Shipping industry website news, ship brokerage company Gibson pointed out in its latest report that India’s growing refining capacity and domestic consumption dynamics may provide significant support to the tanker market, including product tankers and crude oil tankers, in the short term.
Gibson stated: “India’s product oil exports have remained largely flat over the past five years, averaging about 1.2 million barrels per day. Although domestic refining capacity has grown during the same period, it has primarily been used to meet its domestic demand. India’s export growth rate this year has hit a new high since 2021, and as the country continues to expand its refining capacity, exports are expected to increase further.”
Unlike most countries that rely on new large-scale projects, India’s strategy mainly involves expanding and upgrading existing facilities. It is expected that an additional refining capacity of up to 680,000 barrels per day will be added next year, the largest annual increase in over a decade. In Gibson’s view, with such a large amount of new capacity coming online in the short term, India’s product oil exports may see further growth.
From a regional perspective, the geographical distribution of India’s new capacity presents distinct characteristics. Specifically, the Barmer refinery (180,000 barrels per day), expected to commence operations in the second half of this year, and several projects scheduled for next year, such as Panipat in the north (200,000 barrels per day), Numaligarh (120,000 barrels per day), and Bina (60,000 barrels per day), are all located inland, making it unlikely for their products to be exported via sea. Meanwhile, although the coastal region of Koyali will add 80,000 barrels per day of capacity, it faces challenges in selling products to inland customers.
Gibson pointed out that this distribution will reshape the domestic product trade pattern in India. New inland capacity will primarily meet local demand, while coastal refineries will face more intense competition when vying for the inland market. This may force coastal refineries, such as those on the West Coast, to turn overseas to find new customers, thereby further boosting product oil export volumes in the short term.
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Although the short-term export outlook is optimistic, uncertainties remain in the long term. India’s own oil demand growth rate is expected to be the highest in the world. Strong domestic demand will gradually absorb part of the new capacity, thereby limiting and eventually putting downward pressure on export volumes. The future export potential of India will depend on the race between the ramp-up speed of new refineries and the growth of domestic demand.
Gibson concluded that, in the short term, with the commissioning of new capacity, the product tanker market might witness the last surge of clean product exports until domestic demand picks up again and reverses this trend. The outlook for the crude oil tanker market is clearer and more optimistic. Given that India’s domestic crude oil production is expected to decline slightly, the increase in refinery throughput must be achieved through a significant rise in crude oil imports, which will directly benefit the crude oil tanker transportation market.
