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Growth in domestic demand for natural gas amid reasonable prices and ample availability of liquefied natural gas (LNG), or super-chilled gas, in the international market led to a double-digit growth in India’s LNG imports in the first four months of the current financial year (FY25). Notably, the uptick in imports came amid a growth in domestic gas production as well. The consumption growth was primarily driven by the power sector, given that the government’s thrust on raising power production to meet high summer demand led to higher-than-usual electricity generation by gas-based units. The country’s LNG imports rose 13.1 per cent year-on-year in April-July to 11,423 million standard cubic metres (mscm), while natural gas consumption was higher by 8.6 per cent at 23,364 mscm, per latest provisional data available with the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry. Net domestic natural gas production for the four-month period was 11,941 mscm, up 4.6 per cent year-on-year. The rise in LNG imports pushed up India’s reliance on imported gas to 48.9 per cent in April-July from 46.9 per cent on the year-ago period. For the full FY24, India’s natural gas import dependency was 47.1 per cent, the PPAC data shows. For the April-June quarter (Q1)—the peak summer quarter in most parts of India—power generation by gas-based plants jumped 62.5 per cent year-on-year to 13.49 billion units (1 unit is 1 kilowatt hour), per data from the Central Electricity Authority (CEA). The overall plant load factor (PLF)—capacity utilisation of power generation units—for gas-based plants in Q1 was almost 25 per cent, up from 15.3 per cent in the year-ago quarter. PLF for gas-based power plants in June this year was 25.8 per cent, up from 17 per cent in June 2023. For April-July, the PLF for gas-based power plants was 22.2 per cent, against 15 per cent a year ago. Power generation from these units in April-July jumped to 16.17 billion units from 10.54 billion units in the corresponding four months of last year. According to ship tracking data from commodity markets analytics firm Kpler, India’s LNG imports touched a near four-year high in June as gas-based power plants operated at notably higher run rates than their usually subdued capacity utilisation levels amid a surge in electricity demand due to the severe heatwave. With the monsoon covering most parts of the country in July, the power demand has evidently softened from the supernormal levels during the peak summer months. To be sure, gas-based power plants use domestic natural gas as well as imported LNG as feedstock. As domestic natural gas production is able to meet just around half of India’s total gas consumption, the cheaper local gas is allocated as per a priority list in which city gas distribution and fertiliser sectors have a higher priority than the power sector. As imported LNG is usually costlier than domestic gas, gas-based power plants have been operating at very low capacity use levels mainly due to unfavourable economics. In anticipation of a severe summer, the Power Ministry had invoked the Section 11 of the Electricity Act, 2003, on April 12, issuing a set of instructions to the power generation companies to ensure that electricity demand is met. As part of the instructions, idling gas-based power plants were asked to operate from May till the end of June. At almost 25 gigawatts, India’s gas-based power generation capacity accounts for 5.6 per cent of the country’s overall installed generation capacity, per Power Ministry data. In May, S&P Global Commodity Insights had said that with subdued prices of LNG in the spot market and growing demand for the fuel in India, there was a ramp-up in India’s spot LNG purchases. The government has been pushing for higher consumption of natural gas in India, with an aim to increase the share of the fuel in the country’s primary energy mix to 15 per cent by 2030 from over 6 per cent at present. The push for higher natural gas consumption, even if it leads to higher imports, is not without reason. Natural gas is far less polluting than conventional hydrocarbons like crude oil and coal, and is usually cheaper than oil, for which India depends on imports to meet over 85 per cent of its requirement. As the country moves towards green energy and future fuels, natural gas is seen as a key transition fuel in that journey. Various sectors, including the likes of city gas distribution, fertilizer, power generation, and refineries and petrochemicals, are seen as major growth areas for natural gas demand in India. Sukalp Sharma is a Senior Assistant Editor with The Indian Express and writes on a host of subjects and sectors, notably energy and aviation. He has over 13 years of experience in journalism with a body of work spanning areas like politics, development, equity markets, corporates, trade, and economic policy. Before joining The Indian Express, Sukalp had long and enriching stints at financial newswire Informist and the Express Group’s pink paper The Financial Express. He considers himself an above-average photographer, which goes well with his love for travel. ... Read More None
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