Indian gas demand reaches inflection point: IEA
India has choices to make to meet projected increased electricity demand due to economic growth. However, at the end of the day, Indian gas use will continue to increase as the larger part of its power generation mix.
A recent International Energy Agency (IEA) India Gas Market Report projected that Indian gas demand will increase nearly 60% by 2030 to 103 billion cubic meters (bcm) annually, marking a significant shift in the country’s energy landscape.
The increased gas usage will also put India on par with what the report called some of the world’s largest gas consumers. After “over a decade of slow growth and periodic declines, Indian gas demand increased by more than 10 percent in both 2023 and 2024, indicating an inflection point,” the report said.
However, domestic Indian gas production will be unable to sufficiently meet that projected demand. In 2023, domestic production met 50% of demand and is projected to grow, but gradually, reaching just under 38 bcm by 2030, about 8 percent above 2023 levels. As such, “limited growth in domestic supply means India’s LNG imports will need to more than double to around 65 bcm a year by 2030 to meet rising demand,” the report added.
Indian Prime Minister Narendra Modi set a goal back in 2017 to make India a gas-based economy, with the fuel making up at least 15% of the country’s energy mix by 2030. When Modi was re-elected last June, his government renewed its gas pledge with LNG as one of the main drivers.
These measures could cause India’s total gas demand to reach similar levels as South America’s current gas consumption. “This scenario would require additional policy support to drive higher utilisation of gas-fired power plants, faster adoption of LNG in heavy-duty transport, and more rapid expansion of city gas infrastructure,” the report found.
More U.S. LNG
Most of India’s new LNG supply will come from the U.S., the world’s largest exporter of the super-cooled fuel as well as legacy producers Qatar and Australia. Keisuke Sadamori, IEA Director of Energy Markets and Security, said that “the prospect of higher gas demand in India coincides with an expected wave of new global LNG supply.”
Global LNG demand is estimated to rise by around 60 percent by 2040. The expansion is largely driven by economic growth in Asia, particularly China and India, according to the Shell LNG Outlook 2025. In 2024, China was the top global LNG importer, followed by Japan, South Korea and India.
Like other countries in the region, except China, India is also bowing to U.S. retaliatory threats and agreeing to ramp up its U.S. LNG procurement. Modi met Trump in February in Washington and pledged to increase American energy purchases from US$10 billion to US$25 billion, including oil and LNG exports.
Going a step further, the Indian government said in March that it was considering a proposal to scrap the import tax on U.S. LNG to boost purchases. Scrapping the import tax would make U.S. LNG more price competitive, while helping trim India’s trade surplus with the U.S.
State-run GAIL Ltd., India’s largest natural gas company, also indicated that it would revive plans to buy a 26 percent stake in an LNG plant in the U.S. Another possibility would be for it to secure a long-term U.S. LNG supply deal. Extra LNG supply from the U.S. would help India meet its gas demand growth, but it would also put the country’s already problematic decarbonisation goals in jeopardy.
NDC commitments insufficient
India is one of just a few major countries that has failed to set a net zero emissions 2050 goal. Its 2070 net zero goal — set at the COP26 summit in Glasgow in 2021 — drew criticism in international circles at the time, as did its continued reliance on fossil fuels for power generation.
The Indian government has also set its Nationally Determined Contribution (NDC) to reach a 45% reduction in emissions intensity of its GDP by 2030, compared to 2005 levels. It also aims to derive at least 50% of its electricity production from non-fossil fuel sources by 2030.
A country’s NDC outlines its commitment to reduce greenhouse gas emissions per the Paris Climate Accord. These targets, however, are considered insufficient compared to what’s needed to align with the Paris Accord’s 1.5°C target, a Climate Action Tracker report found.
India also considers gas to be an ideal transition fuel to pivot away from coal in its power sector. There’s one caveat, however. When used for electricity production, gas emits at least half of the CO2 as coal, the world’s dirtiest burning fossil fuel. Gas also has methane leakage problems across the entire gas value chain.
“A long or slow transition away from other fossil fuels and which requires lots of investment in gas infrastructure would make for a bad bridge,” said Mark Radka, Head of the United Nations Environment Program’s (UNEP) Energy and Climate Branch. “The rapid decrease in the cost of solar, wind and other renewable energy technologies makes these an even better alternative than gas in more and more locations,” he added.
More renewables needed
However, to its credit, India is trying to maximise its renewable energy development and has set an ambitious goal of achieving 500 gigawatts (GW) of non-fossil fuel capacity by 2030 at a cost of some US$300 billion.
Modi said at an energy conference in February that the success of the renewables drive would hinge on “resource availability, a skilled work force, economic strength, political stability, and strategic geography.” The problem is that the goal may never materialise, according to a new Institute for Energy Economics and Financial Analysis (IEEFA) report .
In a positive development, “India is making bold strides in its renewable energy drive, a crucial element to meet its rising power demand and align with its energy transition goals,” the report said. Meanwhile, the country’s renewable power auctions reached a record 59 GW in 2024, up 2.4 times from the previous year.
The report added, however, that renewable project execution in India is still not keeping pace with projects in the pipeline due to a lack of transmission infrastructure, project financing bottlenecks, and delays in signing power sales agreements that threatens to erode investor confidence in the sector.
(Writing by Tim Daiss; editing by Sophie Davies)