India's gas consumption to rise by 5-6% in FY2024: ICRA
India's total gas consumption for the financial year ending March 31, 2024 (FY2024) is anticipated to witness a growth of 5-6% year/year, according to Prashant Vasisht, senior vice president and co-group head of corporate ratings at ICRA.
In FY2023, the country's total gas consumption stood at 57.74bn m3, with imported LNG - which is regasified and supplied to consumers - contributing around 26.07bn m3 or 45% of the total, while the remaining portion was domestically produced gas.
“ICRA expects the overall gas consumption to rise by 5-6% in FY2024. While the availability of additional gas from HPHT [high pressure/high temperature] fields will support gas consumption, ICRA expects LNG share to remain significant going forward,” Vasisht said.
“The share of LNG is expected to remain around 45-50% given the softening spot LNG prices and restart of Gazprom LNG inflows from Russia which had remained unavailable for a major part of FY2023,” he added.
Data from the initial two months (April and May) of FY2024 revealed a 5.9% year/year increase in regasified LNG (R-LNG) consumption. Key contributing sectors to this growth include fertilizers, power, refineries, and petrochemicals/steel. However, this growth was partially offset by decreased RLNG consumption in the city gas sector and other sectors due to greater access to HPHT gas.
New gas formula to boost consumption in the city gas sector
The Indian government in April revised the pricing guidelines for locally produced gas. The government's decision was based on the recommendations of an expert panel chaired by economist Kirit Parikh, which submitted its report in November last year.
Under the new formula, the price of domestically produced gas will be linked to the monthly average of the Indian crude basket, with a floor of $4/mn British thermal units (Btu) and a cap of $6.5/mn Btu.
ICRA expects city gas distribution volume offtake to increase by 12-15% year/year in FY2024 supported by the implementation of the Kirit Parikh committee recommendations which has brought down the APM [administered price mechanism] gas prices and the same was passed on to the CNG and domestic piped natural gas consumers. In FY2023, the city gas sector consumed 12.2bn m3 of gas.
“Additionally, preferential status in bidding of HPHT gas and softening of the spot LNG prices will support the gas offtake by the CGD sector. The CNG vehicle registration data indicates strong sales momentum in CNG vehicles in the passenger vehicle segment which will have a positive impact on CNG volumes across the players,” Vasisht said.