Steel consumption in Oil and gas sector rises to 1 million tonnes in FY 20

Oil and gas sector is among the eight core industries in India and plays a major role in influencing decision making for all the other important sections of the economy.

In a recent webinar conducted by SteelMint on steel pipes and tubes, Mr. Godfrey John, Director & Business Unit Head India, APAC & EMENA Welspun Corp Ltd, pointed out that although there was a setback in business on account of covid19 in the month of April 2020 but by May 2020 PSU’s in the country regrouped and they had orders from Indian Oil, BPCL and GAIL. He also pointed out that the government is bullish on the development of National Gas Grid and in fact the Minister of Petroleum and Natural Gas, Dharmendra Pradhan has recently announced investment of 17000 crores for laying gas pipelines and crude oil pipelines. Looking at the nature of proactive initiatives taken by government he expects addition in consumption of 1 million tonne per annum in years to come.

Key initiatives taken by the government of India to fuel the demand for pipes in the oil and gas sector:

• The government is planning to invest US$ 2.86 billion in the upstream oil and gas production to double natural gas production to 60 bcm and drill more than 120 exploration wells by 2022.
• The government has laid down plans for the expansion of National Gas Grid to 27,000 km from the present 16,981 km. Currently, around 7,000 km of pipeline is under construction. The share of natural gas in India’s energy basket is 6.2 per cent, against 23.4 per cent globally. The government plans to increase it to 15 per cent over the next decade.
• The Petroleum and Natural Gas Regulatory Board (PNGRB) has granted authorization to the entities for developing a City Gas Distribution (CGD) network (including PNG network) in a specified Geographical Area (GA) of the country. With the completion of 10th City Gas Distribution Bidding Round, CGD would be accessible in 228 Geographical Areas covering more than 400 districts spread over 27 States and Union Territories covering approximately 70 percent of India’s population and 53 percent of its geographical area.
• In an effort to boost Make in India initiatives and further the goal of Aatmanirbhar Bharat, state-run GAIL is processing line pipe tenders of more than Rs 1,000 crore for around 100,000 tonne steel procurement by September 2020. This would translate to progressive supply of 800 kilometre of line pipe from domestic bidders.
• The government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023

Road Ahead

India’s economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment. As per a report by BP Energy Outlook 2019, Crude oil consumption in India is expected to grow at a CAGR of 3.60 per cent to 500 million tonnes by 2040 and Natural Gas consumption in India is forecast to increase at a CAGR of 4.31 per cent to 143.08 million tonnes by 2040. With rising oil prices, the expectation is that the big push will come from City Gas Distribution projects and capacity expansion at the exploration and the refining side, thus making us believe that Indian Steel pipe Manufacturers are entering a new age of prosperity.

~ By Nitish Shukul