Natural gas demand in India is expected to increase by 6% in 2024, mainly supported by higher gas use in industry, including in the fertiliser sector, and stronger gas burn in the power sector amid the development of its national pipeline grid and city gas infrastructure, according to the International Energy Agency’s (IEA) latest ‘Gas Market Report, Q1-2024’.
The country saw a 7% year-on-year decline in the natural gas demand in 2022, though India’s primary gas supply rose by 5% y-o-y in 2023, according to the Petroleum Planning & Analysis Cell. The gas demand growth is primarily driven by the petrochemical, power generation, refinery and industrial sectors.
The IEA report acknowledges India’s “advance gas market reforms” in 2023, saying the country introduced a “unified pipeline tariff system” in April 2023, which, it says, could benefit consumers located far from domestic gas supply sources or LNG terminals. Additionally, the country is considering establishing “strategic gas reserves” to enhance gas supply security.
The Petroleum and Natural Gas Regulatory Board’s (PNGRB) Unified Tariff (UFT) policy aims to create a “single, consistent and fair” tariff structure for natural gas transport across the country. The UFT policy will apply to a network of 21 pipelines, representing around 90% of pipelines in operation or under construction.
Notably, the price of transporting gas consists of two components: The unified tariff is a fixed charge determined by the PNGRB and based on the levelised cost of service of the entire pipeline network, and is revised periodically to reflect the changes in pipeline costs and utilisation. The zonal factor is variable and depends on the tariff zones.
“The UFT policy aims to create a more stable, competitive and transparent pricing regime, which should benefit both gas supply and demand. It is expected to assist the government in achieving the “One Nation One Grid One Tariff” model,” the report acknowledges.
India has no underground storage sites and has limited LNG storage capacity (1.5 bcm). In May 2023, the country’s Energy Transition Advisory Committee (ETAC) suggested the development of strategic gas storage to strengthen the country’s energy supply security and reduce price volatility. In November 2023, the government also requested national oil and gas companies to prepare a feasibility study on the potential development of “gas storage facilities” with a capacity of 3-4 bcm.
China regained its position as the world’s largest LNG importer in 2023, with natural gas demand increasing by 7%. In contrast, natural gas consumption in Europe fell by 7% to its lowest level since 1995.
The global energy crisis triggered by Russia’s invasion of Ukraine the put security of supply for natural gas at the forefront of energy policymaking globally.
Globally, the gas demand is forecast to grow by 2.5% in 2024, with the growth expected to be concentrated in fast-growing markets in Asia Pacific and gas-rich countries in Africa and the Middle East.
