Even as India was busy during 2023 securing the critical crude oil and natural gas supplies amidst an international market riled by sanctions and geopolitical conflicts, the year was marked by the world’s third largest energy consumer’s efforts to accelerate its transition to cleaner fuels, particularly for the oil and gas sector.

The upstream and downstream behemoths such as Oil and Natural Gas Corporation (ONGC), Reliance Industries (RIL), Indian Oil Corporation (IOCL), etc focused on net zero targets and plans for establishing solar and wind power capacities along with expanding into EV charging, green hydrogen and green ammonia production.

Even though India’s appetite for fossil fuels is not expected to slow down any time soon, the push by oil and gas majors towards adopting clean energy sources such as renewable energy (RE), green hydrogen, e-mobility, etc will have a bearing on its energy mix by the end of this decade with renewables and electric vehicles (EVs) leading the charge.

Summing up the current global sentiment around energy, S&P Global Commodity Insights Climate & Energy Transformation Lead Simon Thorne said: “While the security of oil and gas supply will remain paramount to many countries, the world is focusing more and more on securing source materials for clean energy technology, battery metals and renewables.”

Clean energy push

Avaada Group Chairman Vineet Mittal emphasises that rising consumer consciousness towards the environment and countries setting up net zero emission targets make it critical for companies in the hydrocarbon value chain to diversify business models to include clean and sustainable energy sources.

The World Energy Outlook 2023 points out that transitioning to clean energy sources for India means that every dollar of value added by the industry results in 30 per cent less CO2 by 2030 than it does today and each kilometre driven by a passenger car, on average, emits 25 per cent less CO2.

JM Financial in a September 21 report said RIL aims to achieve Net Zero by 2035, followed by ONGC by 2038. Similarly Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), Oil India and GAIL by 2040, while IOCL aims to achieve the same by 2046.

The findings, which are based on annual and sustainability reports for FY23, points towards investments being firmed up by the oil and gas (O&G) firms.

For instance, RIL in its FY23 annual report highlighted its readiness to double its committed clean energy capex of ₹75,000 crore for 3 years, while the government has budgeted infusing ₹30,000 crore in IOCL, BPCL and HPCL in FY24 for clean energy projects, the brokerage added.

“Clean energy transition is not a short-term activity, rather it will take a few decades, however, oil and gas companies can accelerate it. Oil and gas majors have deep experience of raising capital along with the ability to maintain strong balance sheets, so it is not difficult for them to fund innovative new energy businesses,” Mittal told businessline.

Secondly, as the RE market is growing and will require a more robust infrastructure for supply chains, their expertise in managing complicated global supply chains, optimising assets and mastering delivery logistics will be an added advantage, he added.

In this direction, he feels that a carbon credit trading scheme, green credit programme, PLI for solar module manufacturing, the launch of National Green Hydrogen Mission and the decision to transition away from fossil-fuels at COP28, which appeared (for) first time in COP’s formal outcome in 30 years, are key developments in 2023.

2024 holds the key

Mittal expects that the pressing issues decelerating the pace of energy transition will be addressed in 2024.

“One pressing challenge lies in land acquisition. Securing vast expanses for solar and wind farms remains a formidable task. Complex land acquisition processes, fragmented holdings, and regulatory complexities impede project development, underscoring the need for streamlined procedures,” he added.

Mittal emphasised that higher cost of funding poses a substantial hurdle. India grapples with comparatively elevated financing costs, deterring widespread adoption of renewable technologies and discouraging potential investors. Addressing this financial barrier is pivotal and warrants strategic intervention.

Addressing the increased demand for RE and establishing a robust ecosystem for green hydrogen and ammonia will be pivotal in 2024, he projected.