India’s import bill for natural gas surged by 12.9% to $6.1 billion during the first five months of the current fiscal compared with $5.4 billion in the same period a year ago due to rise in consumption particularly by the CGD companies and the power sector, data from the Petroleum Planning and Analysis Cell showed.
The import bill for the month of August stood at $1.2 billion against $1.1 billion in the corresponding period of last fiscal. The country imported 15,064 million standard cubic meters of LNG (liquified natural gas) during April to August, up by 17.4% from the corresponding period of FY24, the data showed. The growth was also supported by stabilised prices of natural gas from the earlier highs recorded in FY23, enabling consumers to buy more imported gas, as per analysts.
During the period, the country’s consumption of natural gas increased by almost 18% to 30,003 mmscm with major demand coming in from the CGD, fertilizer, and the power sector.
In 2022, the sudden outbreak of war between Russia and Ukraine had led to a sharp increase in prices of natural gas in FY23 as a result of which gas lost its cost competitiveness to the alternate fuels. Accordingly, natural gas consumption declined in FY23. However, with range-bound prices, analysts expect the consumption to grow in the medium term.
“With imported LNG prices expected to remain range-bound (at $10-$12/mmbtu), growth in domestic natural gas production and sizable demand from key user industries, natural gas consumption is slated to grow significantly in the medium term,” CareEdge Ratings had earlier said in a report.
As the imports continue to grow, the country’s production of natural gas also registered a marginal increase of 2% in the Apr-Aug period. However, the production growth has remained below the set targets. State-owned major oil and gas production company Oil and Natural Gas Corp produced 7,843 mmscm of natural gas during the period, 4% lower than the same period of last fiscal and much lower than the target of 8,209 mmscm for the period, according to PPAC data.
Oil India however registered an increase of 4.8% in its gas production during Apr-Aug from last year at 1,322 mmscm but failed to reach the target of 1,606 mmscm gas production.
The country’s dependence on imported gas stood at 50.2% in the period against 50.7% in Apr-Aug of FY24. In the month of August alone, the import dependency surged to 48.2% against 46.7% in August 2023. CareEdge Ratings expects the country’s gas import dependency to remain at around 45% by FY26.
Even though domestic natural gas production has failed to meet the targets, the production levels have registered an increase. Domestic natural gas production was on a declining trend till FY21 on the back of depleting production from existing fields and with no major discoveries coming on-stream.
However, due to new gas discoveries in a few off-shore fields coming onstream, domestic natural gas production started improving from FY22, CareEdge had said. The agency expects domestic gas production to improve in the medium term on the back of production ramp-up from discoveries of the recent past along with sizable new production expected to come onstream in FY25.
Going forward, analysts also see gas imports to increase at a moderate pace in spite of expected growth in domestic production as the consumption of natural gas is expected to outpace domestic production.
Source: Financial Express