India's LNG imports took a significant hit recently, experiencing a double-digit decline. But what exactly caused this downturn, and what does it mean for the country's energy future?
According to experts and industry insiders, the primary culprits behind the drop in liquefied natural gas (LNG) imports during the first half of the 2025-26 financial year (April-September) were a strong monsoon season and volatile LNG prices. Data from the Ministry of Petroleum and Natural Gas (MoPNG) backs this up.
Specifically, India's LNG imports decreased by 11.1%, totaling 16.9 billion cubic meters (bcm), compared to 19.0 bcm during the same period the previous year. Interestingly, this decline occurred even though domestic natural gas production also fell, dropping to 17.6 bcm from 18.2 bcm.
This shift meant India's reliance on imported gas slightly decreased, going from 51.5% to 49.3%. It's important to remember that India heavily depends on LNG imports to meet its gas demand, as domestic production falls short. In fact, nearly half of the country's gas consumption is fulfilled through imports, making India the world's fourth-largest LNG importer.
The Monsoon's Impact:
The monsoon season, spanning from June to September, played a significant role. Rainfall during this period was 108% of the long-period average, the highest since 2001, according to the India Meteorological Department (IMD). This heavy rainfall led to a decrease in power demand, which in turn reduced the need for natural gas in gas-based power plants.
Price Volatility and Alternative Fuels:
Adding to the situation, the international LNG market experienced volatility, leading to elevated spot prices. Consequently, some gas-consuming industries, such as fertilizers and refineries, switched to alternative fuels like naphtha. This shift further contributed to the decline in LNG imports.
"We were prepared to import LNG in large volumes, anticipating higher-than-usual demand from the power sector. But the need did not arise as power demand did not jump significantly due to the rains this year," explained a senior executive from an Indian oil and gas company involved in LNG imports.
"As for other sectors, the high spot prices reduced their gas offtake, which also contributed to lower LNG imports," the official added.
Understanding LNG:
LNG, or liquefied natural gas, is natural gas cooled to extremely low temperatures, making it easier to store and transport via specialized LNG vessels. Once imported, it's converted back into a gaseous state, known as regasified LNG (RLNG).
Sector-Specific Declines:
* Power Sector: RLNG use in the power sector decreased by nearly 18% year-on-year to 1.8 bcm. The strong monsoon reduced power demand, impacting gas-based power generation.
* Fertilizer Sector: RLNG consumption in the fertilizer sector, the largest gas consumer in India, dropped by 8.5% year-on-year to 8.2 bcm.
* Refinery Sector: RLNG consumption in the refinery sector declined by 17.3% to 1.9 bcm.
Industry sources attribute the reduced RLNG use in these sectors to the economic advantage of alternative fuels like naphtha, given the high spot LNG prices.
Looking Ahead:
Experts anticipate that this downward trend in LNG imports might not persist beyond the current financial year. They expect global LNG prices to cool down as large supply capacity comes online starting in 2026. With lower prices, price-sensitive Indian industries are expected to increase their gas usage. Indian gas importers view this dip as temporary and are committed to expanding the country's LNG import capacity.
Bright Spots and Government Initiatives:
The city gas distribution sector saw increased RLNG use, with a 23.1% year-on-year rise to 2.9 bcm. The government is actively promoting increased natural gas consumption in India, aiming to raise its share in the country's primary energy mix to 15% by 2030, up from the current 6%. Natural gas is seen as a crucial transition fuel towards cleaner energy sources, being less polluting than conventional hydrocarbons and often more affordable than oil, which India heavily relies on imports for.
The Future of Natural Gas:
Various sectors, including city gas distribution, fertilizer, power generation, and refineries and petrochemicals, are expected to drive the growth of natural gas demand in India.
But here's where it gets controversial...
While the government pushes for increased natural gas consumption, some might argue about the environmental impact of LNG, even though it's cleaner than other fossil fuels. What are your thoughts? Do you believe the temporary dip in LNG imports is a cause for concern, or a natural fluctuation? Share your opinions in the comments below!
