Mumbai, July 16: After growing at a breakneck pace, hydrocarbon consumption in India will see its first drop in many years in 2009, London-based market research firm Datamonitor said.
Total oil and gas consumption in the country, which has grown by an average of 4.5% in the last four years to 1.29 billion barrels of oil equivalent in 2009, will decline 6.3% this year, said the firm.
Consumption will go back to the 2008 levels by 2011, Datamonitor said in its ‘India Oil & Gas’ report. Even after a recovery in 2010, consumption growth will remain sedate as the average growth rate will drop to less than half of what it was — or 2% — during the five years between 2008 and 2013, it added. Growth in the consumption of oil and gas in India had hit a near-term high of 5.9% in 2006.
The Indian oil and gas market is dominated by state-owned companies such as the Oil & Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC), etc, but private sector companies such as Reliance Industries, Essar Oil and Cairn Energy are playing an increasingly important part.
“The exceptional growth demonstrated by the Indian oil and gas market in 2008 will not be sustained this year as the full impact of recession becomes apparent and pushes the market into a short decline. With recovery forecast for 2010, growth is expected to return quickly but remain at a lower rate than had previously been achieved,” the report said.
Experts felt most of the decline in consumption could be attributed to lower levels of industry activity. Lower demand for diesel, which accounts for around 35-40% of the market, is seen as the biggest contributor to the downturn.
“There is an overall slowdown in industrial activity, especially in areas where large-scale transportation is involved and transporters account for a large part of the overall demand from the vehicular sector. Many of them are filling up less often now as business has turned slow,” said Madhu Ninan, an analyst with Petrowatch, a market intelligence firm for the oil industry.
The 6.3% decline in volume, combined with the steep drop in crude prices, will also see a drastic reduction in the overall industry size in terms of revenues. It will drop from $107 billion (Rs 4.68 lakh crore) in 2008 to $73 billion (Rs 3.21 lakh crore) in 2009, a drop of 31%.
Like consumption, topline growth will remain muted at an average of 2% over the next four years, it said. It had grown at an average of 32% during the four years ended 2008.
–Agencies