Natural gas consumption by the power sector rose 19 per cent Y-o-Y to 8.8 billion cubic meters (BCM) last year, driven by the government’s mandate to meet India’s rising electricity demand, which is estimated to be growing at 6-7 per cent per annum.
Gas Exporting Countries Forum (GECF), in its annual gas market report 2024, said the world’s third largest energy guzzler’s consumption increased 15 per cent Y-o-Y to 65 BCM in 2023 amidst a shift from coal to gas in power generation. GECF expects India’s natural gas consumption to grow 6 per cent Y-o-Y to 68.9 BCM this calendar year.
“This rise in natural gas consumption reflects the country’s economic rebound and the increasing emphasis on cleaner energy sources, with the declining prices of natural gas making it more competitive,” it added.
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The power sector accounted for almost 14 per cent of the total natural gas consumed by the world’s fourth largest liquefied natural gas (LNG) importer last year. At the end of December 2023, India’s LNG imports accounted for about 47 per cent of its total gas requirement.
In the power mix, coal led with a 74 per cent share, followed by renewables (13 per cent), hydro (9 per cent), nuclear (2 per cent) and gas (2 per cent) in 2023.
More gas-based power
Power sector gas consumption surged 19 per cent Y-o-Y to 8.8 BCM last year emphasising natural gas’s growing importance, the GECF report said.
The sector “mirrored” the growth in gas usage in 2023, which was led by the industrial sector, with pan-India electricity generation rising 7.5 per cent Y-o-Y to 1,702 terawatt hours (TWh) in 2023, it added. One TWh equals 1,000 gigawatt hours.
“Due to the heatwave during summer period, which boosted cooling demand, the share of gas in the electricity mix grew significantly. This was the result of the introduction of an emergency directive to address an anticipated shortfall in electricity output during peak power demand in May and June,” the report said.
The directive mandated that gas-fired power plants operate at full capacity during this period. Later, these measures were extended until November 2023, it added.
India’s peak power demand in 2023 rose to a record 240 gigawatts (GW) in September and the Power Ministry expects demand to hit 260 GW in 2024.
Gas trading on exchanges also reported a healthy growth last year. For instance, the Indian Gas Exchange (IGX) traded around 4.85 lakh million British thermal units (mBtu), or 3.3 million standard cubic meters per day (MSCMD), of gas in 2023, a 16 per cent Y-o-Y growth.
Of the total commodity traded at IGX last calendar year, 3.51 lakh mBtu was domestic ceiling price gas.
Cumulatively 1,424 trades were executed on the country’s first automated national exchange for physical delivery of natural gas with maximum number executed in daily contracts followed by monthly, weekly and fortnightly contracts.
Higher gas production
India witnessed a 12 per cent rise in its annual gas production to reach 35.1 BCM in 2023. This rise was predominantly driven by the encouraging government policies adopted to boost domestic production from existing and newly commissioned fields, GECF said.
“The majority of Indian production originated from conventional gas fields (93 per cent of the total production), with 4 per cent coming from CBM development, recording a 9 per cent y-o-Y production growth,” it added.
Directorate General of Hydrocarbons (DGH) awarded exploration and development rights for ten oil and gas blocks under the 8th round of the Open Acreage Licensing Policy (OALP) in 2023.