India’s Dependence On Imported LNG Gradually Decreases In 3 Years: Report

India’s dependency on imported LNG, which stood at 53 per cent of total consumption in FY21, has gradually declined over the last three years and is expected to remain at around 45 per cent by FY26 with the rise in domestic natural gas production, said a report released by CareEdge.

The report said that India is envisaged to have robust demand for natural gas from all the major consumption segments viz. Fertilizer, City gas distribution, Power, Refineries and Petrochemicals. After digesting the shocks of the Covid-19 pandemic and the Russia-Ukraine war, gas consumption in FY24 is expected to be the highest ever in the country.

Imported LNG prices which had shot up significantly in FY23 due to supply disruptions arising from the outbreak of the Russia-Ukraine war have also now normalised during the last one year; and with sizeable expansion of LNG export capacities being undertaken by the gas surplus hubs/regions of the globe, imported LNG prices in India are expected to remain range bound, thus supporting demand.

India has set an ambitious target to increase the share of natural gas in its overall primary energy mix to 15 per cent by 2030 from the prevailing 6 per cent share.

The higher demand for natural gas in the country is also expected to be supported by sizeable growth in domestic gas production wherein nearly 30 MMSCMD of new domestic natural gas production has gradually come on-stream over the last three years and another around 15 MMSCMD of new domestic natural gas production is expected to come on-stream during FY25.

With greater thrust of the Government for transitioning towards cleaner fuel, there was a steady growth in natural gas consumption till FY20. However, due to the impact of the Covid-19 pandemic, there had been a decline in natural gas consumption during FY21 in line with an overall decline in energy consumption in the country. Post subsiding of the impact of the pandemic, industrial activity rebounded which again led to an increase in gas consumption in FY22, reaching to pre-Covid levels.

It was on course to grow further in the subsequent year however, the sudden outbreak of war between Russia and Ukraine in February 2022 led to a sharp increase in prices of natural gas in FY23 whereby gas lost its cost competitiveness to the alternate fuels. 

Accordingly, natural gas consumption declined in FY23. With imported gas prices normalizing to around USD 10- USD 12/mmbtu by the end FY23 and remaining range bound in the current fiscal, natural gas consumption has again started its upward trajectory in 9MFY24 and CareEdge Ratings expects India to record its highest-ever gas consumption annually in FY24.

Going forward, with imported LNG prices expected to remain range-bound, growth in domestic natural gas production and sizeable demand from key user industries, natural gas consumption is slated to grow significantly in the medium term.