India's Natural Gas Market & GECF MCS’ Contribution - A short term Perspective
Mr. Adrian Sookhan, Research Assistant | GECF| Gas Market Analysis Department
In accordance with the GECF’s Long-Term Strategy (LTS), and the Program of Work, the Secretariat is requested to develop an analysis on global natural gas demand, and in some key countries in particular. One such key country (considered in this article) is India. The aim was to analyse the Indian market and the prospects of its development as a key natural gas demand centre for the GECF. Furthermore, future opportunities for the GECF to supply additional LNG to the Indian market, in a bid to achieve the government’s target for natural gas, are also ascertained.
The prospects for the Indian gas market are positive in the short and medium term as the government plans to increase the share of natural gas to more than 15% by 2022 from 6% in 2016. Natural gas has a significant role to play in India’s energy mix in order to achieve other government initiatives including: electrification of millions of households, reduction in coal consumption, powering electric vehicles, expanding the use of CNG in motorcycles and scooters, use of LNG in trains and bunkering. Following slower economic growth of 6.7% recorded in 2017, India’s forecasted economic growth of 7.3% and 7.4% in 2018 and 2019 respectively is also positive news for energy and natural gas consumption. On the down side, India has placed great emphasis on expanding renewable energy capacity and improving the efficiency and technology of coal-fired power plants while the role of natural gas has been neglected in its NDCs for the Paris Agreement.
India has become dependent on LNG imports (only form of natural gas imports of the country) to meet its domestic natural gas demand following a peak in its natural gas production in 2010. Until 2003, India was self-sufficient in natural gas, however, its natural gas imports dependency has grown to 46% in 2017 as shown in Figure 1.
The GECF was the sole supplier of LNG to India in 2004 but its share has decreased to 80% in 2017 with Australia and the U.S. as new entrants supplying LNG to the country. Qatar, Nigeria (SPA between India and Shell) and Russia, all from GECF Member Countries (MCs) are the major suppliers of LNG to India under long-term oil indexed contracts. Despite its declining share of LNG supply to India, the absolute LNG volumes supplied from GECF to India have grown substantially from 2.6 Mtpa in 2004 to more than 16 Mtpa in 2017.
Figure 1. Trend in India’s Natural Gas Imports Dependency
Regarding the gas demand, the driving sectors are fertilizers, power and city gas as they represent more than 50% of the total gas consumption of the country. The role of GECF in guaranteeing supplies to these sectors has been historically robust. However, as the gas demand is full of uncertainties and is price sensitive, its vulnerability is an exposure to the exporters of gas. Particularly for the GECF, such uncertainty about gas demand in the Indian market, leads to a difficulty in the assessment of India’s gas consumption in the short and medium-term. The GECF, as a leading supplier of LNG to the Indian market, will continue to rely on its long-term partnership with India by supporting the needs of this market and bringing awareness of the important role of natural gas in the economic development in the country. Advocacy for natural gas as the cleanest fossil fuel and for the GECF to be seen as a reliable and resilient supplier of natural gas to raise its benefits is on top of the Forum’s agenda.