India may turn into an importer of fuel oil as its state-owned refiners are investing multi-billion dollar investments to upgrade their refineries and produce more profitable refined products such as gasoline or diesel.
India has traditionally been an exporter of fuel oil, the residue oil left after initial crude refining that is typically used in shipping and power generation.
Three state-run energy firms, Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum are planning to spend $20 billion on refinery expansions to add units by 2022.
The expansion would process fuel oil into gasoline and diesel, boosting their output to meet growing local demand for transport fuels.
"Our fuel oil production will be less because everywhere we are going for residue upgrades," said B. Ashok, Chairman of the country's biggest refiner Indian Oil Corp (IOC).
Private refiners Reliance Industries and Essar Oil have already invested heavily to build advanced refineries which produce gasoline at the expense of fuel oil.
With state refiners now doing the same, India will soon have to sharply raise imports of fuel oil, two traders that participate in the market said.
India's net fuel oil exports averaged 109,000 tonnes from April to September, according to the country's Petroleum Planning and Analysis Cell, and the traders estimate this could flip into a need to raise fuel oil imports as early as late 2017.