Moody’s: India to surpass China in oil demand growth over next decade

China drove global oil demand growth over the last decade, but now India is poised to take the lead in demand growth over the next decade, according to a latest report by Moody’s Ratings.

China and India are No. 2 and No. 3 oil consumers in the world. But there are notable differences in demand growth in the two countries.

“Demand growth and import reliance will be higher in India,” Moody’s said. “Demand will grow faster in India than in China over the next decade, as China’s economic growth slows and penetration of new energy vehicles accelerates”.

Consumption of crude oil — the raw material for making fuels like petrol and diesel — in China will peak in the next 3-5 years, while in India Moody’s expect annual growth of 3-5 per cent in the same period.

Stating that both countries relied heavily on oil and gas imports, the rating agency said it expected China’s reliance on oil imports to fall, reflecting slower demand growth and increased domestic production.

“India’s reliance on imports will increase if it is unable to stem a production decline,” it said.

Moody’s said China’s larger oil and gas consumption underpins the scale of its national oil companies (NOCs), which will likely outpace their Indian peers in production growth over the next 3-5 years.

Investments in complex shale gas and offshore projects bolster Chinese NOCs’ reserves and production, while Indian NOCs face challenges from aging wells and slow investment. Additionally, Chinese NOCs’ greater value chain integration mitigates earnings volatility, and they have lower leverage and higher interest coverage. Moody’s saw investment focus vary, reflecting national objectives.

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