Monday, December 19, 2011

Trends in Indian Petroleum Production, Consumption and Imports

In this post, I summarize my export land model analysis of India using the published petroleum production and consumption data from the BP Statistical Review for 2011. 

India's rate of petroleum consumption for the last thirty years has been exponentially increasing and out-striping Indian's domestic production which is in a flat-to-declining trend.  In 2010, India imported 75% of its petroleum, mostly from the MENA countries.  This trend, of increasing dependence on foreign petroleum imports, is likely to continue, at least until the global export pool declines. 

Data Analysis Method
My approach to data analysis is the same as what I have done in the past in my multi-part global regional survey.  In that survey, India was part of, the numbers for the Asia-Pacific region, and like China, I regret not having separated out India from the rest of the Asia-Pacific in that analysis—next time I will.)

All production, consumption and import/export rates (dQ/dt) are reported in units of billions of barrels per year (bbs/yr).  I used the production and consumption data to derive a “reported” net exports (or imports), as production minus domestic consumption.

I fit a logistic models (aka, the Hubbert Equation) to the petroleum consumption and production data using non-linear least squares (NLLS) analysis to obtain the best fit.  Further details of the modeling are presented in the series: Refining the peak oil rosy scenario.  Predicted future import/export trends are derived from the predicted production rate minus the predicted consumption rate.

Where appropriate, I have made comparisons to China.

Production, Consumption and Export/Import Trends
Figure 1 presents the reported production, consumption, and my derived net export/import, rates (blue, red and green open circles respectively) and the corresponding NLLS best curves (solid lines with the same respective colors) to these data. 

The reported production rates and consumption rates both have a fairly uniform shape and therefore fitting a single Logistic equation to each of these data sets is appropriate. 

In Figure 1, the vertical scale to show extrapolated future consumption is so large that the reported past production and consumption numbers are somewhat obscured, so I show the same data in an expanded scale, in Figure 1a.

It is apparent that India has long been a net petroleum importer, as indicated by the negative reported net export values since at least 1965.  Domestic production had steadily increased, until the mid 1990s, but has been flat since then.  Accordingly the logistic equation fit to the production data predicts a long slow decline in petroleum production.  For instance, by 2030 India petroleum production is predicted to be about the same as it was in 1972, when India’s population was “only” 580 million.  In contrast, in 2010, India’s population had doubled to 1.17 billion.  But more on that later.

The trajectory of India’s petroleum consumption looks steeper than its production curve.  Consequently, India is importing increasingly larger proportions of its consumed petroleum.  For instance, in 1990 Indian domestic production provided 59% of India’s consumption, and the remaining 31% was imported.  By 2010, India’s domestic production, almost the same as it was in 1990, only provided 25% of India’s consumption, with the remaining 75% being imported.  If the best fit curves accurately predict future production and consumption, then by 2020, India’s production will only provide 9% of consumption and the remaining 91% would have to be imported. 

According to best fit Logistic equation, India’s consumption would top out at 1.78 bbs/yr in 2029, but, because by then, production will have declined even more: consequently, 96% of India’s petroleum consumption would have to come from imports.  Peak imports are predicted to occur shortly thereafter in 2031, at 1.71 bbs/yr being imported, corresponding to roughly 96% of India’s projected consumption.

The NLLS best fit parameters Qo, Q∞ and the rate constant, "a," corresponding to the solid lines in Figure 1 are summarized in Table 1 below:

Table 1 Summary of NLLS best fit parameter for production and consumption

Qo (bbs)
Q∞ (bbs)
a (yr-1)
Production 1965-2010

Consumption 1965-2010

The estimated Q∞ values reflect India’s historic and likely future need to import petroleum—the estimated ultimately recoverable petroleum of only 13 bbs, is about 8 times lower than the estimated ultimately consumed petroleum.  The rate constants for production and consumption are also interesting in that they suggest that India’s rate of increase in production of 9.3 %/yr actually exceeded it’s rate of increasing consumption of 6.7%/yr.  Incidentally, that annual rate of increase in petroleum consumption is pretty close to India’s annual rate of GDP growth from 2000 to 2010 of 7.4%/yr (see India GDP Growth Rate).  Not a coincidence, I beleive.

India’s petroleum Import sources
According to the EIA, India, in 2010 was the world’s fifth largest importer of oil (Country Analysis Brief India).   

So just where is that oil coming from? 

The EIA presented break down of India’s import sources, in its 2010 Country Analysis Brief, reproduced in Figure 2:

About 85% of India’s imports are from the MENA countries, in particular, Saudi Arabia and Iran.  Probably, the Indians, like the Chinese, would be very happy if North America and Europe  were to sanction the importation of petroleum from Iran, because this would make more Iranian oil available to these countries (see e.g., INDIA SEES NO ISSUES WITH IRAN OIL IMPORTS). 

Indeed, like China, the percentage of India’s imports of the global export pool from 1993 to 2009 has been steadily increasing and looks to have accelerated in the last few years:   

The estimate of the global export pool comes from my previous study examining the production, consumption and net interregional exports for seven world regions (Figure 8 from Estimating the End of Global Petroleum Exports: Part 4 future global net export trends).  That earlier study showed that the ME, SA, AF and FS regions are net petroleum exporters and that the NA, EU and AP regions are net importers.  I predicted that inter-regional net exports would steadily decline, and then end sometime between 2030 and 2035, depending on whether the remaining exporters were to share or not share the remaining export pool with ex-exporters.

Figure 3, illustrates that, despite signs of diminishing export sources, India is projected to take an increasing portion of the available petroleum export pool.  India’s share of the sum of net exports from this pool (mainly ME and AF) have increased linearly, from 2.8 percent in 1994, to 6.4 percent in 2009.  The slope of the linear regression analysis of these data equals 0.18 percent/year (r2=0.84).  More recently, however, in 2005-2009 this percentage increase of the export pool per year has accelerated to 0.6%/yr (r2=0.99). 

Just like China, however, I don’t see how this import trend, and hence the predicted consumption trend in Figure 1, can continue for India. 

To illustrate the reasons for my skepticism, let’s consider some potential petroleum consumption scenarios.

Different scenarios considering India’s future petroleum consumption
If the present trends of production and consumption continued unabated, as suggested by the blue and red lines in Figure 1, then by 2030, India would be producing only 0.07 bbs/yr, but consuming 1.78 bbs/yr, and as noted above, 96% of that consumption would have to come from imports. 

The problem with this scenario, as represented by the solid red line in Figure 4 (scenario I), is that India’s imports most likely will be abated.  They will be abated by at least two factors: the diminishing export pool and increased competition for that diminishing export pool, in particular from China.
For instance, if the trends predicted in my previous multi-part global regional survey are correct, and the world’s inter-regional net exports end sometime between 2030 and 2035, then India’s consumption has to fall back to its own domestic production by then. 

Figure 4 presents three different increasingly pessimistic trajectories by which this could happen.

In scenario II (short red dashes), I assume that India is able to continue its most recent four-year trend of expanding its proportion of importation from the inter-regional net export pool, as shown in Figure 3 (light blue line), right up to the end of exports in 2035 (assuming a no sharing scenario as further explained below).  Even so, scenario II predicts that India is at peak petroleum consumption now, essentially because the rate of increase of the percentage share of the global export pool is less than the rate at which the size of the export pool is decreasing—hence the total amount of petroleum decreases, until the global export pool “runs dry” in 2035. 

In scenario III (alternating short and long dashes), I assume that the percentage of India’s proportion of the inter-regional net export pool stays frozen at its 2009 amount of 6.4 percent, and, I further assume that there is no sharing of the remaining export pool with former exporters as they become ex-exporters.  According to this scenario, there is a steep decline in India’s petroleum consumption, until the global export pool runs dry in 2035, and then India is back to relying only on its small domestic production. 

In scenario IV (long dashes), I again assume that the percentage of India’s proportion of the inter-regional net export pool stays frozen at its 2009 amount of 6.4 percent, but this time, I assume that there is sharing of the remaining export pool with the ex-exporters.  Of course, this causes the global export pool to run dry sooner (i.e., by 2030 instead of 2035,  as assumed for scenarios I-III).  Consequently, the decline in India’s petroleum consumption is even steeper, and India is back to  relying on its domestic production by 2030. 

I think that scenarios II, III and IV all illustrate that, if India is to expand its consumption of petroleum, even in the short term, then it must import much greater proportions of the inter-regional net export pool.  Specifically, that light blue line in Figure 3 has to be even steeper in order to service the consumption curve predicted by the solid red line in Figure 4. 

Figure 5 presents these four scenarios again, but this time in terms of per capita petroleum consumption, specifically, in units of barrels per person per year (b/py).  Figure 5 also shows India’s reported and predicted population change out to 2050 (from the US Census Bureau International Database). 

Unlike China, whose population is predicted to top out at about 1.4 billion in 2026 and then slowly decline thereafter, India population is predicted to just keep growing to 2050 and beyond.  Indeed, India is projected to overtake China as the most populated country in the world by about 2025.  By 2050, India's projected population of 1.66 billion will be half-a-billion people larger than it’s 2010 population of 1.17. 

This expanding population, I think, presents India with an insurmountable predicament with respect to food production. 

Even if India could import petroleum at the increasing rate as it has in the past, and, there was unabated consumption (scenario I), India’s per capita consumption still only remains slightly over 1 b/py until 2040, after which it drips below 1 b/py. 

A per capita consumption of 1 b/py is the amount I have estimated to be the bare minimum to sustain a petroleum-driven industrial food production system. 

This may explain, at least in part, why India’s Global Hunger Index (GHI) has been among the highest in the world for the last decade (see e.g., The relationship between hunger and petroleum consumption). 

For instance, with a GHI of 24.1 in 2010, the International Food Policy Research Institute ranks India’s extent of hunger as “alarming.”   India’s GHI actually declined since 1990, with a GHI = 31.7 a ranking of “extremely alarming” hunger.  This is consistent with India’s increasing per capita petroleum consumption, from 0.53 b/py in 1990, to 1.02 b/py in 2010.   With an unabated increase in petroleum consumption, GHI could decline further, at least until 2025, when per capita petroleum consumption is predicted to top out at about 1.25 b/py.  Then per capita petroleum consumption is predicted to decline, and along with it GHI. 

More likely, in my opinion, something closer to one of scenarios II, III, or IV will occur, in which case, India’s per capita consumption is going to start declining now.  The decline is because of the combination of declining imports and increasing population. For instance, India’s per capita petroleum consumption is predicted to drop back down to 1990 levels by 2025 for scenario II, and by 2018 for either of scenarios III or IV.

But unlike 1990 when its population was 0.84 billion, India’s population is predicted to be 1.3 billion in 2018 and 1.4 billion in 2025. 

I have great difficulty imagining how it would be possible to feed an additional 0.5 billion under these circumstances of declining per capita petroleum consumption.

India, even more so than China, relies on petrolum imports.  If petroleum consumption were to continue unabated, India’s projected petroleum imports would have to substantially increase to 96% of consumption by 2030.  Expecting India to able to obtain this level of petroleum imports, I think, is very problematic. 

First, there is my expectation of the export pool of petroleum to diminish and essentially reach zero in about 2030-2035 depending on the sharing scenario as explained above.  Second, India will be direct competition with China to import petroleum from the diminishing export pool. 

Because of India’s high reliance on imports, and, a domestic production capability that is much smaller than China’s, the peaking and decline in the export pool spells disaster for India’s economy, and even more importantly, failure of the petroleum-driven food production system. 

Starting in about 1991, in the face of the collapse of the Soviet Union, a domestic balance of payments crisis, and having to borrow from the IMF, India was forced to transition away from socialism and towards capitalism and globalism.  As an aside, at least part of that balance of payment problem in 1991 was due to the loss of the Soviet Union as a trade partner and the rise in oil prices due to the Persian Gulf War precipitated by Iraq’s attack of Kuwait.  The Persian Gulf War, in turn was precipitated by the collapse in oil prices and hence Iraqi revenue, with Iraq blaming Kuwait for driving down oil prices by exceeding their oil production quota (see e.g., 1991 India economic crisis;  Pathways Through Financial Crisis: India; Gulf War; Making of a Payments Crisis: India 1991; India’s New Foreign Policy Strategy).  India today is even more reliant on oil exports than it was in the 1990s, which in turn, makes India’s economy even more vulnerability to oil price fluctuations than it was in the 1990s. 

While the prospects of economic expansion look quite dim, I think that quite soon, India will have much bigger problems on its hands: food shortages and starvation. 

Based on scenarios II-IV, India is soon going decline below 1 b/py per capita petroleum consumption, and this in turn, is going to affect India’s ability to maintain, let alone expand, its domestic food production system; at least a food production system that is petroleum-driven. 

Based on this analysis, I am sorry to say that it is hard for me to see anything but food shortages, starvation and population decline in India’s near future. 

Coming up: my export land model analysis of food energy production for India; see you then.

No comments:

Post a Comment

Your comments, questions and suggestions are welcome! However, comments with cursing or ad hominem attacks will be removed.