• Natural Gas News

    Indian gas consumption growth in FY2023 to be marginal due to high prices: ICRA


Indian government increased the regulated wholesale prices of locally produced natural gas by 40% with effect from October 1.

by: Shardul Sharma

Posted in:

Complimentary, Natural Gas & LNG News, Asia/Oceania, Liquefied Natural Gas (LNG), Security of Supply, Corporate, Political, News By Country, India

Indian gas consumption growth in FY2023 to be marginal due to high prices: ICRA

Indian gas consumption in the year to March 31, 2023 (FY2023) is likely to be stable or notch up marginal growth due to high prices, Prashant Vasisht, vice president and co-head - corporate ratings, ICRA told NGW.

“Consumption of gas by some sectors such as power would be adversely impacted. We estimate stable or marginal growth in consumption for FY2023 vis-a-vis FY2022,” he said. “For some sectors like urea fertilisers the costs are passed on to the government of India in the form of higher subsidies.”


The National Gas Company of Trinidad and Tobago Limited (NGC) NGC’s HSSE strategy is reflective and supportive of the organisational vision to become a leader in the global energy business.


S&P 2023

According to government data, in FY2022, Indian gas consumption increased by over 5% year/year to 63.9bn m3. The cumulative consumption in the April-September period, the first half of FY2023, was 31.48bn m3.

Indian government increased the regulated wholesale prices of locally produced natural gas by 40% with effect from October 1. For October 1, 2022 to March 31, 2023 period, the price paid to most domestic natural gas producers will be $8.57/mn Btu, up from $6.1/mn Btu in the April 1 to September 30, 2022 period.

The government also notified an increase in the natural gas prices from difficult-to-exploit fields such as deep water, ultra-deepwater and high pressure-high temperature to $12.46/mn Btu from $9.92/mn Btu.

The prices of locally-produced gas are set every six months through a formula linked to global rates, which have risen sharply in the last six months.

India’s LNG imports have also been impacted due to high global prices. The cumulative imports during the April-September period, the first six months of FY2023, were 11mn metric tons or 14.7bn m3, down 11.3% yr/yr. The import cost during April-September was $6.6bn, up from $5.8bn in the same period last year,

ICRA expects the LNG import volumes for FY2023 to be between 22 and 23mn mt. 

Price advantage of CNG over liquid fuel moderates

The demand for CNG vehicles in India was strong till the early part of the year as the prices of petrol and diesel were continuously rising. The recent hike in domestic gas prices has eroded the price advantage that CNG enjoyed to some extent.

“Though the economics for use of CNG would still be favourable as compared to liquid fuels, however, the competitive advantage has moderated, which may deter conversion to CNG and may have an adverse impact on new [city gas distribution (CGD)] areas coming online thereby impacting their returns. We estimate a growth in CGD gas volumes of 8-10% in FY2023 vis-a-vis FY2022,” Vasisht said.

According to a report published by Economic Times on September 30, the Indian automobile industry has trimmed the estimate of the number of CNG vehicle that would be sold in FY2023. The industry expects to sell 500,000-550,000 units in the year ending March 2023, about 25-30% lower compared with the estimate of 700,000-750,000 at the beginning of the fiscal year. This would still be much higher than 2,61,000 units of CNG passenger vehicles sold in India in FY2022.

Indian gas production growth a bright spot

After years of stagnant output, India’s domestic gas production in FY2022 jumped almost 20% year/year to 33.13bn m3. The trend has continued in the current fiscal as well. In the first six months of FY2023, the cumulative production of natural gas was 17.18bn m3, up 1.7% year/year.

New gas projects are expected to come online in the near future. Reliance and BP will bring the MJ gas project off India’s east coast by end of 2022, Mumbai-based Reliance said mid-October. MJ gas field lies in Indian upstream block KG D6 in water depths of 700m to 1,100m. It is the third of three gas projects in KG D6's 350bn Indian rupee ($5bn) integrated development programme.

The first two projects, R-Series and the Satellite clusters, received FIDs in 2017 and 2018 respectively. Reliance and BP achieved first gas at R-Series in late 2020, and brought the Satellite cluster on stream in April 2021.

By 2023, the three projects are anticipated to produce over 30mn m3/day of gas, according to Reliance.

New blocks on offer

The government is also trying to help boost the supply of local gas by putting new blocks for bidding. In early October, the government offered 16 coalbed methane (CBM) blocks in the latest bid round.

Simultaneously, 26 offshore oil and gas blocks are also being offered in a separate round under Open Acreage Licensing Policy (OALP). The OALP was launched in June 2017 and adopts all the features of the Hydrocarbon Exploration and Licensing Policy (HELP): reduced royalty rates; no oil cess (an extra tax); a uniform licensing system; marketing and pricing freedom; revenue-sharing model; and exploration rights on all retained area for the full contract life.

The 26 blocks cover approximately 223,000 km2. Out of 26 Blocks, 15 are in ultra deep-water, eight are in shallow water and three are on land. The Indian downstream regulator, DGH, is calling the latest round OALP bid round-IX under HELP.