CALCULATE YOUR SIP RETURNS

The Growth and Future of India’s Petroleum Industry: Key Stocks Involved

Written by: Nikitha DeviUpdated on: Jan 29, 2025, 2:04 PM IST
India's petroleum industry drives economic growth. Growth initiatives, exports, and stocks like Reliance, ONGC, IOC, and HPCL highlight its global significance.
The Growth and Future of India’s Petroleum Industry: Key Stocks Involved
ShareShare on 1Share on 2Share on 3Share on 4Share on 5

India’s petroleum industry plays a pivotal role in the country’s economic landscape, contributing significantly to its energy security and socio-economic development. This sector encompasses a broad range of activities, including exploration, production, refining, distribution, and marketing of petroleum and its by-products. From upstream activities such as crude oil and natural gas extraction to downstream processes involving the refining of fuels like petrol, diesel, LPG, and kerosene, the petroleum industry forms the backbone of India’s energy infrastructure.

Key Components of the Petroleum Industry

The Indian petroleum industry is divided into three key sectors: upstream, midstream, and downstream.

  • Upstream: This involves the exploration and production (E&P) of crude oil and natural gas. State-owned and private companies are involved in oil and gas exploration, with major players like the Oil and Natural Gas Corporation (ONGC) and Reliance Industries leading the sector.
  • Midstream: The transportation and storage of crude oil and natural gas are critical for ensuring the continuity of supply. This includes pipelines, transportation via ships, and storage facilities.
  • Downstream: This sector includes refining crude oil into finished petroleum products and the distribution and marketing of these products. India has 19 public sector undertakings (PSUs) and three private-sector refineries, making it one of Asia’s key refining hubs.

Growth of India’s Refining Capacity

India has seen a remarkable increase in refining capacity. In April 2014, the refining capacity stood at 215.066 Million Metric Tons Per Annum (MMTPA), which has grown to 256.816 MMTPA by April 2024. This increase is driven by both state-owned and private refineries, with private players such as Reliance Industries playing an essential role in making India a significant global refining centre.

The Evolution of the Industry

The roots of India’s petroleum industry date back to 1867 when the first oil well was drilled in Digboi, Assam. This led to the formation of the Indian Oil Corporation in 1959, which set the stage for refining and distribution on a large scale. Over the decades, the industry expanded with significant milestones, including the development of world-class refineries such as the Jamnagar refinery by Reliance Industries in Gujarat, which remains one of the largest single-location refineries in the world.

Key Government Initiatives

The Indian government has been active in fostering growth in the petroleum sector. Several initiatives have been launched to boost exploration, improve refining capacities, and enhance energy security:

  • Pradhan Mantri JI-VAN Yojana: This scheme supports bioethanol production, focusing on second and third-generation plants that use non-food feedstock.
  • Ethanol Blending Program: The government aims to achieve 20% ethanol blending in petrol by 2025-26 to reduce dependence on fossil fuels and curb carbon emissions. Ethanol blending has already risen significantly, from 38 crore litres in 2013-14 to 707.4 crore litres in 2023-24.
  • Strategic Petroleum Reserves: India has developed underground storage facilities to hold up to 5.33 Million Metric Tonnes (MMT) of crude oil in Visakhapatnam, Mangalore, and Padur.
  • City Gas Distribution Network Expansion: India has significantly expanded its network for supplying compressed natural gas (CNG) and piped natural gas (PNG) across urban areas.

Foreign Trade and Export Growth

India’s petroleum industry is also a key player in the global energy market. The country’s refining capacity exceeding 250 MMTPA has enabled it to cater to growing international demand. Major export destinations include South Asia, Africa, and Europe. The government’s emphasis on export-oriented growth, along with Special Economic Zones (SEZs) for refineries, has boosted India’s position as a global petroleum exporter.

Key Petroleum Stocks to Watch

India’s petroleum industry is supported by a wide array of stocks, with both public and private sector companies playing significant roles. Below are a few prominent stocks:

  1. Reliance Industries Limited (RIL): As one of the largest conglomerates in India, Reliance Industries plays a dominant role in the refining and petrochemical sectors. In the quarter-ended December 31, 2024, the company reported consolidated revenue reaching ₹2,67,186 crore ($31.2 billion), marking a 7.7% year-on-year (YoY) increase. In addition, the company achieved a record quarterly consolidated profit after tax (PAT) of ₹21,930 crore ($2.6 billion), reflecting a growth of 11.7% YoY.
  2. Oil and Natural Gas Corporation (ONGC): ONGC is a public-sector company in India involved in the exploration and production of oil and gas. For Q2 FY’25, the company reported gross revenue of ₹1,58,329 crore, marking a 7.3% increase compared to ₹1,47,614 crore in Q2 FY’24. However, net profit for Q2 FY’25 declined by 38.9% to ₹9,878 crore from ₹16,171 crore in Q2 FY’24.
  3. Indian Oil Corporation (IOC): As the oil marketing company in India, IOC is a major player in the downstream sector. In the quarter-ended December 31, 2024, the company reported a total income of ₹2,20,543.92 crore, down from ₹2,28,160.31 crore during the same period last year. The PAT was ₹2,147.35 crore, dropped from ₹9,220.85 crore YoY.
  4. Bharat Petroleum Corporation Limited (BPCL): BPCL is an oil marketing and refining company. In the quarter-ended December 31, 2024, the company reported a total income of ₹1,28,158.36 crore, down from ₹1,30,475.59 crore during the same period last year. The profit was ₹3,805.94 crore, dropped from ₹3,181.42 crore YoY.
  5. Hindustan Petroleum Corporation Limited (HPCL): HPCL is another major public-sector company in India that refines petroleum products and distributes them through an extensive network. The company has reported standalone revenue from operations of ₹1,18,936 crore for Q3 FY25, compared to ₹1,18,443 crore in Q3 FY24. The company’s standalone PAT for the quarter was ₹3,023 crore, a significant increase from ₹529 crore in Q3 FY24.

The Future of India’s Petroleum Industry

India’s petroleum industry is expected to witness continued growth, driven by rising demand for energy and the government’s focus on improving infrastructure and energy security. The target refining capacity for 2030 is 309.5 MMTPA, and the aim for exploration acreage has been set at 1 million square kilometres by 2030.

Additionally, for the development of green hydrogen production, the target is 5 MMTPA by 2030.

Conclusion

India’s petroleum industry continues to evolve, with significant investment in exploration, refining, and distribution. Government initiatives and foreign trade have contributed to making India a global player in petroleum exports. As the country looks to meet its growing energy needs and transition to greener sources of energy, India’s petroleum sector remains a key pillar of its economic and energy strategy.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Published on: Jan 29, 2025, 2:04 PM IST

Nikitha Devi

Nikitha is a content creator with 6+ years of experience in the financial domain. Specialising in personal finance, investments, and market insights, Nikitha simplifies complex financial topics, making them accessible to readers.

Know More

We're Live on WhatsApp! Join our channel for market insights & updates

Open Free Demat Account!

Join our 2.5 Cr+ happy customers

+91
Enjoy Zero Brokerage on Equity Delivery
4.4 Cr+DOWNLOADS
Enjoy ₹0 Account Opening Charges

Get the link to download the App

Get it on Google PlayDownload on the App Store
Open Free Demat Account!
Join our 2.5 Cr+ happy customers