The Indian Express (Delhi Edition)
Reliance on imported gas up on robust demand recovery
AFTER FALLING in the financial year 2022-23 (FY23), India’s reliance on imported natural gas has grown notably in the first 11 months of the current fiscal as consumption picked up amid relatively lower prices. The country’s import dependency in the case of natural gas in Aprilfebruary was 46.1 per cent, against 43.6 per cent in the corresponding period of FY23, as per latest available data with the oil ministry’s Petroleum Planning & Analysis Cell (PPAC). For the full FY23, natural gas import dependency was 43.9 per cent, down from 48.4 per cent in FY22.
India’s natural gas consumption, and consequently imports, had been on a growth trajectory till FY20, with the government’s push to increase the share of the fuel in the country’s primary energy mix to 15 per cent by 2030 from a little over 6 per cent. However, the pandemic dampened demand, leading to lower imports in FY21. While demand largely recovered in FY22, the Ukraine war sent international natural gas prices soaring to multi-year highs in FY23. This led to considerable demand destruction as well as supply issues in India’s case, resulting in lower consumption as well as imports.
In FY24, however, international prices have been considerably lower than supernormal levels seen in FY23, making natural gas competitive again with alternate industrial fuels in India, thereby pushing its consumption as well as import. Natural gas is imported into India in its super-chilled or liquefied form— liquefied natural gas (LNG).
Despite net domestic natural gas production growing 6 per cent year-on-year in Aprilfebruary to 32.65 billion cubic metres (bcm), high demand growth led to natural gas imports rising 17.6 per cent to 27.93 bcm, the PPAC data shows. India’s total natural gas consumption for the 11 months to February stood at 60.58 bcm, up 11 per cent year-on-year. The fall in international LNG prices relative to previous fiscal is evident from the fact that despite a jump in LNG import volumes, the value of imports in Aprilfebruary declined to $12 billion from $15.9 billion a year ago.
“Going forward, with imported LNG prices expected to remain range-bound, growth in domestic natural gas production and sizable demand from key user industries, natural gas consumption is slated to grow significantly in the medium term,” Careedge Ratings had said in a note earlier this month. The rating agency expects India’s reliance on imported natural gas to be in the range of 45 per cent till FY26.
“Gas imports are expected to increase at a moderate pace in spite of expected growth in domestic production because consumption of natural gas is expected to outpace domestic production. Still, imports as a percentage of total consumption are expected to remain largely range-bound during next two years, up to FY26. Had there been no growth in domestic gas production, probably dependence on imports would have been much higher,” Careedge said.
The rationale behind the government’s push to increase consumption of natural gas in the country, even if it leads to higher imports, is rather simple. Natural gas is far less polluting than conventional hydrocarbons like crude oil and coal, and is usually cheaper than oil, for which India depends on imports to meet over 85 per cent of its requirement.
As the country moves towards green energy and future fuels, natural gas is seen as a key transition fuel in that journey. Various sectors, including the likes of city gas distribution, fertilizer, power generation, and refineries and petrochemicals, are seen as major growth areas for natural gas demand in India.