India set to boost diesel exports as refining capacity expands

India is poised to increase diesel exports next year as new refining capacity comes online, potentially easing supply shortages in global markets, including the United States and Europe.

Oil Minister Hardeep Singh Puri said on Tuesday that state-owned refiners would add at least 15 million tonnes of annual diesel production capacity through a new refinery and expansions at existing facilities.

“We’ll be in the happy situation of not only refining for ourselves but for the world,” Puri told reporters on the sidelines of an industry conference in Goa.

Global crude oil and fuel supplies have been disrupted by conflicts in the Middle East and the Russia-Ukraine war, tightening markets and pushing prices higher. Diesel supplies have come under particular pressure after Russia halted exports in July to safeguard domestic availability following attacks on its refineries and ports.

The shortage drove US diesel prices to record levels and prompted Washington to consider restrictions on exports. The situation subsequently eased after US President Donald Trump reached an agreement with Russian President Vladimir Putin to release additional fuel into global markets.

The disruption has created an opportunity for India, already one of the world's leading diesel suppliers. According to Kpler data, India overtook Russia this year to become the world's second-largest diesel exporter.

The planned refinery expansions could further strengthen India's position in international fuel markets, with Goldman Sachs Group Inc. expecting global supplies to remain tight through 2027.

Indian Oil Corporation (IOC), the country's largest refiner, expects to increase annual diesel production by as much as nine million tonnes from next year. Chairman Arvinder Singh Sahney said the increase would follow expansions at three refineries, adding more than 17 million tonnes of crude-processing capacity.

Hindustan Petroleum Corporation Ltd. (HPCL) expects to add around four million tonnes of annual diesel output as its new Rajasthan refinery, with a capacity of nine million tonnes a year, reaches full production, Chairman Vikas Kaushal said.

Numaligarh Refinery Ltd., a subsidiary of Oil India Ltd., plans to increase diesel production to around three million tonnes annually. Bharat Petroleum Corporation Ltd. (BPCL), meanwhile, expects to add 1.5 million tonnes of annual output from 2028, Chairman Sanjay Khanna said.

Oil ministry data showed that Indian refineries produced 59 million tonnes of diesel during the first half of the financial year beginning in April, while domestic consumption stood at around 46 million tonnes.