7th May 2010 - India: Prospects And Challenges

When shipping gurus discuss prospects for the global tanker industry, there is a strong consensus that China's rapid economic growth and its increasing dependence on the international crude markets will continue to be a key driving force for seaborne oil transportation. Yet, at the same time, quite a few seem to overlook if not to discount the huge potential of China's largest neighbour - India.

With more than 5.7% GDP growth last year despite global recession and an expectation of 8.8% growth this year and around 8% per annum over the next five years, India is the second fastest-growing major economy in the world. At the same time, the country's oil needs, currently at 3.3 million b/d according the IEA, are largely met by imports, as domestic crude oil production is only 0.8 million b/d.

As in China, present oil consumption per person in India is much smaller than in developed economies, thus the long-term growth prospects are immense. However, there are challenges. As recently admitted by the state, the poor government of domestic infrastructure remains a major obstacle to economic development and so gains in oil demand this year and next are projected to be much smaller than in China, at around 0.1-0.2 million b/d per annum. As a result, the Indian authorities have made building of roads, bridges, airports and power plants a high priority.

Meanwhile, further investment in refining capacity is planned, with an additional 0.65 million b/d crude distillation due on stream in 2010/11 and a further 0.3 million b/d in 2012. With limited growth prospects for domestic crude oil production, this would indicate crude imports potentially rising by almost 1 million b/d over the next three years, from around 3 million b/d currently. In addition to forecast increases in crude imports, we should not forget the likes of Reliance, with significant product exports to international markets both East and West.  As refining capacity will grow much faster in the near term than oil demand, this suggests a further growth in product exports.

Therefore, there will be more crude in AND more products out. With this in mind, India undoubtedly will look very different in 5 years from now and its influence on both crude and products tanker markets will grow exponentially.