Indian Gas Growth Hinges on Infrastructure Investment and Market Reforms

India's long-term natural gas growth is not just about expanding LNG import capacity but also requires acceleration of investment in transmission and distribution infrastructure, as well as reforms to market design, regulation, and pricing. According to a new report from the International Gas Union (IGU), India has significantly expanded regasification terminal capacity, but the pace of investment in midstream infrastructure has lagged, limiting gas consumption.

The Strait of Hormuz crisis has exposed India's vulnerability to disruptions in its gas supply chains, with the country heavily reliant on imports from Gulf countries. The IGU report argues that reforms to pricing mechanisms and market access are essential to support sustained growth in gas demand.

India remains dependent on imports to meet 50-52% of its natural gas requirements, with the balance met through imports of liquefied petroleum gas (LPG) from Qatar, Australia, the US, and Russia. The report notes that the dependence is even more pronounced in LPG, with India importing around 60-65% of its requirement despite being one of the world's largest LPG consumers.

To capitalize on lower global prices, the IGU report says India will need to enable buyers to respond more effectively to short-term LNG price opportunities. This requires further liberalization of LNG terminal capacity bookings and system entry charges, improving access for buyers and addressing historically low utilisation rates at import terminals.