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Natural gas consumption rises 7 per cent in first half

India’s natural gas consumption rebounded 7% year-on-year in the fiscal first half, reversing a decline last year, as international gas prices and supplies normalised.

Consumption rose to 32.6 billion cubic meters (BCM) in the April-September period, according to oil ministry data. For the full year ended March 31, consumption stood at 60 BCM, nearly the same level as in 2018-19.

Gas consumption rose 5% in 2019-20 before falling by a similar percentage point the subsequent year as the pandemic curtailed demand. It expanded 5% in 2021-22, boosted by the post-pandemic recovery but fell by a similar volume again in the succeeding year, weighed down by record high prices in the international markets.

Japan Korea Marker (JKM), the liquefied natural gas (LNG) spot market benchmark for North Asia, surged to nearly $70 per MMBtu in August 2022 but has since plummeted to around $18. Most of India’s long-term contracts for LNG imports are benchmarked to crude oil, which has also been more stable than last year.

The current stability in the global gas and crude markets has brought some confidence among Indian consumers, boosting consumption, an industry executive said, adding that a further drop in prices can lead to even greater demand. LNG imports have expanded 9% on-year in the April-September period.

Long-term LNG imports from a key supplier were disrupted last year following the start of the Ukraine war. That has since resumed, increasing supplies for domestic consumers.A 4% rise in domestic production of natural gas, which has traditionally been cheaper than imported fuel, has also aided local consumption. India imports about 46% of the gas it consumes.A change in policies, which made locally produced gas more affordable while increasing its allocation to city gas distributors, also helped drive consumption. This allowed city gas distributors to reduce their intake of expensive LNG and offer cheaper domestic gas to CNG vehicle drivers.

This year’s demand expansion has come mainly from power plants, city gas distributors, and refineries. Refineries, which account for about 8% of India’s total gas consumption, increased their consumption by 28% this year. Spiralling prices last year prompted refiners as well as many other industries to switch to liquid fuel.

Meanwhile, rising electricity demand has boosted gas use in power generation by 18% year-on-year. The power sector accounts for 14% of India’s natural gas consumption.

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