India’s natural gas consumption is likely to rise by 16 percent in the next two years due to robust demand expected from the petrochemical, refineries, and allied sectors. These consumption sectors have envisaged mega expansion plans to meet growing domestic requirements, following India’s economy witnessing a phenomenal growth rate and expected to continue the trend in the future as well. Additionally, domestic production and imports are also set to grow in tune with growing consumption.
Major consumption sectors of natural gas include fertilizer, city gas distribution (CGD), power, refineries, and petrochemicals. The petrochemical and sponge iron sectors, along with the fertilizer industry, made up most of India’s non-energy consumption of natural gas in recent years. The fertilizer industry is the largest consumer of natural gas in India, accounting for some 28 percent of total consumption.
| India’s natural gas market (Million Metric Standard Cubic Meter per Day or MMSCMD) |
| Financial year (April-March) | Consumption | Production | Imports |
| 2025-26 | 212 | 116 | 96 |
| 2024-25 | 196 | 114 | 82 |
| 2023-24 | 182 | 100 | 82 |
| 2022-23 | 167 | 94 | 73 |
| 2021-22 | 175 | 93 | 82 |
| 2020-21 | 167 | 78 | 89 |
| 2019-20 | 175 | 83 | 92 |
| 2018-19 | 167 | 88 | 79 |
| 2017-18 | 162 | 87 | 75 |
| 2016-17 | 153 | 85 | 68 |
Sources: Care Ratings Ltd, and Polymerupdate Research
Ambitious targetIndia has set an ambitious target to increase the share of natural gas in its overall primary energy mix to 15 percent by 2030 from the prevailing share of 6 percent. This forecast is based on the growing demand for natural gas across all consumer industries. After sustaining the shocks of the Covid-19 pandemic and the Russia-Ukraine war, gas consumption in the financial year 2023-24 is expected to be the highest ever in the country.
The higher demand for natural gas in the country is also expected to be supported by a sizeable growth in domestic gas production, with nearly 30 Million Metric Standard Cubic Meter per Day (MMSCMD) of new domestic natural gas production gradually coming onstream over the last three years and another around 15 MMSCMD of new domestic facility expected to commence commercial production during the financial year 2024-25.
Additionally, imported liquefied natural gas (LNG) prices, which had significantly shot up in the financial year 2022-23 due to supply disruptions arising from the outbreak of the Russia-Ukraine war, have also now normalized 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. With the rise in domestic natural gas production, India’s dependence on imported LNG, which stood at 53 percent of total consumption in the financial year 2020-21, has gradually declined over the last three years and is expected to remain at around 45 percent in the financial year 2025-26.
Transitioning towards cleaner fuelWith greater thrust of the government for transitioning towards cleaner fuel, there was a steady growth in natural gas consumption till the financial year 2019-20. However, due to the impact of the Covid-19 pandemic, there has been a decline in natural gas consumption during the financial year 2020-21 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 the financial year 2021-22, 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 the financial year 2022-23 whereby gas lost its cost competitiveness to the alternate fuels. Accordingly, natural gas consumption declined in the financial year 2022-23. With imported gas prices normalizing to around US$10-12/mmbtu by the end of the financial year 2022-23 and remaining range bound in the current fiscal, natural gas consumption has again started its upward trajectory in the April-December 2023 quarter and is expected India to record its highest-ever gas consumption annually in the financial year 2023-24.
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. Domestic natural gas production was on a declining trend till the financial year 2020-21 on the back of depleting production from existing fields, with no major discoveries coming on-stream.
Production to riseHowever, due to new gas discoveries in a few off-shore fields coming onstream, domestic natural gas production again started improving from the financial year 2021-22. Going forward also, domestic gas production is expected to improve in the medium term on the back of production ramp-up from discoveries of the recent past along with sizeable new production expected to come on onstream in the financial year 2024-25.
On the back of limited domestic natural gas production, India historically had a high dependence on imported gas. However, during the last three years financial years ending 2022-23, gas imports declined mainly due to improved domestic gas production and a rise in imported gas prices. Going forward, gas imports are expected to increase at a moderate pace despite expected growth in domestic production because of consumption of natural gas is expected to outpace domestic production. Still, imports as a percentage of total consumption are expected to remain largely range-bound during the next two years, up to the financial year 2025-26. Had there been no growth in domestic gas production, probably dependence on imports would have been much higher.
“Despite high reliance on imports in the past due to falling domestic production, significant growth in domestic gas output from the financial year 2021-22 onwards along with expected increases in the financial year 2023-24 and financial year 2024-25 offer hope for reduced import dependency. Regulatory steps to adjust domestic gas pricing, stabilizing imported gas prices, adequate LNG capacity in India, and expanding gas pipeline infrastructure are expected to support this shift towards a greater share of natural gas while keeping our import dependency at around 45% of total natural gas consumption by the financial year 2025-26,” said Hardik Shah, Director at CareEdge Ratings.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
