The demand for natural gas in India is expected to grow by more than 7 per cent year-on-year (y-o-y) in the current calendar year on the back of rising consumption from the sectors of industry and transport, the International Gas Union (IGU) said.
IGU, in the 2024 edition of the global gas report, said India will continue to be the second largest growth market for natural gas after China, albeit at a slightly slower pace.
Gas consumption by the world’s fourth largest liquefied natural gas (LNG) importer is expected to grow 7.1 per cent y-o-y, or around 5 billion cubic meters (BCM), in 2024. The world’s fastest emerging economy’s consumption rose by 12.7 per cent y-o-y, or around 7 BCM, in 2023.
“In India, industrial and transport demand will largely continue to drive growth in gas demand, balancing a slower pace of residential and commercial natural gas demand growth,” it added.
Industry and trade sources said that demand for gas from the industry has been robust and is expected to continue in the short to medium term fuelled by the green energy transition. Besides, the growth in vehicles running on compressed natural gas (CNG) is also pushing up consumption.
In India, gas demand growth was driven by industry, growing by 16.3 per cent, or 6 BCM y-o-y in 2023. The fertiliser sector was particularly one of key gas consumers in India, as increasing domestic urea production led to a one-fifth reduction in imports of the material, boosting demand for natural gas as a feedstock, the IGU report pointed out.
Quoting Indian government data, the report said that CNG vehicles, including three-wheelers and cars, grew 53 per cent y-o-y to 1,80,000 in India from 2022 to 2023.
“As a result, demand for natural gas from transport increased by 1 BCM in the period, a trend slated to continue. With increased access to natural gas through the city gas distribution network, the residential and commercial sectors also saw a boost, growing by 1 BCM in 2023 relative to 2022 levels,” it added.
Increasing share
India has an “ambitious target” to increase the share of natural gas in its primary energy mix from the current 6.7 per cent to 15 per cent by 2030, surmounting challenges of affordability and availability, the report said, adding that to address these issues, the country has implemented several policy measures.
In March 2023, a new domestic gas pricing formula was introduced, linking prices partially to crude oil with a ceiling of $6.50 per mBtu, aiming to make gas more affordable for consumers, especially in the city gas and fertilizer sectors.
This is expected to lower prices by $1-2 per million British thermal units (mBtu).
“However, such caps can introduce the pitfall of distorting long term economics for suppliers and producers, resulting in a mismatch of investment and ultimately slow down progress for gas access,” it added.
Besides, India also revised its gas transmission tariff structure, implementing a ‘unified’ system to replace the zonal structure, reducing transmission costs for inland industries and city gas distributors.
These changes are likely to boost domestic consumption and encourage fuel switching from coal and oil to natural gas - a positive possibility for reducing greenhouse gas emissions and improving air quality, it added.