Decrease in global natural gas prices
Anticipating a surge in natural gas usage due to declining global prices, the government is actively promoting the adoption of gas-based energy to address the rising power needs of domestic industries and gas-fired power plants. It is projected that for the fiscal year 2025, annual gas consumption will see a notable increase of approximately 30% to 35% compared to the previous fiscal year.
Rajesh K Mediratta, Managing Director & CEO of the Indian Gas Exchange, a platform facilitating transparent price discovery for physical gas trading, expressed, “We anticipate that the recent drop in international spot prices for gas, falling from around $15 per mmbtu to $8 -11 per mmbtu (metric million British thermal units) a couple of months ago, could significantly drive gas consumption this fiscal year. The expected uptick in gas usage for industrial power needs alongside heightened demand for gas-based power generation will be the main factors propelling this consumption surge.”
Global gas prices:
He elaborated, stating, “Numerous authorities, such as those in Delhi and Uttarakhand, have imposed directives on industries to curtail/reduce the utilization of pet coke, coal, and furnace oil (considered as dirty fuels). Furthermore, the government has issued directives under Section 11, which sets fuel consumption standards for designated classes, to initiate gas-based power plants to address the heightened power demand during the summer season. Additionally, the network of PNG (Piped Natural Gas) and CNG (Compressed Natural Gas) stations is being expanded across states. Collectively, these measures, coupled with the decrease global gas prices, are poised to bolster the demand for gas within the country.”
With the objective of decreased global gas prices is increasing gas consumption to meet industrial power demands, IGX has recently introduced small-scale LNG contracts. “We are also introducing long-duration contracts, enabling bidders to bid for periods of three months, six months, and one year. Price discovery for these contracts will be tied to benchmarks such as Brent Crude, JKM (the North East Asian price index for LNG), and WIM (Liquefied Natural Gas price assessment for spot physical cargoes into ports in India and the Middle East region), providing stakeholders the flexibility to choose their preferred benchmark for trade,” explained Mediratta.
It’s worth noting that IGX facilitated trade for approximately 4 crore mmbtu in FY24, marking a reduction of over 20% compared to the trade volume of 5.1 crore mmbtu in FY23. Mediratta attributed the decline in trade volume to the lower availability of domestically produced gas for trading on the platform in FY24 compared to FY23.
Discussing the government’s objective to elevate the proportion of gas-based energy in the overall energy consumption to 15% by 2030, Mediratta remarked, “Presently, gas-based energy accounts for approximately 6% of the total energy consumption. This figure decreased during the Russia-Ukraine War when gas prices surged to about $30 per mmbtu. With current gas prices ranging from $8 to $11 per mmbtu, the production cost of one energy unit stands at around Rs 6.5 to 7 per unit, compared to Rs 12 per unit when gas prices hovered around $15 mmbtu,” stated the MD of IGX.
