India’s natural gas consumption is expected to double in the next 15 years to hit 113.7 billion cubic meters (bcm) aided by a rising population and the government’s push to accelerate economic development.

Fuelled by population growth, economic development and a shift towards cleaner energy, India’s gas consumption is expected to nearly double to 113.7 bcm by 2040 from 65 bcm in 2023, according to Rystad Energy’s research.

Near-term demand is supported by a 51 per cent jump in domestic gas production since 2020 to 36.7 BCM by 2025, but this will not be enough to meet the country’s growing demand for natural gas. The result is that India will continue to rely heavily on imports to satisfy its future energy needs, it added.

The world’s fourth largest liquefied natural gas (LNG) importer meets roughly half of its natural gas demand via imports.

“India’s LNG sector is experiencing significant growth. Looking ahead, a strategic next step could involve continued dealings with the Middle East. The geographical proximity of the two regions, combined with the substantial volume of uncontracted LNG production in the Middle East, presents an excellent opportunity for India to secure favourable terms – it’s an ideal buyer-seller relationship that could help fuel India’s needs,” said Kaushal Ramesh, Vice President of Gas & LNG Research at Rystad Energy.

The nation is well-positioned to attract aggressive targeting from Middle Eastern producers and off-takers, with nearly 100 million tonnes per annum (mtpa) of Middle East LNG remaining uncontracted by 2035, he added.

Gas demand

India’s gas demand will come from several sectors, including the country’s expanding city gas distribution (CGD) network as well as the fertilizer, refining and petrochemicals industries, Rystad Energy said.

Urea production in India heavily depends on natural gas as a key input, with limited alternatives available in the short term. As the government aims for complete food security, it continues to provide substantial subsidies for urea production, resulting in steady demand for gas in this sector, regardless of price fluctuations.

Following the successful restart of four gas-based fertilizer plants in 2021 and 2022, Indian urea production reached 30 mt in 2023. This was still short of that year’s urea demand of 35 mt, suggesting further growth potential in the near term. Meanwhile, rising demand for oil products and petrochemicals could increase India’s refining capacity to around 335 mtpa by 2030, with many expansions expected to occur near LNG terminals.

The CGD sector also supports gas use across transportation, industrial, commercial and domestic applications through the development of compressed natural gas (CNG) stations and piped natural gas (PNG) networks, it added.

India’s CGD network has expanded rapidly in recent years, with the number of CNG stations rising more than fivefold since 2015 to 5,710 by April of last year and the number of PNG connections more than quadrupling to 12 million over the same period. After the latest CGD bidding rounds, nearly 100per cent of India’s geographical area is expected to be covered by the CGD network, reaching a population of over 1.4 billion.

Challenges ahead

While there are positive signs for the Indian gas sector, several challenges could hinder its growth, Rystad said.

“A key issue is Indian buyers’ history of renegotiating or even abandoning near-complete deals, which creates uncertainty for suppliers. This preference for flexibility and cost-effectiveness over long-term commitments highlights India’s focus on securing the best prices for its consumers in a volatile global market – but it could limit LNG growth prospects,” it added.

Additionally, slow infrastructure development has hampered the growth of India’s gas sector. Regasification terminals remain concentrated in the western part of the country, and efforts to expand the gas pipeline network to other regions have been inconsistent. This slow progress is due to regulatory hurdles, challenges in securing investments, difficult terrain, and competing priorities as India channels significant resources into renewable energy development alongside its gas infrastructure.

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