Mainly due to the government’s push of meeting its 20% ethanol blending target by FY25, a cumulative 28-30 million tonne (MT) of domestic petrol sales is expected to be displaced by other energy sources, analysts at Crisil said.
Initiatives to control emissions, such as aggressive adoption of compressed natural gas (CNG) and ethanol blending, are seen to slow down growth in the demand for transportation fuels like petrol and diesel.
Mainly due to the government’s push of meeting its 20% ethanol blending target by FY25, a cumulative 28-30 million tonne (MT) of domestic petrol sales is expected to be displaced by other energy sources, analysts at Crisil said. Of this, 16-18 MT sales displacement is seen to be due to ethanol blending, 9-11 MT due to CNG and 1-2 MT by electric vehicles (EV).
For petrol, demand is seen to grow at 2% compound annual growth rate (CAGR) between FY22 and FY25. Given that commercial vehicles account for around 75% of diesel consumption, where the shift towards alternative fuel is expected to be lower, diesel sales are seen to rise at around 4% CAGR between FY22 and FY25.
In the five-year period beyond FY25, there will likely be further flattening of petrol demand due to higher uptake of EV, with petrol demand growth likely dropping to a mere 1% CAGR, analysts pointed out. A total loss of 70-72 MT per annum is expected on petrol sales between FY26 and FY30 — 46% attributable to ethanol blending, 34% to CNG, and 20% to EVs. Petrol sales were at 30 MT in FY20, 28 MT in FY21 and 17.5 MT in the April-October period of the current fiscal.
Of the total expected replacement of 5-7 MT in diesel consumption between FY22 and FY25, 5-5.5 MT is expected to be on account of CNG, and 0.5-1 MT due to EVs. The consumption is seen to slow to about 2.5% CAGR between FY25 and FY30. Diesel sales were at 111 MT in FY20, 100 MT in FY21 and 42.3 MT in the April-October period of the current fiscal.
The current refining capacity stands at nearly 250 MT per annum (MTPA) and by FY30, the capacity is expected to around 360 MTPA. Against this, domestic demand for petroleum products is expected to grow at a slower pace from 214 MT in FY20 to 290-310 MT by FY30.
With muted petrol and diesel sales growth and potential lower refinery utilisation, refiners are likely to gain from optimally integrating their current refining processes to yield more chemical products per barrel of oil. “From being a net importer of many petrochemicals so far, it will shift to becoming an exporter amid plant shutdowns in Europe and continued demand from China,” Crisil said.