

 

Further, improving fuel efficiencies, substitution of petrol by CNG on account of cost advantage, development of urban infrastructure projects such as metro and increasing popularity of cab aggregation are the key factors that are likely to restrict petrol volume growth.

 

The diesel demand is expected to clock a subdued ~2.5-3.0% CAGR as commercial vehicles (CV) sales are expected to see sluggish growth. The slower demand would be more pronounced in fiscal 2020 due to a decline in freight movement on account of slower industrial activity. However, going forward, industries and infrastructure porject execution are expected to revive and freight transport is likely to see an improvement. However, slower growth in the sales of CVs and diesel cars (cars and utility vehicles) will restrict demand for diesel.

 

The other factors that are likely to limit the volume growth in this category are electrification of the railways (for which the government has set a target); electrification of industrial areas; shift of agri pumpsets from diesel to electric and solar; and declining power deficit scenario, leading to lesser consumption of diesel in DG sets.

 

Similarly for LPG, we expect the demand to grow slower than in the previous five years as new connection targets are almost achieved and the additional demand would be more dependent on these connections (free connections given to rural and below poverty line category) opting for refilling. The refilling data, though, is quite encouraging as close to 75% of the free connection LPG consumers came for refilling. However, as the per capita consumption is lower for the rural as well as BPL categories, the increase in growth would be moderate. Further, aggressive network expansion in the city gas distribution segment would displace demand from the LPG segment. Hence, considering these factors, we expect LPG to grow 5.0-5.5% during the forecast period.

 

Other products such as aviation turbine fuel (ATF) and naphtha expected to contribute to the growth of overall petroleum product over the period as new capacities are expected to be added in both the segments. On the other hand, petroleum products such as fuel oil (FO), petcoke and superior kerosene oil (SKO) are expected to witness a decline in growth due to regulatory restrictions.