India’s soaring energy appetite fuels a surge in natural gas consumption

Joya Saikia

(The writer can be reached at joyasaikia1990@gmail.com.)

India’s surge in electricity demand, driven by the expanding industrial and commercial sectors and increasing household usage, has prompted the government to revive gas-based power plants. This revival, in turn, has resulted in a notable upswing in the consumption of natural gas.

In India, power consumption reached an unprecedented peak demand of 241 gigawatts (GW) on September 1, marking an all-time high. Notably, during the months of August, September, and October 2023, there has been a growth of over 20 percent in power consumption.

India’s gas consumption, as reported by the Gas Exporting Countries Forum (GECF), experienced its ninth consecutive month of expansion, exhibiting a noteworthy year-on-year increase of 24 percent. In September 2023, consumption reached 5.8 billion cubic metres (BCM).

According to the report, the notable increase in gas consumption was primarily propelled by the power generation and refinery sectors. These sectors recorded impressive year-on-year growth rates of 34 percent and 78 percent, respectively.

According to the Gas Exporting Countries Forum (GECF), the surge in gas consumption aligned with the commencement of the festive season, traditionally linked to heightened power demand and increased industrial activities post-monsoon season. The latest report highlights that, significantly, Indian authorities extended the operational duration of gas-based utilities to operate at maximum capacity, addressing the escalating electricity demand.

The consumption of the commodity increased during the initial half of the current financial year due to the operation of gas-based power plants.

In its March 2023 report, the GECF highlighted that the surge in temperatures during a recent heat wave in India led to increased cooling demand. As a result, there is a forecasted growth in the share of natural gas in the electricity mix in the upcoming months. This shift is attributed to the Indian Power Ministry’s proactive response to an anticipated electricity output shortfall during peak demand in May and June. The ministry has issued an emergency rule, mandating that gas-fired power plants operate at full capacity during this critical period. The government issued a directive to NTPC, instructing the operation of 5,000 MW of gas-based capacity during May–June 2023. Simultaneously, NTPC Vidyut Vyapar Nigam, a subsidiary, secured 4,000 MW of gas power from other state-run plants. In anticipation of increased electricity demand, the government has mandated the continued operation of gas-based power plants until March 2024. Approximately 7-8 GW of gas-based capacity is currently operational.

The Petroleum Planning and Analysis Cell (PPAC) data mirrors this trend. During H1 FY24, India’s overall natural gas consumption reached 32.6 BCM. Within this, the power sector constituted 15 percent of the total share, while refineries contributed 8 percent.

In contrast, in H1 FY22, the aggregate consumption amounted to 30.6 BCM. Within this figure, the power sector accounted for 14 percent, and refineries maintained an 8 percent share. For the third consecutive month in October 2023, gas and LNG spot prices saw a continual rise in both Europe and Asia. The heightened volatility of spot prices was notably influenced by increased geopolitical risks in the Middle East and the re-emergence of potential strikes at Australian LNG facilities.

The average TTF spot price reached $13.4 per mBtu, marking a significant 17 percent month-on-month increase. Similarly, the average NEA spot LNG price also witnessed a 17 percent month-on-month rise, reaching $15.3 per mBtu. As we look towards the approaching winter season, there is anticipation that spot prices will find support from the expected surge in demand for heating.