Indian gas boom dampens demand for LNG, but not for long

Indian gas boom dampens demand for LNG, but not for long

While the current boom in domestic gas production will derail liquefied natural gas (LNG) demand growth in the short-term, the lack of significant pre-FID domestic supply and no discoveries of note in blocks awarded under the OALP rounds should ensure that beyond 2024 India’s LNG demand roars back, writes Gavin Thompson, Wood Mackenzie Asia Pacific vice chair.

India’s domestic gas production has been in a sorry state for years. With output falling for more than a decade as legacy fields decline, India’s modest upstream prospectivity and challenging exploration and production regime have proven stubborn deterrents to new investment. And even as India’s gas demand has surged, the country’s notoriously byzantine business environment, coupled with more attractive opportunities elsewhere, mean India’s upstream sector has remained firmly off the radar for many.

This has proven to be good news for LNG. As domestic production has stalled, LNG imports have filled the gap. In 2020, LNG demand increased by around 14% to reach 25.7 million tonnes, with India climbing the ranks of the world’s most important LNG markets. Last year’s low traded LNG prices saw India import over 9 million tonnes of spot LNG as the country’s notoriously price-sensitive buyers came in from the cold.