India’s long-term natural gas growth relies on not just expanding LNG import capacity but also on investing in transmission and distribution infrastructure, reforming gas pricing and market regulations, and boosting demand from gas-intensive industries, as per a report by the International Gas Union (IGU).
The report highlights that while India has made progress in increasing LNG regasification terminal capacity, the lack of investment in midstream infrastructure hampers the country’s ability to raise natural gas consumption. Reforms in pricing mechanisms, market access, and commercial frameworks are crucial for sustaining gas demand growth.
The IGU points out that India’s vulnerability to energy supply chain disruptions, especially due to heavy reliance on LNG and LPG imports from the Gulf region, was underscored during the recent Strait of Hormuz crisis. Qatar remains India’s primary LNG supplier, with a significant portion of LPG imports also originating from the Gulf.
India’s reliance on imported gas remains substantial, with domestic production meeting only about half of the total natural gas demand. The rest is fulfilled through LNG imports from countries like Qatar, Australia, the United States, and Russia. Moreover, a large portion of India’s LPG demand is met through overseas purchases, despite being one of the world’s largest LPG consumers.
The report notes that a significant amount of these imports pass through the Strait of Hormuz, exposing the risks associated with India’s dependence on this crucial maritime route. However, the medium- to long-term outlook could brighten if tensions in the Gulf region ease, with new LNG export capacity coming online in the coming years likely to stabilize global LNG markets and enhance the economics of gas consumption in India.
It suggests that reduced demand in other Asian markets post the recent price shock could further drive down regional LNG benchmark prices, potentially benefiting India’s gas market.
