Fitch Ratings says India's gas consumption target faces risks

India’s target to increase the share of natural gas in the energy mix to 15% by 2030, from 6% in 2017, remains exposed to risks of lower demand from price volatilities, and infrastructure constraints, Fitch Ratings said on January 10. 

Progress on the target has been minimal – 6% share in 2021 – as natural gas growth has not managed to outpace total energy growth, it said.

“We believe that natural gas demand from price-sensitive industrial and power sectors may be limited in times of rising natural gas prices, as they switch to cheaper alternate fuels in the absence of robust emission norms,” Fitch Ratings said.

Gas adoption for mobility and household fuel may also slow when its price benefit against alternate fuels decreases. Infrastructural issues may also delay the adoption.

“India’s inadequate gas pipeline network and our expectation of execution delays in some under-construction projects may limit natural gas demand growth to lower than its intrinsic levels, even in times of low natural gas prices,” it said.

Underutilised existing LNG import infrastructure may slow new capital expenditure (capex) in the near to medium term, creating temporary bottlenecks in case demand picks up sharply.

“Sustained high natural gas prices and customers switching to alternate fuels may squeeze developers’ returns and fresh capex plans,” Fitch Ratings said.