Global LNG supply surge to benefit India

Global LNG supply surplus with 193 MMT of new capacity expected from CY2024 to CY2028, likely stabilizing prices and benefiting India. After a tough FY2023, India’s gas consumption rebounded to 187.9 mmscmd in FY2024 and is set to grow by 6-8% in FY2025.

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Following two turbulent years of fluctuating natural gas supplies and prices in CY2022 and CY2023, the global liquefied natural gas (LNG) markets are moving towards a substantial supply surplus, with significant capacity expansions planned from CY2024 to CY2028, according to an ICRA report. Approximately 193 MMT of LNG production and liquefaction capacity is expected to be added globally over the next four years. This increase in capacity, coupled with modest growth in global natural gas consumption, is expected to keep LNG prices stable, benefiting India.

Girishkumar Kadam, Senior Vice President and Group Head, Corporate Ratings at ICRA Ltd, noted, “Global natural gas consumption is expected to witness modest growth, given the focus of the major natural gas consumers in regions of European Union, Japan & Korea towards other sources of energy. Amidst these demand headwinds, the LNG capacity addition over the next four years, which is equivalent to ~41 percent of the current global LNG production capacity, is expected to result in a downward pressure on the global LNG prices. India thus stands to benefit in terms of availability of LNG at reasonable prices over the medium term, notwithstanding the near-term volatility amid geopolitical tensions in West Asia.”

After facing challenges in FY2023 due to high LNG prices, India’s gas consumption surged to 187.9 mmscmd in FY2024, marking a ~17 percent increase year-over-year as LNG prices eased. The report forecasts a 6-8 percent year-over-year growth in consumption for FY2025, driven by softer LNG prices and increased domestic gas production. This growth is supported by the City Gas Distribution (CGD) sector and refineries. The CGD sector’s demand, primarily from CNG, remains strong due to its economic benefits over alternative fuels and the rise in CNG vehicle sales. However, the adoption of electric vehicles poses a threat to CNG demand. Additionally, CGD entities face challenges in maintaining competitive CNG prices due to the decreasing share of APM gas. The fertilizer segment, the largest natural gas consumer, is not expected to see further growth due to a lack of new urea capacity expansions, as noted by ICRA.