As domestic LNG output rises, imports will decline to 45% by FY26

Following the pandemic and a sharp increase in imported LNG prices due to geopolitical situation, the demand for natural gas declined since fiscal FY21-23, Care Ratings said

With increasing local production, the import dependency of natural gas in general and LNG in particular, is likely to come down to 45 per cent by FY26, says a report.

According to a Care Ratings analysis, with the rise in domestic natural gas production, the dependency on imported LNG (liquefied natural gas), which stood at 53 per cent in FY21, has gradually declined over the past three years and is expected to remain at around 45 per cent by FY26, the agency said.

Higher demand for natural gas is also expected to be supported by sizeable growth in domestic gas production, wherein nearly 30 MMSCMD of new domestic natural gas production has gradually come on-stream over the past three years and another 15 MMSCMD of new domestic production is expected to come on-stream next fiscal alone.

There has been a steady growth in natural gas consumption till FY20.

However, following the pandemic and a sharp increase in imported LNG prices due to geopolitical situation, the demand for natural gas declined since fiscal FY21-23, the agency said.
 

Hardik Shah, a director at the agency expects the trend to reverse and the country is likely to record the highest-ever gas consumption in FY24.

The government aims to increase the share of natural gas in its primary energy mix from the present 6 per cent to 15 per cent by 2030, focusing on key end-use sectors like fertilizers, city gas distribution, power, refineries, and petrochemicals.

Despite high reliance on imports in the past due to falling domestic production, significant growth in domestic output from FY22 onwards along with expected increases in FY24 and FY25 offer hope for reduced imports.

Enabling regulatory measures to adjust domestic pricing, stabilizing imported gas prices, adequate LNG capacity, and expanding gas pipeline infrastructure are expected to support this shift towards a greater share of natural gas, while keeping the import dependency at around 45 per cent by FY26, Shah added.