 "India's natural gas consumption seen rising 3-4% in FY27 on demand: Icra")
India's natural gas consumption is expected to grow by 3-4 per cent year on year in 2026-27, following a period of near-term moderation in the previous year, said credit rating agency Icra. The rebound in domestic gas demand would be driven by a recovery in industrial offtake from key sectors and the continued expansion of the city gas distribution (CGD) network.
What is supporting the outlook for gas consumption and LNG prices?
Supporting the gas consumption outlook, global liquefied natural gas (LNG) prices have eased on expectations of warmer winters in key regions and healthy inventory levels. The upcoming sizeable LNG capacity additions globally are expected to lead to a moderation in prices from calendar year 2027.
Why did gas consumption fall in FY26 so far?
India witnessed a 4.5 per cent decline in gas consumption in the first seven months of FY26, driven by lower offtake from key consuming sectors including fertiliser, power and refineries. While the CGD segment continues to witness healthy growth and remains a key driver, overall consumption for FY26 is anticipated to be flat or show low single-digit moderation.
What is Icra’s view on crude oil prices and petroleum demand in FY27?
Meanwhile, crude oil prices are expected to average between $60 and $70 per barrel in FY27 due to muted global demand growth amid increasing supplies. “Even at these levels, the profitability of domestic crude producers will remain healthy and their capex plans are likely to remain intact. Domestic consumption of petroleum products is expected to grow by 1-2% in the same period,” said Varun Gogia, assistant vice president and sector head at Icra.
How could domestic gas prices move, and what does it mean for CGD firms?
Domestic gas prices are also likely to moderate as crude oil prices soften. Icra expects the administered price mechanism (APM) gas price for January 2026 to be around $6.1 per million metric British thermal unit (mmbtu). The lower APM gas price would bode well for CGD entities, helping them offset the impact of currency depreciation.
Why is capex expected to stay elevated in the sector?
The sector’s capital expenditure intensity is expected to remain high over the next three years, driven by ongoing investments in CGD infrastructure, gas pipelines and petrochemical capacities.