India’s natural gas consumption is on upward trajectory. The International Energy Agency (IEA) forecasts a nearly 60 per cent increase by 2030, reaching approximately 103 billion cubic meters (bcm) annually. This surge is primarily driven by the city gas distribution (CGD) sector, which is expanding rapidly. By 2030, India’s gas consumption is expected to approach that of Saudi Arabia.
Current Consumption Trends
In recent years, India’s natural gas demand has grown notably. In 2023 and 2024, demand rose by over 10 per cent. This growth is attributed to improved infrastructure, increased domestic production, and favourable global gas market conditions. The country has also seen a substantial expansion in compressed natural gas (CNG) infrastructure and residential gas connections.
Factors Driving Demand
Several factors are contributing to the rising demand for natural gas. The rapid expansion of CNG infrastructure is a key driver. Additionally, small industrial users are increasingly opting for gas due to its cost advantages over liquid fuels. Heavy industries, particularly iron and steel production, are also contributors, adding around 15 bcm per year.
Infrastructure Development
India has made considerable strides in developing its gas infrastructure. Since 2019, the number of CNG stations has nearly quadrupled, and residential gas connections have more than doubled. The transmission pipeline network has expanded by 40 per cent, with expectations of further growth. By 2030, the number of CNG stations and residential connections is projected to nearly double again.
Import vs. Domestic Production
Despite the positive outlook for demand, domestic production is not keeping pace. In 2023, domestic production met only 50 per cent of the country’s gas demand. By 2030, production is expected to reach just under 38 bcm, representing an 8 per cent increase from 2023 levels. Consequently, LNG imports will need to more than double to around 65 bcm annually to meet rising demand.
Global LNG Market Dynamics
The projected increase in India’s gas demand coincides with an anticipated increase in global LNG supply. However, careful planning is necessary to ensure supply security. The IEA warns of a widening gap between contracted LNG supply and projected requirements after 2028. This gap may expose India to the volatility of the spot LNG market unless additional contracts are secured.
Policy Interventions
Targeted strategies and policy interventions could further boost gas consumption. The IEA suggests that with appropriate measures, gas consumption could exceed the current forecast, potentially reaching around 120 bcm per year by 2030. This would place India close to the total gas consumption of South America.
Future Outlook
The future of India’s natural gas market is promising yet challenging. The country is poised for growth in consumption. However, it must navigate the complexities of domestic production limitations and global market dynamics to ensure a stable and secure gas supply.
Questions for UPSC:
- Examine the impact of rising natural gas consumption on India’s energy security.
- Critically discuss the role of infrastructure development in enhancing natural gas usage in India.
- Point out the challenges faced by India in increasing its domestic natural gas production.
- Analyse the implications of global LNG market fluctuations on India’s energy strategy.
Answer Hints:
1. Examine the impact of rising natural gas consumption on India’s energy security.
- Increased natural gas consumption can reduce reliance on coal and oil, promoting cleaner energy sources.
- Growing demand may lead to higher LNG imports, making India vulnerable to global market fluctuations.
- Enhanced energy security requires diversified supply contracts to mitigate risks associated with spot market volatility.
- Rising consumption can stimulate domestic production, but current limitations hinder self-sufficiency.
- Strategic energy policies are essential to balance demand growth with supply security and environmental goals.
2. Critically discuss the role of infrastructure development in enhancing natural gas usage in India.
- Significant expansion of CNG stations and residential connections has facilitated greater access to natural gas.
- Improved transmission pipelines enhance delivery efficiency and reliability of gas supply across regions.
- Infrastructure development supports industrial growth by providing cost-effective energy solutions to small manufacturers.
- Future infrastructure plans aim to double CNG stations and residential connections by 2030, further boosting usage.
- Investment in infrastructure is crucial for integrating renewable energy sources into the gas network.
3. Point out the challenges faced by India in increasing its domestic natural gas production.
- Limited exploration and production activities hinder the discovery of new gas reserves.
- Regulatory and bureaucratic hurdles can delay project approvals and operational efficiency.
- Investment in technology and infrastructure is required to enhance production capabilities.
- Geopolitical factors and global market dynamics can affect investment in domestic production.
- Environmental concerns and opposition from local communities can complicate new projects.
4. Analyse the implications of global LNG market fluctuations on India’s energy strategy.
- Global LNG price volatility can impact India’s energy costs and economic stability.
- Dependence on imports may expose India to supply disruptions, necessitating strategic reserves and contracts.
- Fluctuations can influence domestic energy policy, pushing for more investment in renewable sources.
- Long-term contracts are essential to mitigate risks associated with spot market pricing.
- India must enhance its negotiating power in global LNG markets to secure favorable terms and conditions.
