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India’s natural gas demand is set to grow by 4 per cent in 2023 and rise at an average annual rate of over 8 per cent till 2026, a medium-term forecast by the International Energy Agency (IEA) has shown.
Released on Tuesday, it also showed that global gas demand is on course to grow by an average 1.6 per cent a year between 2022 and 2026, down from an average of 2.5 per cent a year between 2017 and 2021.
Following a steep 6 per cent decline in 2022, liquefied natural gas (LNG) imports into India increased by 8 per cent in the first eight months of 2023 compared to the same period of the previous year. Primary gas supply increased by 2 per cent.
Since June, spot LNG prices have fallen to below the $15 per metric million British thermal unit (MMBTU) threshold, which led to a positive demand response from the industry and the power sector, the report said.
During the next five years, India is set to add over 20 billion cubic metres (bcm) of natural gas incremental demand, the report said.
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The industry is set to remain the largest contributor to this growth, accounting for close to 40 per cent of the total increase.
In April, the Dhamra LNG import terminal — with a capacity of 7 bcm per year — was commissioned.
The seventh LNG import facility and second on the East Coast, along with Ennore, raised India's total regasification capacity by 10 per cent.
Natural gas is shipped in its liquid form as LNG to terminals. Regasification is the process of converting the LNG back to its gaseous state by heating it, after which it is transported through pipelines.
“According to data from the Petroleum Planning and Analysis Cell, demand for regasified LNG in the fertiliser sector almost tripled during the first eight months of 2023 compared with the same period in 2022. It was largely due to government subsidies and improved connectivity for fertiliser plants in southern India,” the report said.
The fertiliser sector is set to be a key driver behind India’s growing industrial gas demand, as urea imports are planned to be phased out by 2025-end.
The government wants to raise the share of gas in its energy consumption mix to 15 per cent by 2030, up from the current 6 per cent. The country currently imports about 50 per cent of its gas requirements. India's energy demand is rising 4-5 per cent annually.
Despite continuing renewable capacity additions, gas-to-power demand is expected to grow at an average of 15 per cent per year between 2022 and 2026. This comes as capacity factors improve at existing gas plants in response to growing power demand, the IEA projects.
The development of the distribution network and a continued push to favour gas in household applications are expected to drive average annual growth of 7 per cent in city gas distribution.
Global demand slowing
After a decade of unprecedented expansion, growth in global demand for natural gas is expected to slow in the coming years as consumption declines in mature markets. Going ahead, half of the growth is expected to be driven by China, which is doubling down on the fuel.
Meanwhile, natural gas production is expected to expand by close to 6 per cent or 240 bcm by 2026. North America and the Middle East are forecast to account for almost 80 per cent of the net increase. Russia’s production is set to remain well below the record levels reached in 2021, the report said.
