The domestic natural gas consumption in India is set to rebound, with a projected growth of 3-4% year-on-year in FY2027, following a decline in FY2026. A report by ICRA highlights that this recovery will be driven by increased industrial demand and the ongoing expansion of the City Gas Distribution (CGD) network. Significant contributions to this growth are expected from key sectors such as refining, fertilizers, and CGD, aiming to reverse the downward trend noted in the previous fiscal year.
Decline in Consumption During FY2026
During the first seven months of FY2026, India’s natural gas consumption decreased by 4.5% compared to the previous year. This decline was primarily due to reduced demand from major sectors, including fertilizers, power generation, and refineries. While the CGD segment maintained healthy growth, overall gas consumption for FY2026 is expected to remain flat or show low single-digit moderation. Stagnation in domestic gas production has exacerbated the situation, as any potential increases in output are likely to be countered by natural declines from existing gas fields, contributing to the subdued consumption trend.
Factors Supporting Future Growth
Looking ahead, ICRA’s report indicates a more favorable energy environment for FY2027. Crude oil prices are anticipated to stabilize between USD 60-70 per barrel, driven by muted global demand growth and rising supplies. This price stability is likely to enhance the profitability of domestic crude oil producers, enabling them to maintain their capital expenditure plans. Additionally, the domestic consumption of petroleum products is projected to grow by 1-2% in FY2027, suggesting a positive outlook for the energy sector.
Global LNG Market Trends
On the international front, liquefied natural gas (LNG) prices have begun to decline, influenced by expectations of milder winters in key regions and strong inventory levels. Significant global LNG capacity additions are anticipated, which may lead to a moderation in prices starting in calendar year 2027. As domestic gas prices are expected to soften in line with lower crude oil prices, this could further enhance the competitiveness of natural gas in the Indian market.
Digihunt is not a financial advisor and this is not investment advice.