Paris-based IEA expects India's natural gas demand to increase by 4pc this year and grow at an average rate of over 8pc/yr in 2022-26, adding over 20bn m³ of incremental demand.
Indian gas demand has started to grow this year, driven by the industrial and power sectors, compared with last year when total demand fell by 6pc as a tight global gas market reduced power sector gas burn by nearly a quarter and abruptly slowed industrial demand growth to just 2pc.
India's natural gas demand fell by 6.3pc to 60.4bn m³ in 2022, Indian oil ministry data show.
"India's natural gas demand is forecast to return to a growth trajectory, supported by a positive economic outlook, improving gas supply availability and continued gas market opening reforms," the energy watchdog said in its medium-term forecast.
Industry will remain the largest contributor to this growth until 2026, accounting for close to 40pc of the total increase in Indian natural gas demand.
A positive economic outlook — with GDP growth expected to average almost 7pc/yr during 2023-26 — and priority allocation for certain industrial segments will help the largest gas-consuming sectors rebound from lacklustre growth in 2022-23, the IEA said.
The fertilizer industry is set to be a key driver of India's rising industrial gas demand, as the country aims to phase out urea imports by the end of 2025. "India's conventional urea production capacity is expected to increase by over 6mn t/yr by 2025, which could translate into almost 5bn m³ of incremental gas demand," the IEA added.
India's April commissioning of the 7bn m³/yr Dhamra LNG import terminal is set to add more than 10pc to India's existing regasification capacity, the IEA said. Demand for regasified LNG in the fertilizer sector almost tripled in the first eight months of this year to 11.39bn m³, up by 25pc compared with the same period in 2022, largely because of government subsidies and improved connectivity for fertilizer plants in southern India, the IEA said, citing data from the Indian oil ministry's Petroleum Planning and Analysis Cell.
Gas-to-power demand declined steeply in 2022, but is expected to recover until 2026 as gas burn in the power sector rose by 20pc on the year during January-August on the back of lower natural gas prices.
"Despite continuing renewable capacity additions, gas-to-power demand is expected to grow at an average of 15pc/yr between 2022 and 2026 as capacity factors improve at existing gas plants in response to growing power demand," the IEA said. "Development of the distribution network and a continued push to favour gas in household applications are expected to drive average annual growth of 7pc in residential and commercial gas use during 2024-2026."
Peak power demand this year prompted the government to instruct state-controlled utility NTPC to generate 5GW from its gas-fired power plants during April-May.
India's natural gas production is predicted to grow at a rate of 4pc/yr over 2022-26, adding more than 10bn m³ of gas supply by 2026. India produced 33.4bn m³ of natural gas in 2022, up by 3pc on the year, oil ministry data show.
The government has outlined plans to make India a gas-based economy, with the share of natural gas in its primary energy mix targeted to rise to 15pc by 2030 from around 6pc in 2022.
