Published: October 29, 2026 11:46 am
Author: RT
Long-planned refinery expansions are set to boost India’s diesel exports amid disruptions to Russian and Middle Eastern supplies
India’s long-planned refinery expansions could make it an even bigger diesel supplier in 2027, just as disruptions to Russian and Middle Eastern shipments have created an unexpected export opportunity for Indian refiners.
State-owned refiners plan to add 16.5 million tons of annual diesel production capacity next year, executives said at an industry conference in Goa on Tuesday. The projects were originally intended to meet India’s growing domestic fuel requirements, not the current global diesel shortage.
“The expansion is driven by a portfolio, but the opportunity is in diesel,” XAnalysts founder and chief oil analyst Mukesh Sahdev told RT.
Why are global diesel supplies tight even as oil demand is falling?
The US-Iran war has disrupted Middle Eastern fuel shipments, while attacks on Russian refineries and export restrictions have reduced supplies from another major producer. Diesel powers transportation, factories, and farms, and the shortages are largely driving the current price inflation and affordability crisis.
Global diesel and gas oil availability fell by 1.7 million barrels per day – equivalent to roughly two-and-a-half times Japan’s daily diesel consumption last year – in the third quarter, compared with a year earlier, according to figures from the International Energy Agency (IEA) and the Energy Institute.
Wholesale diesel prices surpassed $200 per barrel in September, nearly double their prewar levels, and reached around $220 in Europe and the US, the IEA said.
The shortage persists despite weakening overall oil demand, as diesel consumption has remained comparatively resilient and inventories have fallen, the agency said. On October 15, IEA members agreed to accelerate emergency stock releases, including over 20 million barrels of diesel.
How are Indian refiners positioned to benefit?
Indian Oil Corporation, the country’s largest refiner, expects expansions to add around 8 million tons of diesel a year. Hindustan Petroleum Corporation’s new Rajasthan refinery is expected to produce 3 million tons next year, while the expanded Numaligarh refinery in Assam state will add another 3 million tons, Reuters reported.
Bharat Petroleum Corporation plans another 1.5 million tons of annual output. In all, India’s plans will expand overall refining capacity from 267 million tons annually to 300 million by 2030.
The country already produces more diesel than it consumes.
Refiners produced around 59 million tons from April to September, against domestic consumption of around 46 million, according to Oil Ministry data cited by Bloomberg.
The additional volumes are coming onstream amid a global shortage, creating a commercial opportunity for projects originally designed around Indian fuel demand, ICRA senior vice president Prashant Vasisht told RT.
Russian crude ‘a natural fit’
New refining capacity alone does not guarantee more diesel. Refineries need suitable crude oil, while equipment limits how much of it they can turn into diesel, Vasisht explained.
“Indian refineries are also getting the right quality of crude oil,” Sahdev said, noting Russian, Iraqi, and heavier Venezuelan grades as suitable feedstocks for diesel production.
Russian crude is “a natural fit for the Indian system,” he added. The new Rajasthan refinery can process Russian Urals and Iraqi Basrah grades, S&P Global reported in July.
Sahdev said India’s reliance on Russian barrels has also grown as production from traditional suppliers in Malaysia and West Africa declined.
Can India fill the global supply gap?
India is already the world’s second-largest seaborne diesel exporter after the US, according to data analysis firm Kpler. Exports reached 596,000 barrels per day in September, compared with the year-to-date average of 482,000 barrels per day, the data shows.
Additional Indian production could make a meaningful difference to global supplies, but it cannot replace all the diesel lost because of disruptions affecting Russia and the Middle East, the analysts cautioned.
“We are providing very large quantities to Europe and some of the other regions, but these are still not enough,” Vasisht said.
Not all the additional diesel will be available for export. India’s growing domestic demand, refinery operations, and freight costs will determine how much reaches overseas buyers.
The IEA expects global refinery output to recover in 2027, but warns that depleted inventories could keep diesel markets tight well into next year.
But expanding production alone is not enough, Sahdev cautioned. India also needs stronger commodity-trading networks and financial mechanisms to capture the full value of its growing refining capacity.
“If India does not do this, then somebody else will make money on Indian capacity,” he said.
