According to rating agency ICRA, significant increases in the world’s capacity for producing liquefied natural gas (LNG) are anticipated to cause a surplus in supply over the course of the next several years. This would help India, since prices for LNG, or super-chilled gas, are predicted to remain low for a long length of time.
Over the next four years, an additional 193 MMT (million metric tonnes) of LNG production and liquefaction capacity is expected to be installed globally. ICRA stated in a report on Wednesday that “significant capacity addition combined with the expectation of modest demand growth in the global natural gas consumption will keep the LNG prices under check, benefiting India.”
The process of turning natural gas into a liquid at extremely low temperatures is known as liquefaction. The most practical method of moving gas is LNG, which is regarded as the sole method superior to pipeline transportation. The only practical choice for nations like India that are not linked to global gas supply pipelines is to acquire gas in this extremely liquid and refrigerated state.
Over the course of the last two years—2022, and 2023—there has been significant fluctuation in the price of LNG owing to a number of factors, including the influence of the Russia-Ukraine conflict on the world energy markets and the quick rebound in demand for LNG as the COVID-19 epidemic subsided. But in the short to medium future, supply limitations may disappear as about 200 million tonnes of liquefaction capacity are anticipated to be built globally between now and 2028.
Almost half of India’s domestic gas needs are met by imported gas, making it one of the top importers of LNG. With more capacity coming online and signs that the global LNG market is set to become a buyer’s market, nations like India stand to benefit by saving significant foreign cash.
Given that the main natural gas users in the European Union, Japan, and Korea are shifting their attention to other energy sources, a moderate rise in the world’s natural gas consumption is anticipated. The addition of 41% of the current global LNG production capacity over the next four years, or LNG capacity addition, is expected to push down global LNG prices in the face of these headwinds on demand, according to Girishkumar Kadam, Senior Vice President and Group Head, Corporate Ratings at ICRA.
According to ICRA forecasts, India’s natural gas consumption is predicted to increase by 6-8% YoY in 2024–25 (FY25), helped by lower LNG costs and a rise in domestic gas output.
It is anticipated that LNG will make up 50% of the gas mix in FY2025, up from 48% in FY2024. But as India attempts to boost the amount of natural gas in the energy mix, the reliance on LNG will grow further, the rating agency added, given local supply is anticipated to start slowing from FY2028 onwards.
The Indian government is increasing natural gas consumption to 15% by 2030, aiming to increase its share in the country’s primary energy mix from over 6%. This is due to its lower pollution and lower cost compared to conventional hydrocarbons. Natural gas is seen as a key transition fuel for green energy and future fuels.
