Prospective global gas supply glut to benefit India: ICRA

According to the report, natural gas consumption in India is forecast to grow by 6-8% year-on-year (YoY) in the current financial year (FY) ,up from 187.9 million metric standard cubic meters per day (mmscmd) in FY24.

Bengaluru: The planned global capacity addition of about 193 million metric tonnes (MMT) of liquefied natural gas (LNG) between 2024 and 2028 is expected to lead to a supply glut and the consequent fall in prices in the pursuant years. This, combined with the anticipated modest growth in global natural gas consumption, is set to benefit India in terms of availability of LNG at reasonable prices, according to a report by the ratings agency ICRA Ltd, released on Wednesday.

“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, " said  Girishkumar Kadam, ICRA’s senior vice president and group head, corporate ratings.

"Amidst these demand headwinds, the LNG capacity addition over the next four year, which is equivalent to 41 per cent 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  notwithstanding the near-term volatility amid geopolitical tensions in West Asia,” he added.

According to the report, natural gas consumption in India is forecast to grow by 6-8 per cent year-on-year (YoY) in the current financial year (FY) ,up from 187.9 million metric standard cubic meters per day (mmscmd) in FY24.  This growth is being driven by softer LNG prices; strong demand from  city gas distribution (CGD) networks; increased gas usage by oil refiners.

CGD networks are an interconnected system of underground natural gas pipelines for supplying piped natural gas (PNG) and compressed natural gas (CNG). While the CNG is predominantly used as auto-fuel, the PNG is used in domestic, commercial  and Industrial segments.

Moreover, going forward, domestic gas production will witness marginal growth between FY25 and FY26, with the ramp up of production from ONGC’s KG-98/2 basin in Q4 FY25 and on-streaming of few stranded gas production fields.

The share of LNG in the gas mix is projected to increase from 48 per cent in FY24 to 50 per cent in FY25. However, since domestic production is expected to start moderating from FY28 onwards, the reliance on LNG would further rise as India looks to increase the share of natural gas in the energy mix.

As of December last year, the share of natural gas in the energy basket is 6.7 per cent. The Government has set a target to raise the share of natural gas in the energy mix to 15 per cent in 2030.