India's Natural Gas Demand To Grow 4% In Last Four Months Of 2023: IEA

India's demand for natural gas will surge 4% in the final four months of 2023, according to the International Energy Agency's Medium-Term Gas Report. This is higher than the 2% increase that the Petroleum Planning and Analysis Cell reported in the first eight months of the same year. The growth is expected to contribute an additional 10 billion cubic metres of gas supply by 2026.

The report, issued on Oct. 10, also projects an average annual growth rate of over 8% in India's natural gas demand between 2022 and 2026, resulting in a substantial 20 billion cubic metre increase. This increased demand will primarily be fueled by the power, petrochemical, and fertiliser sectors.

After a steep drop in 2022, the IEA stated that India's natural gas demand is expected to rebound and resume its growth pattern on the back of a favourable economic outlook, enhanced availability of gas supply, and the ongoing reforms aimed at opening up the gas market.

The Indian natural gas market is heavily skewed towards industrial demand, according to the IEA report. Industrial demand made up over 70% of the net gas demand increase from 2017 to 2021 and is projected to contribute 40% of the overall demand growth by 2026.

The Indian natural gas market, as per the IEA report, is heavily tilted towards industrial demand. This sector represented over 70% of the net gas demand increase between 2017 and 2021 and is expected to contribute 40% to the overall demand growth by 2026.

Although smaller than industrial demand, gas demand for power generation also plays a significant role in India, the report stated. Gas-to-power demand is projected to grow 15% annually from 2022 to 2026, due to expanding capacity at existing gas plants and increasing power demand, despite ongoing additions of renewable capacity.

The IEA indicated that the fertiliser sector will significantly drive India's industrial gas demand growth as the country works towards discontinuing urea imports by the end of 2025. By 2025, India's traditional urea production capacity is projected to rise by over 6 Mtpa, potentially leading to nearly 5 bcm of additional gas demand, the report said.

In the first eight months of 2023, demand for re-gasified LNG in the fertiliser sector nearly tripled compared to 2022, with government subsidies and improved connectivity for southern Indian fertiliser plants contributing to this surge, according to the IEA. The commissioning of the Dhamra LNG import terminal in April is anticipated to boost India's regasification capacity by more than 10%, it said.

The report indicated that global gas demand is anticipated to increase at an average annual rate of 1.6% between 2022 and 2026, which is a drop from the 2.5% average annual growth observed between 2017 and 2021. Nonetheless, there is an expected recovery in Asia Pacific's gas demand, especially in 2023, with a growth rate of nearly 3%, primarily due to China.

The Asia Pacific region's gas demand is projected to expand by 20% by 2026 when compared to 2022, according to the IEA. This growth is primarily concentrated in China, India, and emerging Asian markets. In contrast, gas demand in the region's mature markets, such as Japan and Korea, is expected to decline due to the increased availability of nuclear energy and the growing adoption of renewable energy sources in the power sector.