India’s natural gas consumption soars with lower global prices

In December, India’s natural gas consumption surged by 9%, fueled by lower international prices, while liquefied natural gas (LNG) imports rose by 12% year-on-year. A decline in global LNG prices, attributed to a mild winter and high storage in Europe, contributed to the increase.

Despite a previous fiscal year dip, the current year shows a recovery, with LNG imports up 14% and overall gas consumption rising by 9.4%. India aims to boost natural gas in its energy mix, leveraging increased domestic production, imports, and global partnerships.

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Domestic consumption of natural gas in India experienced a notable 9% surge in December compared to the previous year, attributed in part to the impact of lower international prices. The import of liquefied natural gas (LNG) also witnessed a substantial 12% year-on-year increase during the same period, as indicated by official data. This surge in LNG imports can be attributed to a decline in international LNG prices, driven by a mild winter and elevated storage levels in Europe, leading to reduced demand for the fuel.

The Japan/Korea marker, a key benchmark for the North Asian spot LNG market, plummeted to approximately $10 per million British thermal units (mmbtu) from an October average of $18. Typically, LNG prices rise during the winter due to heightened heating requirements. Interestingly, the average price in January 2023 stood at $19 per mmbtu.

The previous fiscal year witnessed a decline in India’s LNG imports and overall gas consumption due to elevated prices. However, the current fiscal year has seen a recovery in demand, with LNG imports rising by 14% year-on-year in the April-December period and overall gas consumption in the country increasing by 9.4%. Notably, imports constitute 46% of the total domestic gas consumption.

With demand resurgence, Indian companies are re-engaging with the spot LNG market. Industry experts anticipate that LNG prices will remain subdued in 2024, supported by robust US LNG exports, stable European demand, and ample storage. Furthermore, an expected surplus of LNG carriers in 2024 is anticipated to keep freight rates low.

In December, domestic natural gas production in India increased by 6%, and for the April-December period, it expanded by 5%. The addition of new output from fields operated by private players is contributing to the growth of the domestic gas supply.

India has set ambitious targets to increase the share of natural gas in its primary energy mix from the current 6% to 15% by 2030. To achieve this, the country has established an extensive network of gas pipelines and constructed LNG import terminals to facilitate the distribution of imported gas to a growing customer base. Additionally, Indian gas marketers are entering into long-term purchase agreements with global gas suppliers, such as GAIL’s recent 10-year deal with Vitol for the annual purchase of 1 million tons of LNG.