In anticipation of a spurt in natural gas consumption on the back of a slump in international prices, the government is actively encouraging the use of gas-based energy to meet the increasing power requirements of domestic industries and gas based power plants. For FY25, the annual gas consumption is expected to surge by around 30% to 35% compared to FY24.
Speaking to FE, Rajesh K Mediratta, MD & CEO, Indian Gas Exchange, a platform for the physical trade of gas through transparent price discovery, said, “We are expecting that the reduction in international spot prices for gas from around $15 per mmbtu to $8 -11 per mmbtu (metric million british thermal units) a couple of months back, may significantly boost the gas consumption for this financial year. The expected growth of gas use for industrial power requirements and the increased demand for gas based power plants will be the driver for this consumption growth.”
He further said, “Many authorities including Delhi and Uttarakhand have issued mandates for the industry to restrict/decrease the use of pet coke, coal and furnace oil (dirty fuels). Additionally, the government has issued guidelines under Section 11, a fuel consumption standard of the government for any prescribed class, to start gas based power plants to meet the increased power demand in the summer season. The PNG and CNG stations’ network is also being expanded throughout the states. All of these combined with the cheaper international prices will increase the demand for gas in the country.”
With the aim to increase the gas consumption to meet the demand of power in the industry, IGX has already launched small scale LNG contracts recently. “We are further bringing up the long duration contracts which will allow the bidder to bid for a period of three months, six months and one year. The price discovery for these contracts will be linked with Brent Crude, JKM (North East Asian price index for LNG) and WIM ( Liquefied Natural Gas (LNG) price assessment for spot physical cargoes into ports in India and Middle East region) so that stakeholders can choose any benchmark for their trade,” Mediratta said.
It may be mentioned that the IGX facilitated the trade for around 4 crore mmbtu for FY24, more than 20% reduction compared to the trade of 5.1 crore mmbtu in FY23. Mediratta said that the reason for reduced trade is the lower availability of domestically produced gas to be traded on the platform in FY24 compared to FY23.
Talking about the Government’s target to increase the share of gas based energy in overall energy consumption to 15% by 2030, Mediratta added, “Currently, gas based energy constitutes about 6% of total energy consumption. This had come down in the backdrop of the Russia-Ukraine War when gas prices shot up to about $ 30 per mmbtu. Current gas prices at $8-11 per mmbtu means that the cost of producing one unit of energy is around Rs 6.5 to 7 per unit against Rs 12 per unit when the gas price was around $15 mmbtu”, said the IGX MD.
