ICRA Forecasts 3-4% Increase in Domestic Natural Gas Consumption by FY27
The domestic natural gas consumption in India is projected to experience a rebound, growing by 3-4% year-on-year in FY2027, following a period of decline in FY2026. A report by ICRA indicates that this recovery will be fueled by increased industrial demand and the ongoing expansion of the City Gas Distribution (CGD) network. Key sectors such as refining, fertilizers, and CGD are expected to significantly contribute to this growth, reversing the downward trend observed in the previous fiscal year.
Decline in Consumption During FY2026
In the first seven months of FY2026, India’s natural gas consumption saw a decline of 4.5% compared to the previous year. This downturn was primarily attributed to reduced demand from major sectors, including fertilizers, power generation, and refineries. Despite the CGD segment maintaining healthy growth, overall gas consumption for FY2026 is anticipated to remain flat or experience low single-digit moderation. The stagnation in domestic gas production has compounded the issue, as any potential increases in output are likely to be offset by natural declines from existing gas fields, contributing to the subdued consumption trend.
Factors Supporting Future Growth
Looking ahead, ICRA’s report suggests a more favorable energy environment for FY2027. Crude oil prices are expected to stabilize between USD 60-70 per barrel, driven by muted global demand growth and rising supplies. This price stability is likely to support the profitability of domestic crude oil producers, allowing them to maintain their capital expenditure plans. Additionally, the domestic consumption of petroleum products is projected to grow by 1-2% in FY2027, further indicating a positive outlook for the energy sector.
Global LNG Market Trends
On the international front, liquefied natural gas (LNG) prices have begun to ease, influenced by expectations of milder winters in key regions and robust inventory levels. Significant global LNG capacity additions are anticipated, which could lead to a moderation in prices starting in calendar year 2027. As domestic gas prices are expected to soften in tandem with lower crude oil prices, this could further enhance the competitiveness of natural gas in the Indian market.
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