According to a report by India Ratings and Research (Ind-Ra), Indian oil and gas companies are adopting net zero and sustainability goals that surpass those of international counterparts. The targets set for the period 2035 to 2046 are notably ambitious, despite current lower capital expenditure allocations towards the green transition, primarily aimed at reducing process emissions.
Rakesh Valecha, Senior Director of the Core Analytical Group at Ind-Ra, noted that while the net zero targets for Indian oil and gas companies appear aggressive and concentrate on reducing process-related carbon footprint (Scope 1 and Scope 2), a shift in product mix may eventually become necessary to tackle Scope 3 emissions in the long term.
Valecha emphasized the importance of transparent disclosures regarding capital expenditure on transition initiatives, similar to global peers, for accurately evaluating progress towards the stated goals. The report also discusses the anticipated smooth transition towards renewable energy sources due to established project economics. However, it acknowledges challenges associated with carbon capture, utilization, and storage (CCUS) technology, which remains costly and not yet fully viable for the sector, despite some investments spurred by government incentives.
As reported by ETEnergyworld.com, despite these challenges, Indian oil and gas companies proactive commitment to net zero targets positions them as leaders in the global drive for environmental sustainability. Over the next five years, the industry may experience lower margins due to increased research and development spending and additional capital expenditure required for transitioning to green sources. This could lead to higher leverage, although credit profiles are expected to stay resilient due to existing ratings and potential government support for public sector entities.
