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After a temporary slowdown in 2020, India is set to emerge as one of the primary drivers of growth in gas demand in Asia, said a report by the International Energy Agency (IEA) report on the gas sector for the year 2020.
Based on the IEA forecast, India is set to see an estimated 28 billion cubic meter (bcm) per year increase in total consumption during 2019-25, owing to a combination of supportive government policies and improved liquefied natural gas (LNG) and pipeline infrastructure,
The report indicates that India’s natural gas production is also expected to increase 12 bcm a year in 2019-25, with most of the net increase coming from a handful of ongoing deepwater development projects. The report highlighted that the Asia Pacific region may increase its share of total LNG imports, from 69 per cent in 2019 to 77 per cent by 2025. Out of this, India will lead to LNG growth accounting for about 20 per cent of incremental trade, and its imports too may increase by 50 per cent between 2019 and 2025 to support strong growth in demand.
Natural gas consumption in India rose by an estimated 10 per cent year-on-year during the first quarter of 2020. However, the introduction of a nationwide lockdown in March led to a sharp decrease in demand. Based on the report, gas consumption was down by 25 per cent in April, with small industry and CNG distribution for transport being the hardest hit, while gas-fired generation was up 14 per cent in spite of a 24 per cent fall in electricity demand, as cheap imported natural gas was used to meet peak demand.
IEA said that the primary driver of India’s post-crisis demand expansion will be the industrial sector, representing 36 per cent of the incremental growth between 2019 and 2025. The energy industry – led by refining – contributes another 10 per cent to the total consumption increase. The growing networks should drive robust demand growth in the residential and transport sectors, which account for 19 per cent and 34 percent of incremental demand, respectively.
chart“This rapid growth in industry and energy own use is fuelled by improved access to natural gas, both in traditional gas-consuming sectors, such as fertilisers, and in a range of light industries where gas is already cost-competitive with liquid fuels. Expansion of India’s pipeline network will enable greater gas use over time,” the report said. In addition to this, the expansion drive on city gas distribution networks is expected to fuel gas demand as it is targeting more than 35 million additional household connections and over 7 000 new CNG filling stations by 2029.
On LNG front, India’s imports may increase by 16 bcm annually and reach 48 bcm by the end of the forecast period. With the recent addition of the Ennore and Mundra terminals and the expansion of the Dahej facility, effective regasification capacity stands at 53 bcm, the report said.
“After the completion of five new terminals and a breakwater facility at Dabhol, which are already under construction, India’s import capacity could increase by another 31 bcm a year, implying an average utilisation rate of 57 per cent in 2025, a slight decrease from 69 per cent in 2019,” it added. India has come out with a roadmap to increase the share of natural gas in its energy basket from 6 per cent to 15 per cent.