Natural gas consumption in India likely to rise

Natural gas consumption in India is expected to rise in 2023 due to softening in LNG (liquefied natural gas) prices amid milder-than-expected winters in Europe, and muted demand in China, according to analysts.

In the benchmark NYMEX platform, natural gas prices have fallen to $2.50 per mmBtu (metric million British thermal units) in April 2023, compared to $4.40 MMBtu in January.

Domestic production of natural gas from the Krishna Godavari basin is also expected to increase in 2023, with ONGC and Reliance expected to ramp up production in the basin.

Energy experts, however, remain cautious of variables like European natural gas inventory levels and temperatures in Europe in 2023.

India ups gas price under APM for May to $8.27 mmBtu; impact on PNG, CNG unlikely     India ups gas price under APM for May to $8.27 mmBtu; impact on PNG, CNG unlikely. 

Piped natural gas growth remains slow in India despite government push Piped natural gas growth remains slow in India despite government push

A senior official of the oil ministry said LNG prices in 2023 would depend on temperatures in Europe. If Europe experiences a severe winter and therefore has to consume more gas, natural gas prices cannot be predicted, the official said.

Meanwhile, India has increased the price for domestic natural gas for May to $8.27 per metric million British thermal units (mmBtu) from $7.92 in April.

But the price of gas from the nomination fields of both ONGC Ltd and Oil India Ltd (OIL) will be subject to a ceiling of $6.50 per mmBtu. This means that the price of piped natural gas (PNG) and compressed natural gas (CNG) may remain unchanged as the two public sector units use the gas from their nomination field to supply to them.

In 2022-23, India’s natural gas consumption declined by around 6 percent on account of high international gas prices.

Consumption of natural gas in 2022-23 fell to 60,311 million metric standard cubic metre (mmscd) compared to 64,159 mmscd in the previous year, per government data.

Customers in India reduced gas buys and instead chose alternative fuels as prices touched an all-time high of 350 Euros per megawatt hour (MWh) in August 2022.

Imports of LNG also fell in the year to 26,647 mmscd from 31,028 mmscd. India is dependent on imports for around 50 percent of its natural gas needs.

This is in sharp contrast to the Indian government’s aim of increasing the share of natural gas in its energy mix, from 6 percent currently to 15 percent by 2030.

LNG prices were at record-high in 2022 due to supply concerns after Russia, one of the largest exporters of natural gas, sent troops into Ukraine.

In line with international prices, domestic prices of natural gas were hiked by 40 percent for the second half of FY22-23. The Indian government has now accepted a new pricing formula for domestic natural gas, according to which domestic gas produced from legacy and old fields will have a floor of $4 per mmBtu and a cap of $6.50 per mmBtu.

Supply of LNG to India was also disrupted in 2022 as the Russian energy giant Gazprom, which used to supply gas to India, had halted supplies to GAIL since May 2022.

Due to the halt in supplies from Gazprom, GAIL was forced to buy expensive gas from the spot market. The oil giant confirmed in April 2023 that gas supplies from Gazprom have resumed.

Tags: Consumption, India, Natural Gas, NYMEX