The decline in natural output of crude oil from mature fields with domestic exploration & production (E&P) companies failing to arrest the fall will reflect in higher import dependency in FY25.

Fitch Ratings expects crude oil production to grow only in low single-digit percentages during FY26.

“We expect India’s crude oil production to fall by 2-3 per cent in FY25 (7M FY25: -3 per cent). The fall reflects the ongoing struggle of companies like ONGC to arrest the natural output decline at mature fields through technology investments to raise recovery and tap isolated reservoirs,” the agency projected.

However, production should grow by low single-digit percentages in FY26, as production increases at ONGC’s offshore field in the KG Basin, and at privately owned fields, it added.

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“We expect India’s crude oil import dependency to continue rising in the near term, driven by faster growth in petroleum product demand than in domestic crude oil production.,” Fitch said.

India’s crude oil import dependency was at 88.1 per cent in 7MFY25 (FY24: 87.8 per cent, FY14: 77.6 per cent), and Russia had the largest share of India’s oil supplier mix in H1 FY25 at 39 per cent, it added.

Demand for natural gas

Fitch expects India’s total gas consumption to rise by around 10% in FY25 (7M FY25: 11 per cent).

Increasing demand from key end-user sectors, policy measures supporting the use of gas as it is cleaner than traditional fuels, and rising natural gas production and LNG imports will support this growth, it added.

Consumption rose by 11-14 per cent in the city gas distribution (CGD), refinery and petrochemical segments in 7M FY25.

India’s natural gas production will grow by a low single-digit rate in FY25 (7M FY25: 2 per cent), supported by ONGC’s development projects on the western and eastern coasts, including from the KG Basin field.

However, the growth will slow from the 9 per cent CAGR over FY21-FY24, when RIL’s KG Basin field reached peak production of around 27 million standard cubic metres per day (MSCMD).

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“We expect LNG imports to increase by around 20 per cent in FY25 (7M FY25: 22 per cent). This will be driven by increasing demand and lower international gas prices that will improve affordability for price-sensitive sectors,” the ratings agency projected.

The faster growth in LNG imports than domestic production will continue to increase India’s imported LNG dependency (7M FY25: 51 per cent, FY24: 47 per cent), it added.

Gas prices

“We believe CGD companies may raise prices for piped natural gas (PNG) and compressed natural gas (CNG) in the near term, as they try to cover the shortfall in domestically produced input gas with gas from more expensive deep-water offshore fields and LNG imports,” Fitch Ratings said.

This follows the government cutting its allocation of the domestic Administered Price Mechanism (APM) natural gas to CGD companies in November, given the consistent decline in production from such fields in recent years. PNG and CNG have historically received the highest share of such domestic gas.