India’s rising power demand, fuelled by growing industrial and household consumption, is propelling higher consumption of natural gas, which the Indian Gas Exchange (IGX) expects to grow by 30-40 per cent y-o-y in the current financial year.

“Natural gas consumption by the power sector stood at 20.4 million standard cubic meters per day (MSCMD) in FY23, which is expected to grow by 30-40 per cent in FY24,” IGX MD and CEO Rajesh Kumar Mediratta said.

Power consumption in India, which witnessed an all-time high peak power demand of 241 gigawatts (GW) on September 1, has grown by more than 20 per cent during August, September, October and November 2023.

According to the Gas Exporting Countries Forum (GECF), India’s gas consumption marked its ninth consecutive month of growth with a 24 per cent y-o-y increase, reaching 5.8 billion cubic meters (BCM) in September 2023 primarily driven by power generation and refinery sectors.

This calendar year (2023), India’s demand has been growing every month on an annual basis, Mediratta said, adding that from January to October 2023, total gas consumption grew by 13 per cent y-o-y.

Growing trend

The demand is expected to show a growing trend in the near term driven by CGD expansion and power sector demand. This is further aided by gas prices, which are witnessing lower volatility and expected to remain less volatile, he added.

Prices are expected to remain range bound given the brimming European Union (EU) storage levels, robust liquefied natural gas (LNG) supply, high Norwegian pipeline gas supply and sluggish Asian LNG demand. In the upcoming months, temperatures across Europe and Asia will remain the key determinant for spot prices, Mediratta said.

Mediratta said that the Directorate General of Hydrocarbon (DGH) has empanelled IGX as one of the five agencies to carry out domestic gas (marketing and pricing freedom) auctions.

About 36 such auctions have been conducted in the last 2.5 years and a similar run-rate of auctions (15 per year) is expected going forward. The major sellers of natural gas include Reliance Industries, Oil and Natural Gas Corporation (ONGC), Vedanta, LNG Bharat etc.

Long Duration Contracts

IGX also signed an index sharing agreement with S&P Platts for Long Duration Contracts. Now, Platts indices JKM, WIM and Brent will be used for launching contracts beyond a month—3 Months, 6 Months and 12 Months— With this, the exchange shall target to bring bilateral trading for up to a year contracts.

IGX has also sought approval from the Petroleum and Natural Gas Regulatory Board (PNGRB) for launching small-scale LNG (ssLNG) trading on the exchange, which allows trading of LNG from RLNG terminals and distributed fields in ssLNG containers.

IGX has also proposed to launch it at Dahej, Dabhol, Hazira, Kochi, Ennore LNG terminals to start with. The approval of the same is expected soon, Mediratta said.

As of FY23, around 0.7 MSCMD of LNG is transported by road in India, constituting around 0.4 per cent of the total natural gas consumption. This is expected to grow to 5 MSCMD over the next five years. ssLNG contracts will benefit buyers who are situated in areas not yet covered by the national gas grid.

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