India’s Gas Demand Set to Double by 2040 Amid Production Shortfall
India’s gas consumption is projected to nearly double by 2040, driven by population growth and cleaner energy needs. Despite increased domestic production, the country will remain reliant on LNG imports, securing long-term contracts to bolster energy security.
October 24, 2024. By EI News Network
The report said that gas consumption is projected to rise from 65 billion cubic meters (Bcm) in 2023 to 113.7 Bcm by 2040. Despite a 51 percent increase in domestic gas production since 2020, reaching 36.7 Bcm by 2025, the country will remain heavily reliant on imports to meet its growing needs.
India has strengthened its trade security by signing long-term contracts that extend beyond 2030, protecting the country from global price fluctuations and supply disruptions. These contracts ensure a steady flow of natural gas, vital for supporting the nation’s expanding economy and shift toward a cleaner energy mix. Coal remains a significant energy source, particularly during heatwaves when coal and liquified natural gas (LNG) are used for power generation. Gas accounts for just 2 percent of India’s power mix, but future policies promoting coal-to-gas transitions could increase its role.
India's LNG sector is growing rapidly, said the report and further added, " With the Middle East emerging as a key partner. The proximity and volume of uncontracted LNG from the region provide India with a strategic advantage for securing favorable terms, positioning it well for future negotiations."
“India’s LNG sector is experiencing significant growth. Looking ahead, a strategic next step could involve continued dealings with the Middle East. The geographical proximity of the two regions, combined with the substantial volume of uncontracted LNG production in the Middle East, presents an excellent opportunity for India to secure favorable terms – it’s an ideal buyer-seller relationship that could help fuel India’s needs. The nation is well-positioned to attract aggressive targeting from Middle Eastern producers and offtakers, with nearly 100 million tonnes per annum of Middle East LNG remaining uncontracted by 2035,” said Kaushal Ramesh, Vice President, Gas and LNG Research, Rystad Energy.
The demand for gas will also come from India’s expanding city gas distribution network, fertiliser production, refining, and petrochemical industries. The government’s push for food security through urea subsidies further drives gas consumption, while rising demand for oil and petrochemicals could boost refining capacity to 335 million tonnes annually by 2030.
However, challenges remain. The report highlighted several key issues, stating, "The Indian gas sector, despite its potential for growth, faces several significant challenges. One of the main issues is the country's history of renegotiating or even abandoning nearly completed deals, creating uncertainty for suppliers. This approach prioritizes flexibility and securing the best prices for consumers in a volatile global market but could ultimately hinder the growth of the LNG sector. Additionally, slow infrastructure development, particularly the concentration of regasification terminals in western India and inconsistent expansion of the gas pipeline network, further complicates the sector's growth. Regulatory hurdles, investment challenges, difficult terrain, and a focus on renewable energy have also slowed progress in gas infrastructure development."
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