India’s liquefied natural gas (LNG) consumption is expected to grow by 6-8 per cent YoY in FY25, supported by softer LNG prices and an uptick in domestic gas production. This growth is supported by the City Gas Distribution (CGD) sector, followed by the refineries’ offtake, said rating agency Icra.
India’s gas consumption, after witnessing headwinds in FY23 owing to the elevated LNG prices, recovered sharply to 187.9 million metric standard cubic meters per day(mmscmd) in FY24 (17 per cent increase YoY) with the easing of LNG prices.
The demand from the CGD sector is underpinned by the CNG segment, which remains robust owing to the strong economic advantage over alternate fuels, following the strong uptick in CNG vehicle sales in the last couple of years. The increasing adoption of electric vehicles in the passenger vehicle and bus segments will remain a key threat to the CNG offtake.
Additionally, the ability of the CGD entities to ensure the availability of CNG at competitive prices going forward will remain a key challenge, given the falling share of the administrative price mechanism (APM) gas in the overall gas mix. The fertiliser segment will remain the largest off-taker of natural gas, albeit the demand from here on is not expected to grow, given there are no further capacity expansions in the urea segment.
The report stated, “The domestic gas production will witness marginal growth over the course of FY25 and FY26 with the ramp-up of production from ONGC’s KG-98/2 basin in Q4 FY25 and on-streaming of few stranded gas production fields. Given the expectation of a growth of 6-8 per cent YoY in natural gas consumption in the country, the reliance on LNG will, however, remain material. The share of LNG in the gas mix is projected to increase from 48 per cent in FY24 to 50 per cent in FY25. However, since domestic production is expected to start moderating from FY28 onwards, the reliance on LNG would further rise as India looks to increase the share of natural gas in the energy mix.”
The rating agency also highlighted that after two volatile years in terms of natural gas supplies and pricing in CY22 and CY23, the global liquified natural gas (LNG) markets are now heading towards a significant supply glut with large capacity additions planned from CY24 to CY28. Globally, about 193 MMT of the LNG production and liquefaction capacity is slated to be added over the course of the next four years.
Significant capacity addition amid the expectation of modest demand growth in global natural gas consumption will keep the LNG prices under check, benefitting India.
