India’s LNG roadmap could lead to billions more in stranded assets

New Delhi’s plans to diversify its energy mix could be causing more harm than good as it navigates complicated energy sourcing decisions. A recent development includes the government greenlighting Shell Energy India’s plan to expand the Hazira LNG terminal in Gujrat, western India, more than four-fold. Capacity will increase from 6.28 mtpa to 26.2 mtpa, worth an estimated $2.45 billion.

The environmental clearance follows a significant delay of some four years. Permission to expand the terminal to 10 mtpa expired because Shell couldn’t obtain necessary state-level authorisation. The new, much larger 26.2 mtpa expansion was only activated after the Gujrat government was persuaded to remove its long-standing opposition.

Shell’s clearance fits New Delhi’s ambitious plan to raise LNG import capacity by 27% to 66.7 mtpa by 2030. It’s also part of Indian Prime Minister Narendra Modi’s plan to transform the country into a so-called gas-based economy, with the fuel making up at least 15% of its energy mix from a current 6.5%.

Though Modi made his gas pledge in 2017, his government is still pursuing a pro-gas agenda. On the production side, the government has introduced incentives in upstream gas licencing and pricing adjustments to lift output. India is also expanding LNG import capacity and adding terminals since import reliance will deepen.

Debasish Mishra, Chief Growth Officer, Deloitte South Asia, highlighted India’s economic growth as an integral part of the country’s energy expansion. He told Gas Outlook that “Given India’s robust economic growth and the government’s focus on expanding gas infrastructure there will definitely be a need for more LNG supplies.” His analysis dovetails several other consultancy and think tank findings.

Global price swings

Yet, India’s growing reliance on LNG imports isn’t a quick fix. It exposes its energy companies to volatile global price swings. Though prices have moderated in recent years, high spot LNG rates during the 2022–23 gas crisis following Russia’s invasion of Ukraine forced Indian utilities and industries to scale back consumption, a reminder that infrastructure expansion doesn’t guarantee fuel affordability.

Notably, domestic gas output can’t come close to meeting demand. In 2023, domestic production met about 50% of the country’s gas needs. The U.S. Energy Information Administration (EIA) projected that India’s gas demand will rise around 60% by 2030; with domestic production growing only modestly to around 38 bcm. This in turn will force India’s LNG imports to more than double by then.

India’s LNG expansion also mirrors a broader regional push, with new capacity planned across Southeast Asia and several Gulf states. Shell’s Hazira project positions the company to capture that demand, even as similar investments in neighbouring markets face utilisation challenges.

India is also building out renewables, mostly solar and wind power, at near unprecedented rates, becoming one of the world’s fastest-growing renewable energy hubs. Renewables now make up 50.07% of India’s total installed power capacity of 484.82 GW, a COP26 commitment achieved five years ahead of the 2030 target. There’s also a major policy push for next-generation clean fuels, particularly the National Green Hydrogen Mission, which aims to position India as a global green hydrogen production hub.

As much as India pivots to renewable energy that’s supported by gas, it’s still not reigning in its coal development. In fact, the opposite is true. Despite massive investments in renewables and the push for a gas-based economy, coal remains the absolute backbone of India’s electricity grid while its usage and capacity are still increasing to meet the nation’s soaring power demand.

Coal-fired thermal power plants currently generate more than 70% of India’s total electricity. India has an operational installed capacity of over 210 GW of coal-fired power plants. The government has also sanctioned 25 GW to 30 GW of new thermal power capacity currently in various stages of planning and construction.

More stranded assets

India’s forward-thinking renewables development, and it’s still over-reliance on coal for power generation risks creating significant financial instability in its energy sector along with more stranded gas-fired power assets.

At the same time, India’s ambitions to expand LNG import capacity and gas-fired infrastructure risk outpacing actual demand growth. Seven import terminals already operate at roughly 50–60% utilisation, and even with rising industrial and city gas demand, analysts warn that adding more capacity could leave expensive infrastructure under-used. If domestic gas consumption fails to accelerate, new projects like Shell’s $2.45 billion Hazira expansion could deepen the overcapacity problem and create the very stranded assets India hopes to avoid.

A recent Institute for Energy Economics and Financial Analysis (IEEFA) report, “A Bridge to Nowhere: Economic Reality Check for LNG as a Transition Fuel in India,” paints a dire picture. It claims that declining gas usage in the country’s power sector has already produced significant stranded assets worth an estimated $8.2 billion. Thirty-one gas fired projects, around 8 GW of capacity, generated no electricity at all in fiscal 2025, with 5.3 GW subsequently retired, it found.

Purva Jain, an IEEFA energy specialist in Gas & International Advocacy, found that gas-based electricity generation has dwindled from a peak of 13% in 2009–10 to just 2% in the last fiscal year. It’s a clear signal that gas is already losing the battle for market share in India’s power sector.

India’s conflicting signals on energy policy reflect the tension between growth imperatives and transition goals. On paper, LNG expansion fits the government’s push for energy diversification and industrial reliability. In practise, however, uneven gas demand, entrenched coal interests, and a surge of renewables complicate that vision.

The challenge for New Delhi is less about capacity than coordination and how to pace infrastructure investment so that energy security doesn’t come at the expense of economic efficiency or climate credibility.