Indian gas consumption hits highest-ever annual level

Indian gas consumption skyrocketed to its highest ever level — 68.76 billion cubic meters — during the past fiscal year (FY) 2023-24, which ended in March, riding on mounting demand in fertiliser factories, industries, and major manufacturing sectors including iron and steel, and needed market liberalisation.

The South Asian country’s economic giant witnessed a whopping 14.62% growth in natural gas consumption during the FY2023-24 compared to 58.70 billion cubic meters (bcm) consumption of natural gas during FY 2022-2023, according to data released by the Petroleum Planning and Analysis Cell (PPAC) of India.

Of the total Indian gas consumption, 36 bcm was sourced from domestic resources, which is the highest ever so far in a single year, and the remaining 32.76 bcm as re-gasified liquefied natural gas (LNG), which is also the highest in volume in a single year.

Natural gas consumption from domestic sources in India witnessed a continuous growth over the past three years since FY2021-2022 after the post COVID-19 pandemic, showing signs of further growth.

India’s natural gas consumption from domestic sources was 31.49 bcm during FY2021-2022, and 32.93 bcm during FY2022-2023.

The country witnessed its lowest ever natural gas consumption from domestic sources over the past decade during FY2020-2021, when it consumed around 24.48 bcm, which was lower due to the COVID-19 pandemic.

The whole world including India was undergoing COVID-19 mayhem during FY2020-2021 with reduced economic activities and industrial output.

India’s overall natural gas consumption during FY2015-2016 was 47.85 bcm,  during FY 2016-2017 was 50.78 bcm, during FY 2017-2018 was 52.83 bcm, during FY 2018-2019 was 53.84 bcm, during FY 2019-2020 was 56.49 bcm, during FY 2020-2021 was 56.11 bcm, and during FY 2021-2022 was 61.49 bcm, according to the PPAC.

Fertiliser factories accounted for the highest — or 21.04 bcm of natural gas consumption in India during the last year, FY2023-2024 — which is almost one-third or 30.60% of overall natural consumption in India.

Natural gas consumption in fertiliser factories during FY2023-2024 posted 8.48% growth year-on-year compared to 19.40 bcm consumption in FY2022-2023.

City gas distribution

Natural gas consumption through city gas distribution (CGD) networks was the second highest gas-guzzling sector with a consumption of 13.49 bcm of gas during FY2023-2024, which was 12.18% higher than FY2022-2023’s consumption of 12.02 bcm.

Gas consumption in industries witnessed the highest growth in consumption (54.96%) during FY2023-2024 when it consumed around 1.04 bcm of gas compared to 0.67 bcm during FY2022-2023.

The power sector witnessed a growth by 10.22% in terms of natural gas consumption during FY2023-2024 when it consumed around 9.08 bcm of gas compared to 8.15 bcm during FY2022-2023.

Overall Indian gas consumption is on the rise amid a growing government push over the past decade to ramp up the country’s overall natural gas consumption in the coming years.

India expanded its gas pipeline network to 23,000 km in 2023, a 53.33% jump from 14,000 km in 2014, to provide natural gas to all sectors including fertiliser factories, and industries, according to the Ministry of Petroleum and Natural Gas of India.

It has expanded the CGD network exponentially over the past several years and raised the number of CGD covered districts more than nine times to 648 in 2023, from just 66 in 2014.

The number of piped natural gas connected domestic consumers also soared to 11.40 million in 2023 from only 2.24 million in 2014.

The number of liquefied petroleum gas (LPG) customers also rose significantly to 310 million in 2023, from 145.20 million in 2014, reaching almost a saturation level.

The number of compressed natural gas (CNG) stations also grew significantly by more than six fold to 5,899 in 2023 from just 783 in 2014.

The Indian government has also revised natural gas pricing in 2023 to accelerate further the growth of natural gas consumption in all the major gas-guzzling sectors in the years to come.

It has introduced a new gas pricing formula linking it with 10% of the monthly average of Indian Crude Basket, which led to a significant decrease in the prices of piped natural gas (PNG) for households and CNG for transport.

Mixed outlook for LNG

To ensure supply of RLNG, India has increased its number of LNG terminals to total seven in 2023, from only four in 2014.

With the increase in the number of LNG terminals, the country’s overall LNG re-gasification capacity more than doubled in 2023 to 47.7 million tonnes per annum (mtpa) from 22 mtpa in 2014.

To provide access to natural gas in remote areas at a competitive and affordable rate India’s Petroleum and Natural Gas Regulatory Board (PNGRB) has announced unified pipeline tariffs in three zones, which resulted in a lower tariff for consumers in far-flung areas and lower delivered price of gas there.

Indian gas consumption in 2024 is projected to increase by over 7%, according to April 2024’s revised version of the Gas Market Report of the International Energy Agency (IEA).

Citing the Petroleum Planning & Analysis Cell, it said that India’s primary natural gas supply (including net domestic production and LNG imports) increased by 16% y-o-y between October 2023 and February 2024.

This strong growth in supply reflects growing demand for natural gas across all sectors.

The increase in consumption was mainly driven by the oil refining sector (up by more than 70% y-o-y) and industry (up by over 15% y-o-y), the IEA report stated.

In 2024 India is expected to see an increase in LNG imports due to the decline in spot LNG prices. However, this growth could be tempered by the increase in domestic gas production from ONGC’s KrishnaGodavari field, it maintained.

Following an announcement by Prime Minister Narendra Modi in January 2024, the US$67 billion investment plan for developing the Indian gas supply chain is set to maintain its momentum over the coming years, the IEA noted.

According to the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA) , the government of India has set ambitious targets to increase the country’s overall natural gas consumption from 51.3 mtpa to 139 mtpa by 2030, with the majority of growth expected to be met by LNG imports.

In 2022, however, LNG imports fell 17% due to LNG price spikes, demonstrating the country’s sensitivity to volatile prices. As markets eased in 2023, India’s LNG demand rebounded by 9% to 22 mtpa. However, demand remains well below levels seen before the Russian invasion of Ukraine.

The role of LNG in power generation is likely to remain low in India, it said.

The share of gas-fired generation in India’s power mix remains at just 2% and the country has no plans to build more gas-fired power plants, the IEEFA noted.

The fertiliser sector accounts for the largest share of India’s LNG demand, due largely to government subsidies that help the sector absorb price shocks in global markets.

In 2023, demand in the fertiliser sector increased by 24%.

The government has budgeted US$22.7 billion for subsidies in the fertiliser sector for the 2024 fiscal year.