Oil Demand and Growth in India and China

Moody's Ratings highlights the shift in global oil demand growth leadership from China to India over the next decade. India, currently the world’s third-largest oil consumer, is expected to experience faster demand growth compared to China, which is the second-largest consumer.

Differences in Demand Growth

• India's Growth: Annual growth of 3-5% in crude oil consumption is expected in the next 3-5 years.
• China's Growth: Crude oil consumption will peak in 3-5 years, with demand growth slowing due to economic deceleration and increased adoption of new energy vehicles.

Reliance on Imports

• India's import reliance will increase unless production issues are addressed.
• China’s import reliance may decrease due to slower demand growth and a push for domestic production.

National Oil Companies (NOCs)

• China: Larger scale and continued investment in exploration and development, with a focus on shale gas and offshore projects.
• India: Challenges from aging wells and slower investment; plans to expand refining and petrochemical facilities.

Investment and Policy Differences

Investment trends in the oil sector reflect national priorities and government policies in both countries.

• China: Market-oriented policies; investments in downstream sectors will decline as major projects complete.
• India: Policies result in earnings volatility; reliance on petroleum sector revenues for fiscal budgets.

Environmental Regulations

• China faces stricter carbon regulations, necessitating faster transition to green technologies.
• India’s carbon regulation is still developing, with less immediate pressure on NOCs to invest in green technologies.

Energy Security and Import Dependence

• Both countries heavily depend on oil and gas imports.
• China imports over 70% of its crude and 35-40% of natural gas needs.
• India imports around 90% of crude and 50% of gas requirements.
• Energy security is a major concern, exacerbated by geopolitical risks, especially for China.

Gas Demand and Future Projections

• India aims to increase natural gas's share in its energy mix to 15% by 2030, up from 6%.
• Natural gas demand growth in India is expected at 4-7% per year through 2030.
• Factors driving demand include expansion of industrial sectors and urban gas consumption.
• Challenges include connectivity and affordability compared to cheaper renewables.