India is becoming the new China in the energy world.

As India’s economy expands by luring the type of manufacturing that China is trying to shun, the world’s second-most populous nation is increasingly becoming the center for oil demand growth. India is trying to hedge its future energy needs by investing in new production at home and abroad just like China a decade ago.

However India has an advantage that China did not have. India’s spurt comes during the biggest energy price crash in a generation while China’s binge came during a commodity super-cycle that saw WTI crude reach a high of $147.27 a barrel in 2008. The South Asian nation spent $60 billion less on crude imports in 2015 than the previous year even while buying 4 percent more as oil has tumbled more than 50 percent from mid-2014 levels.

“In addition to the boost from low oil prices, structural and policy-driven changes are under way which could result in India’s oil demand taking off in a similar way to China’s during the late 1990s, when Chinese oil demand was at levels roughly equivalent to current Indian oil demand,” said Amrita Sen, chief oil analyst for Energy Aspects Ltd. in London.

In the last 17 years the Chinese economy grew from the seventh largest in the world to No. 2. Vehicle sales surged and oil demand has nearly tripled since then. This has made the country the world’s largest crude importer this year overtaking the U.S.

The rise in demand for oil in India coincides with a reopening by Iran. In an interview, Indian Oil Minister Dharmendra Pradhan said that he would lead a delegation this month to Iran. A port in Chabahar, near Iran’s border with Pakistan and about 800 kilometers from India’s west coast is being developed in Iran with help from India. Economic zones and joint projects on fertilizer plants and petrochemical projects are being discussed between the two countries, Pradhan said.

“Our engagement with Iran will be multi-dimensional,” Pradhan said.

According to the International Energy Agency last year Asia’s third-biggest economy consumed 4 million barrels of oil. It is expected to surpass Japan as the world’s third-largest oil user this year. Adding 6 million barrels a day of demand, compared to 4.8 million for China, India would be the fastest-growing crude consumer in the world through 2040, according to the IEA.

Growth in India is being driven by a sustained focus on the manufacturing sector as the country leaders intend to create 100 million new factory jobs and increase manufacturing’s share of the economy to 25 percent by 2022 from about 18 percent in 2014.

Through the increase in the amount of goods that need to be moved around on ships and trucks and by raising living standards of workers, oil use is driven by growth in manufacturing. In 12015, a record 24 million new vehicles were purchased by Indians driven by rising wages.

“In a growing economy, where there is so much of emphasis on manufacturing, naturally the demand for energy will grow. The emphasis on manufacturing and infrastructure building contributes a lot to increasing the employment potential, besides bringing in a lot of investments. There is bound to be a lot of more movements on the roads, in terms of goods and services and passengers,” B. Ashok, chairman of Indian Oil Corp., the nation’s largest refiner, said in an interview.

Like China, according to data compiled by Bloomberg, Indian companies pledged $3 billion in asset purchases outside the country in the fourth quarter of 2015, the highest level since 2012. This is an effort to invest in energy-producing assets.

“Economic expansion is priority for the Modi government, and energy is a key part of that story. Indian energy companies will be strategic in their buying. With prices where they are, it makes sense,” said Virendra Chauhan, a Singapore-based oil analyst for Energy Aspects Ltd.

(Adapted from bloomberg.com)