India’s gas consumption to grow 6-7% YoY, says ICRA report

NEW DELHI:  Gas consumption in India is expected to grow by 6-7% year-on-year in FY2024, according to a report by ICRA. The report also mentioned that the Indian gas utilities sector, after experiencing volatility in prices and issues with the availability of LNG (Liquefied Natural Gas) over the last two years, is now returning to a state of normalcy. The gas offtake by the domestic market is supported by softening LNG prices, an uptick in domestic gas supplies, and regulatory initiatives by the government.

“The gas consumption in India is expected to grow by 6-7% YoY in FY2024 over a low base, supported by softer LNG prices and an uptick in the domestic gas production,” said Sabyasachi Majumdar, Senior Vice President and Group Head, Corporate Ratings, ICRA Ltd.

According to a report, the domestic production of gas is projected to witness healthy growth in FY2024, primarily from the Krishna-Godavari Basin, which is likely to keep the reliance on LNG in check. Also, the city gas distribution (CGD) and the fertiliser sectors will continue to drive demand growth owing to favourable policy support. The CGD sector has benefitted from the implementation of the Kirit Parikh Committee recommendations in April 2023, resulting in the lowering of domestic gas prices, thereby improving the cost economics for CNG and PNG(d) vis-à-vis alternate fuels. ICRA expects the demand from the industrial sector to witness a healthy uptick amid soft LNG prices and increasing domestic gas production.

Globally, the liquefied natural gas (LNG) prices moderated in CY2023 after reaching all-time highs in CY2022, influenced by changes in demand patterns across key consuming nations. LNG demand from China has been subdued amid an economic slowdown, increased pipeline flows from Russia, and a growing reliance on coal. EU demand stabilized after an initial peak, attributed to mild winters, austerity measures, and a weak economic environment. Demand from Japan and South Korea was also tepid, as they increasingly focused on the use of renewables and nuclear power. On the other hand, domestic demand in the US has also witnessed subdued growth, and with healthy gas inventory levels, Henry Hub prices have moderated.