India Set to Become Global Epicenter of Oil Demand Growth Through 2035: IEA Report

India has achieved its 50% non-fossil power capacity target five years ahead of schedule, marking a significant milestone in its energy transition journey.

New Delhi: The International Energy Agency (IEA) announced on Wednesday that India, currently the world's third-largest oil-importing and -consuming nation, is poised to become the new epicenter of global oil demand growth over the next decade.

Among emerging markets and developing economies, India's energy demand is projected to grow at the fastest rate, increasing by 3 percent annually on average until 2035.

In its latest Global Energy Outlook, the Paris-based agency revealed that India will account for the largest increase in global oil consumption through 2035. This growth is driven by rapid economic expansion, accelerating industrialization, and rising vehicle ownership across the country.

India's growing appetite for energy is expected to outpace the combined demand growth of China and Southeast Asia, highlighting its increasingly pivotal role in shaping global oil markets.

"Oil remains the dominant fuel to 2050 in the Current Policies Scenario. While China accounted for more than 75 percent of oil demand growth over the past ten years, this picture is changing, and India becomes the new epicenter of growth in oil demand," stated the IEA report.

"India leads global oil demand growth over the next ten years, with almost half of the additional barrels produced globally to 2035 heading in its direction." India's oil consumption is projected to increase from 5.5 million barrels per day (mbpd) in 2024 to 8 mbpd by 2035, driven by rapid growth in car ownership, increasing demand for plastics and chemicals, expanding aviation sector, and rising use of Liquefied Petroleum Gas (LPG) for cooking.

"Oil demand in India increases by 2 mbpd to 2035 - the largest increase in any country - and continues to rise through to 2050. The next largest increases to 2035 are in Africa (1.2 mbpd), and Southeast Asia (1 mbpd)," the report noted.

With limited domestic production capacity, India's dependence on oil imports to meet this rising demand will only increase in the coming years.

The IEA projects that India's import dependency will rise from 87 percent in 2024 to 92 percent by 2035, despite ongoing government efforts to promote domestic oil production.

While India remains heavily import-dependent for crude oil - the raw material processed in refineries to produce fuels like petrol and diesel - it is not only self-sufficient in refining capacity but also maintains an exportable surplus.

Approximately 9 mbpd of new refining capacity is expected to come online globally between 2024 and 2035. With around 5 mbpd in capacity closures during this period, net refining throughput is projected to increase by 4 mbpd. Asia will see a net increase of approximately 3 mbpd in refining capacity between 2024 and 2035, led by expansions in India.

"Since 2022, India has emerged as a global swing supplier, refining volumes of Russian crude oil exports that previously flowed to Europe. India's refining capacity is projected to grow from 6 mbpd in 2024 by 1.5 mbpd to 2035, which solidifies its role as a key exporter of transport fuel," the IEA explained.

India's demand for natural gas, used for electricity generation, fertilizer production, automobile fuel (CNG), and household cooking, is expected to nearly double by 2035, reaching 140 billion cubic meters (bcm). This growth will be primarily led by expansion in the city-gas distribution sector. Most of this demand will be met through imports of liquefied natural gas (LNG).

"In 2035, India is projected to import 50 bcm of LNG, up from 35 bcm today," according to the IEA. India's electricity demand is also expected to rise rapidly, reaching approximately 5,000 TWh by 2050, supported by sustained growth of over 4 percent per year between 2024 and 2050.

LNG imports are projected to almost triple between 2024 and 2035.

The IEA report indicates that coal production is expected to decline in all major producing countries except India through 2035. Coal production in India is projected to increase by around 50 million tonnes of coal equivalent (Mtce) by 2035, as the country pursues its long-term strategy of reducing coal imports and enhancing energy security. Coal production reached almost 600 Mtce in 2024, an increase of nearly 100 Mtce since 2022.

This production growth falls short of the projected increase of around 75 Mtce in India's coal demand over the period, but it will help limit growth in coal imports.

In 2024, Coal India Ltd obtained environmental clearance for the Gevra mine to expand production to 70 million tonnes per year, which would make it the largest coal mine in Asia. The company has also announced plans to launch 36 new mines over the next five years.

Overall, India is emerging as the biggest driver of growth in global energy demand across all sectors - oil, gas, coal, electricity, and renewables combined. According to the IEA, India has become the world's largest driver of energy demand growth, with consumption projected to rise by over 15 exajoules (EJ) by 2035 - nearly matching the combined increase expected from China and Southeast Asia.

The IEA notes that India's overall energy demand is expected to rise sharply as its GDP grows at an average of over 6 percent annually, with transport and industry sectors leading the surge in fuel consumption.

India, which has pledged to achieve net zero emissions by 2070, is targeting 100 GW of nuclear capacity by 2047 and plans to launch a carbon market in 2026. The country has already achieved 20 percent ethanol blending in petrol, helping to curb oil imports.

Solar and wind power are the fastest-growing energy sources in India, projected to constitute nearly 20 percent of the country's energy mix by 2050.

Industrial and transport sectors will drive most of the demand increase, with carbon dioxide emissions expected to peak around 2040 at approximately 3.4 gigatonnes annually.

In a significant achievement, India has reached its 50 percent non-fossil power capacity target five years ahead of schedule, in 2025.

The share of renewables in installed capacity is set to reach 60 percent by 2030 and 70 percent by 2035, accounting for over 95 percent of new capacity additions.

Solar PV alone has attracted USD 113 billion in investment over the past decade in India, outpacing investments in fossil power generation.