India’s natural gas demand is expected to grow by 4 per cent in 2023 and increase at an average annual rate of over 8 per cent until 2026, according to the International Energy Agency’s (IEA) recent medium-term forecast.
Released on Tuesday, the forecast also indicated that global gas demand would rise by an average of 1.6 per cent a year between 2022 and 2026, a decline from an average growth of 2.5 per cent a year between 2017 and 2021.
After witnessing a sharp 6 per cent drop in 2022, Liquefied Natural Gas (LNG) imports into India grew by 8 per cent in the first eight months of 2023, compared to the same timeframe the previous year. Meanwhile, the primary gas supply saw a 2 per cent increase.
Since June, spot LNG prices have dropped to below $15 per Metric Million British Thermal Unit (MMBTU), resulting in a positive demand response from both industry and the power sector, the report highlighted.
Over the next five years, India is anticipated to add more than 20 billion cubic metres of natural gas (bcm) incremental demand. The industry is poised to be the largest contributor to this growth, making up nearly 40 per cent of the total increase.
In April, the Dhamra LNG import terminal, with a 7 bcm per year capacity, commenced operations. As the seventh LNG import facility and the second on the east coast, along with Ennore, it boosted India’s total regasification capacity by 10 per cent.
LNG is typically transported in its liquid form to terminals. Regasification is the process of converting LNG back to its gaseous state by heating, after which it is conveyed via pipelines.
The report cited data from the Petroleum Planning and Analysis Cell, noting that demand for regasified LNG in the fertiliser sector almost tripled in the initial eight months of 2023 compared to the same period in 2022. This surge was largely attributed to government subsidies and enhanced connectivity for fertiliser plants in southern India. The fertiliser sector is projected to play a pivotal role in India’s rising industrial gas demand, with plans to phase out urea imports by the end of 2025.
The government aims to increase the share of gas in its energy consumption mix to 15 per cent by 2030, from the existing 6 per cent. Presently, about half of the country’s gas requirements are imported. India’s energy demand is growing by 4-5 per cent annually.
Despite the ongoing addition of renewable capacities, gas-to-power demand is projected to grow at an average of 15 per cent per year between 2022 and 2026. This is due to improved capacity factors at current gas plants in response to rising power demand. The IEA projects that developments in the distribution network and a sustained push for gas in household applications will lead to an average annual growth of 7 per cent in city gas distribution during this period.
Global demand’s growth rate
After a decade of unparalleled expansion, the growth in global demand for natural gas is anticipated to decelerate in the upcoming years due to reduced consumption in mature markets. In the future, China is expected to drive half of the growth, given its increased reliance on the fuel.
