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India’s Rising Natural Gas Imports
Context:
India’s natural gas import bill surged by 16.4% to $14.2 billion during April-February FY25, compared to $12.2 billion in the same period last year. In February alone, the import bill increased by 8.3% to $1.3 billion. The rising import bill reflects increasing domestic demand, stable global prices, and lower domestic production.
Trends in India’s LNG Imports
Domestic Consumption and Sectoral Demand
- India’s natural gas consumption increased by 9% to 66,975 MMSCM, driven by demand from:
- City Gas Distribution (CGD) sector (20% contribution in FY24, projected to reach 25% by 2030).
- Fertilizer industry (major consumer of natural gas for urea production).
- Power sector (increasing reliance on gas for electricity generation).
- The International Energy Agency (IEA) projects an 8% increase in India’s natural gas demand in 2025 (approximately 6 billion cubic meters additional demand).
- India imported 34,329 million standard cubic meters (MMSCM) of liquefied natural gas (LNG) in the first 11 months of FY25, marking a 19.4% increase over the same period in FY24.
- India was the fourth-largest LNG importer in 2024, accounting for 7% of global LNG shipments.
- LNG imports are expected to moderate in 2025, with growth slowing to 10%, down from 21% in 2024.
- Increased imports were supported by lower global LNG prices and higher domestic consumption.
- Dependence on Imported Gas and Domestic Production Challenges
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- India’s reliance on imported gas increased to 51.3%, up from 46.8% in the previous year.
- Domestic natural gas production declined by 0.5% during April-February FY25.
- ONGC’s production dropped to 17,194 MMSCM, from 17,699 MMSCM in FY24, failing to meet targets.
- Despite marginal growth in domestic production (2.6%) during April-January, the gap between demand and domestic supply widened.
Global and Geopolitical Considerations behind Rising Natural Gas Imports
- Several Indian oil and gas companies are securing long-term LNG supply agreements from the US.
- India and the US reaffirmed their commitment to energy trade during PM Narendra Modi’s visit.
- GAIL India is reviving plans to acquire stakes in a US liquefaction facility.
- Indian Oil is negotiating long-term LNG deals with US-based Cheniere Energy.
- These steps aim to strengthen India’s energy security and diversify its import sources.
Implications of this Rising Natural Gas Import Bill
- Economic Implications
- Impact on Trade and Fiscal Deficit
- Increased expenditure on LNG affects foreign exchange reserves.
- Impact on Domestic Industries
- Rising import prices impact industries like fertilizers, power generation, and city gas distribution.
- Increased costs reduce competitiveness of domestic industries.
- Pricing Challenges
About Natural Gas
- Natural gas is a transition fuel aiding the shift from coal to renewables.
- Supports cleaner industrial processes and transportation (e.g., CNG, LNG-based mobility).
Trends in Natural Gas Imports
- Rising Import Dependence: India meets over 50% of its natural gas demand through imports.
- Increase in LNG Imports: LNG imports have grown due to domestic production constraints.
- Supply Diversification: Imports sourced from Qatar, USA, Russia, and Australia.
- Volatile Prices: Global price fluctuations impact affordability and accessibility
Policy Measures and Reforms
- Hydrocarbon Exploration and Licensing Policy (HELP) aims to boost domestic production.
- National Gas Grid Expansion enhances pipeline connectivity.
- Unified Tariff Policy ensures equitable access to natural gas.
- LNG pricing is linked to global benchmarks (e.g., Henry Hub, Japan-Korea Marker).
- Price volatility affects long-term energy planning.
- Energy Security Concerns
- Import dependency exposes India to supply shocks due to geopolitical tensions.
- Disruptions in LNG supply chains (e.g., Red Sea crisis, Russia-Ukraine war) impact availability.
- Diversification of Supply Sources
- India is expanding LNG agreements with Middle Eastern, African, and American suppliers.
- Investments in domestic exploration and production are crucial to reducing dependency.
- Infrastructure Development
- Expansion of LNG terminals, gas pipelines, and city gas distribution networks is essential.
- Initiatives like One Nation One Gas Grid aim to enhance connectivity and efficiency.
Future Outlook: Policy Implications and Growth Projections
- India aims to increase the share of natural gas in its energy mix from 6% to 15% by 2030.
- Analysts project that gas consumption will grow at a CAGR of 10% during FY25-30.
- The government is planning a capital expenditure of ₹30,000 crore during FY25-27 for infrastructure development.
- IEA forecasts a shift in global LNG market dynamics, with new liquefaction projects and changing European demand patterns influencing prices.
