India’s energy demand is growing rapidly, and this includes a significant rise in natural gas consumption. As the third-largest importer of crude oil in the world, India is expected to become a major player in the natural gas market over the coming decades, driven by both industrial growth and an expanding population.
Natural Gas’ Role in India’s Energy Mix
Currently, natural gas accounts for only 6-8% of India’s total primary energy supply, according to government data and international forecasts, including those from the International Energy Agency (IEA). Despite being a key energy source globally, natural gas plays a relatively small role in India’s power generation, where coal remains dominant. The country is also making strides in expanding renewable energy, with a goal to achieve net-zero emissions by 2070—two decades later than many other nations.
India has made impressive gains in renewable energy, surpassing 200 gigawatts (GW) of installed capacity in October. Renewable sources now account for 46.3% of India’s total installed capacity of 453 GW. India aims to reach 500 GW of non-fossil fuel-based power by 2030.
However, while renewable energy plays an increasing role, natural gas demand is expected to grow substantially in industrial sectors like fertilizers, petrochemicals, and oil refining.
Industrial Growth to Drive Gas Demand
As India’s economy continues to expand, industries like fertilizer production and steelmaking are set to see increased demand for natural gas. The country’s reliance on natural gas for fertilizer production is especially important for maintaining food security, a key priority for the government. Despite rising global natural gas prices, India is committed to supporting urea production to meet its agricultural needs.
In addition, India’s refining sector, which already consumes a significant amount of natural gas, is expanding to meet the growing demand for fuels and petrochemicals. India also aims to become a refining hub for Asia, which will require even more natural gas.
India’s domestic natural gas production has increased over the past two decades, but it will not be enough to meet the future demand. As a result, the country will increasingly turn to liquefied natural gas (LNG) imports. India lacks pipeline connections to major gas producers like Russia or the Middle Eastern countries, making LNG the primary import option.
Rising LNG Imports and Global Market Trends
In the 2023 fiscal year, India imported about 20 million tons of LNG, with Qatar being the largest supplier, followed by the UAE and the United States. LNG imports are expected to rise as India’s refining, petrochemical, and fertilizer industries expand, while population growth and urbanization increase demand for gas in sectors like steelmaking and transportation.
The International Energy Agency (IEA) projects that India’s natural gas consumption will nearly double by 2040, reaching 113.7 billion cubic meters (Bcm) from 65 Bcm in 2023. This surge will be driven by both population and economic growth, as well as a shift toward cleaner energy sources.
LNG Imports to Meet Growing Demand
Despite a 51% increase in domestic gas production since 2020, India will still rely heavily on LNG imports to meet its future needs. According to analysts at Rystad Energy, India’s continued reliance on imports is expected to intensify as demand for natural gas rises across various industries.
As India’s demand for LNG grows, it may seek to secure more long-term contracts with suppliers in the Middle East, where substantial volumes of LNG production are uncontracted. The proximity of the Middle East to India offers an advantage in negotiating favorable terms, according to Rystad’s Kaushal Ramesh.
Natural Gas’ Role in Key Industries
Natural gas will be essential for India’s industrial growth, particularly in the production of urea for fertilizers. The country has committed to supporting this sector regardless of price fluctuations in the global gas market.
The refining industry, another key consumer of natural gas, is expanding rapidly to keep up with growing fuel and petrochemical demand. With plans to increase refining capacity, India expects to continue using fossil fuels, including natural gas, for its energy needs at least until 2040.
Long-term Projections for Gas Consumption
By 2050, India’s natural gas consumption is expected to triple, driven by industrial expansion and rising demand from sectors like refining and petrochemicals. According to the U.S. Energy Information Administration (EIA), India’s natural gas consumption in 2022 was 7.0 billion cubic feet per day (Bcf/d), with the industrial sector accounting for over 70% of demand. By 2050, this figure is projected to grow to 23.2 Bcf/d, with the industrial sector’s share rising to 80%.
Among India’s industrial sectors, refining and basic chemicals will drive the largest increases in natural gas consumption. By 2050, the EIA estimates that gas demand for refining will increase by more than 400%, while demand for basic chemicals will rise by over 250%. Together, these two sectors will account for around 79% of India’s industrial natural gas consumption by 2050.
Conclusion
As India continues to grow its industrial base and expand its refining and chemical sectors, natural gas will play a crucial role in meeting its energy needs. The country’s increasing reliance on LNG imports highlights the challenges it faces in balancing domestic production with rising demand. Despite these challenges, India’s natural gas consumption is set to increase dramatically in the coming decades, driven by the needs of its fast-growing economy.
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