Consumption growth of petroleum products falls short of estimates
DSIJ Intelligence / 21 Nov 2011
According to the Petroleum Products Planning and Analysis Cell (PPAC) the consumption of petroleum products in India grew at a mere 3.61 per cent in the first six months of 2011-12, much lower than the growth that has been witnessed in recent years and its projection of 4.58 per cent made earlier this year.
However, the consumption growth is pretty much in line with global trend as demand has been continuously revised down each month by all leading international agencies (EIA, IEA and OPEC) this year due to sluggish economic growth and macro-economic concerns.
The sluggish growth rate can be attributed to lower consumption demand for petrol and diesel products that account for over 50% of petroleum products’ consumption.
Sale of diesel grew by 5.9 per cent in H1FY12 against a growth of 6.6 per cent in FY11. In fact, in a rare case scenario, consumption of diesel grew at a higher rate than petrol, which saw a growth rate of just 4.8 per cent against 10.7 per cent in 2010-11.
The sharp decline in all-India power deficits and slow down in infrastructure related activities are being stated as the main reasons for low diesel growth. Petrol consumption took a beating due to regular price hikes, up 39 per cent since April 2010 following its decontrol. As a result, consumers have been forced to judiciously use these petroleum products.
However, petroleum products’ consumption growth of 6.1% in Sep 2011 was fueled by a strong growth in LPG (up 10 per cent against 9.1 per cent in 2010-11 on the back of expanding coverage) and ATF growth of over 10 per cent.
Also the 3.61 per cent growth in H1FY11, while being lower than the projected rate, is marginally better than the 2.9 per cent growth in 2010-11.
On the output side, the country's September crude oil output remained almost stagnant year-on-year with the country's exploration companies producing 3.118 MT of oil as against 3.115 MT in the same month last year.
Crude oil output was affected by a 3.4 per cent drop in production at ONGC's Mumbai High offshore fields to 1.349 MT. Also, production rose by just 1% to 525,000 tonnes in Cairn India-operated Rajasthan fieldsagainst 520,000 tonnes in September last year.
Domestic OMC’s processed 10.3 per cent more crude oil at 9.057 MT in September 2011 against 8.213 MT in Sept 2010. Indian Oil Corporation, the nation's largest refiner, converted 20.7 per cent more crude oil at 4.088 MT. Hindustan Petroleum Corporation raised output by 33.9 per cent to 1.405 MT. However, BPCL’s output fell by 10.3 per cent to 1.645 MT.
In conclusion, the consumption and demand for petroleum products is expected to remain muted owing to sluggishness in economic development activity. However given the prevailing demand-supply deficit in the domestic oil & gas industry it is necessary that the output of petro products continues to grow in line with the industry needs. Any fall in output would result in higher dependence on imports and could severely dent the financial performances of the companies going forward.
However, the consumption growth is pretty much in line with global trend as demand has been continuously revised down each month by all leading international agencies (EIA, IEA and OPEC) this year due to sluggish economic growth and macro-economic concerns.
The sluggish growth rate can be attributed to lower consumption demand for petrol and diesel products that account for over 50% of petroleum products’ consumption.
Sale of diesel grew by 5.9 per cent in H1FY12 against a growth of 6.6 per cent in FY11. In fact, in a rare case scenario, consumption of diesel grew at a higher rate than petrol, which saw a growth rate of just 4.8 per cent against 10.7 per cent in 2010-11.
The sharp decline in all-India power deficits and slow down in infrastructure related activities are being stated as the main reasons for low diesel growth. Petrol consumption took a beating due to regular price hikes, up 39 per cent since April 2010 following its decontrol. As a result, consumers have been forced to judiciously use these petroleum products.
However, petroleum products’ consumption growth of 6.1% in Sep 2011 was fueled by a strong growth in LPG (up 10 per cent against 9.1 per cent in 2010-11 on the back of expanding coverage) and ATF growth of over 10 per cent.
Also the 3.61 per cent growth in H1FY11, while being lower than the projected rate, is marginally better than the 2.9 per cent growth in 2010-11.
On the output side, the country's September crude oil output remained almost stagnant year-on-year with the country's exploration companies producing 3.118 MT of oil as against 3.115 MT in the same month last year.
Crude oil output was affected by a 3.4 per cent drop in production at ONGC's Mumbai High offshore fields to 1.349 MT. Also, production rose by just 1% to 525,000 tonnes in Cairn India-operated Rajasthan fieldsagainst 520,000 tonnes in September last year.
Domestic OMC’s processed 10.3 per cent more crude oil at 9.057 MT in September 2011 against 8.213 MT in Sept 2010. Indian Oil Corporation, the nation's largest refiner, converted 20.7 per cent more crude oil at 4.088 MT. Hindustan Petroleum Corporation raised output by 33.9 per cent to 1.405 MT. However, BPCL’s output fell by 10.3 per cent to 1.645 MT.
In conclusion, the consumption and demand for petroleum products is expected to remain muted owing to sluggishness in economic development activity. However given the prevailing demand-supply deficit in the domestic oil & gas industry it is necessary that the output of petro products continues to grow in line with the industry needs. Any fall in output would result in higher dependence on imports and could severely dent the financial performances of the companies going forward.
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