Indian oil companies should increase their international borrowing to keep the industry growing, the country’s oil minister Dharmendra Pradhan said today as quoted by Reuters.
“India’s growing energy sector is attractive for foreign investment,” Pradhan said at an industry event organized by BNEF in New Delhi.
“Many companies have successfully raised funding through overseas bond market and this funding route is likely to grow many fold going forward,” he added.
A jump in bad loans and the consequent bank credibility crisis in India has opened up the way to private equity and sovereign wealth funds to provide funding to India’s energy companies, but most of the flows have been into private businesses, notably renewable energy companies.
State-owned oil and gas players have been slow, it seems, to take the opportunity to replenish their finances with foreign money. This happens at a time when India, expected to become the biggest driver of global oil demand in the medium term, has turned into an attractive investment destination for state and private investment vehicles.
Energy demand in India is expected to double over the next ten years, driven by economic growth and a growing population. To date, most of the country’s energy is produced by coal, but crude oil is replacing that much faster than renewables.
Last year, India, together with China, accounted for half of the global growth in oil demand, which averaged 1.4 million bpd. Domestic production, however, is nowhere near enough to meet this rising demand, and India continues to import as much as 80 percent of the oil it consumes.
The international bond market would be a rational choice for Indian state energy players as the government seeks to boost domestic production to reduce this overwhelming reliance on imported oil, especially in the absence of reliable lending prospects at home.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.