Domestic Production Surge Set To Reduce LNG Imports To 45% By FY26: Report

Over the past three years, this reliance has been steadily diminishing and is expected to stabilise around the 45 per cent mark by FY26, as outlined by the agency

Increased demand for natural gas is anticipated to be bolstered by substantial growth in domestic gas production

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The growing local production and the reliance on imported natural gas, including liquefied natural gas (LNG), is projected to decrease to approximately 45 per cent by the fiscal year 2026, according to a report released on Tuesday. The surge in domestic natural gas output has contributed to a gradual reduction in the dependency on imported LNG, which was recorded at 53 per cent in FY21, as per an analysis conducted by Care Ratings. 

Over the past three years, this reliance has been steadily diminishing and is expected to stabilise around the 45 per cent mark by FY26, as outlined by the agency.

Increased demand for natural gas is anticipated to be bolstered by substantial growth in domestic gas production. Over the past three years, nearly 30 million metric standard cubic meters per day (MMSCMD) of new domestic natural gas production has been gradually introduced. Furthermore, it is projected that an additional 15 MMSCMD of new domestic production will be brought online in the upcoming fiscal year alone.

Natural gas consumption experienced consistent growth until fiscal year 2020. However, due to the pandemic and a significant surge in imported LNG prices triggered by geopolitical tensions, the demand for natural gas has declined from fiscal year 2021 to 2023, according to the agency. Hardik Shah, a director at the agency, anticipates a reversal of this trend, with the country expected to achieve its highest-ever gas consumption in fiscal year 2024.

The government has set a target to augment natural gas's contribution to its primary energy mix, aiming to elevate its current share of 6 per cent to 15 per cent by 2030. This strategic initiative entails a concentrated focus on pivotal end-use sectors such as fertilisers, city gas distribution, power generation, refineries, and petrochemicals.

Despite historical reliance on imports due to a decline in domestic production, promising developments are on the horizon. Notably, significant growth in domestic output is anticipated from fiscal year 2022 onwards, with further expansions expected in fiscal years 2024 and 2025. These developments provide optimism for a reduction in import dependence.

Shah highlighted the importance of regulatory interventions aimed at aligning domestic pricing alongside efforts to stabilise imported gas prices. Moreover, measures such as enhancing LNG capacity and expanding gas pipeline infrastructure are deemed crucial for facilitating this transition towards a greater reliance on natural gas. Despite these advancements, the goal is to maintain import dependency at approximately 45 per cent by fiscal year 2026, as outlined by Shah.