India’s domestic gas demand at inflection point, to rise by 66 per cent in 5 yrs

India’s domestic gas demand is at an inflection point and is expected to see a 66 per cent volume growth over the next five years, primarily driven by sustained weak LNG prices, as per a report. Gas demand is expected to rise from 148 million standard cubic meters per day in 2018-19 to 250 mmscmd by FY25, Elara Securities said in a report.

The bulk of the incremental demand will come from city gas distribution (CGD) operations being rolled out in 400 districts. As much as 52 mmscmd of additional demand will come from retailing of CNG to automobiles and piped natural gas to industries and households, it said.

Another 35 mmscmd is to come from the power sector and 15 mmscmd from fertilizer plants.

“Domestic gas demand is at an inflection point and we expect 66 per cent volume growth or 102 mmscmd over the next five years, given an environment of sustained weak LNG prices, owing to a global supply glut and muted demand from China, which has been aggravated by the coronavirus outbreak,” it said.

LNG delivered cargo prices in western India have hit an all-time low of about USD 2.5 per million British thermal unit, a rate which should propel consumption.

LNG at this rate, it said, is competitive or even cheaper at 53 out of the 78 polluted industrial clusters in the country that use imported coal. “This, we believe, will drive coal replacement demand among industries.”

“We expect LNG prices to remain weak over the next 2-3 years, due to an estimated 47 million tonnes of new LNG supply addition over the calendar year 2020-21 and subdued China LNG demand growth on rising local gas production and commissioning of 104 mmscmd Russia-to-China gas pipeline,” it said.

Giving a breakup of its estimation of additional demand, Elara Securities said 24 mmscmd gas is likely to be consumed by industrial CGD and another 28 mmscmd by non-industrial CGD (CNG, household and commercial piped gas).

“In other words, this would serve an additional 3.8 million CNG vehicles, 33 million households, 0.3 million commercial units and 42,840 industrial units,” it said.

ET Energy World
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