Import-led petroleum consumption

The robustness of petroleum product sales has continued its fervour in FY17; with OCAC's latest volumes for oil marketing companies, sales of key petroleum products have increased by around 22 percent year-on-year in the first month of F17, driven primarily by growth in motor spirit (petrol) and furnace oil. July 2016 data shows that while the growth of furnace oil increased by 28 percent year-on-year, and motor spirit volumes jumped by 31 percent year-on-year; high speed diesel (HSD) volumes were dreary with just over five percent year-on-year growth, and a decline of 19 percent in month-on-month comparison.

HSD follows more of a cyclical trend where it is mostly used in tractors in the agriculture sector. And recently, with the coming of RLNG into the system, its use in the power sector has also diminished significantly. However, the increase in its volumes is primarily due to its usage in the transportation sector.

Furnace oil has also posted a hefty year-on-year growth, which has come primarily in recent months due to increased consumption in the power sector. However, with increased power generation though RLNG and coal in the coming years, the reliance on furnace oil is likely to be reduced significantly, which will threaten furnace oil volumes.

Motor spirit volumes have been on an upward journey with no looking back. The volumetric sales by the OMCs stood at one of the highest levels in July 2016 on account of lower prices and substitution from CNG. However, this growth in petrol volumes might see some easing in the coming months as CNG makes its way into the transport sector once again with RLNG. While the July 2016 data for petroleum imports has not been posted by OCAC on their website yet, a look at FY16 and historical data is sufficient to narrate consumption of petroleum products in the country.

Imports can largely be used as a proxy for fuel demand in the country where the refinery production of petroleum products has principally remained constant. Over the last decade, the refinery production of petrol, diesel, and furnace oil has remained stagnant, with growth in consumption fulfilled via imports (see illustrations).

This is because of no significant improvement in the capacity of local refineries, which along with choked capacity of the ports might lead to a shortage of fuels like diesel or petrol in the near future - something that has been recently taken up by the column (Read: Petrol imports raise red flags, published August 09, 2016).