India's Natural Gas Growth Hinges on Infrastructure Investments and Market Reforms

India's long-term natural gas growth hinges on investments in infrastructure and market reforms, according to a recent report by the International Gas Union (IGU). The country's ability to increase gas consumption has been hindered by slow investment in midstream infrastructure. To sustainably raise gas consumption, changes to price policies and market access are necessary.

The Strait of Hormuz crisis highlighted India's reliance on Gulf-sourced LPGs and LNG, with Qatari exports being the primary source of supply. This vulnerability was revealed when energy passage over the strait was disrupted during the recent Iranian war. As a result, about 50-52% of India's gas requirements are met by domestic production, while the remaining portion is supplied by imports of liquefied natural gas (LNG) from countries such as Qatar, Australia, the US, and Russia.

In addition to LNG, LPG imports also play a significant role in meeting India's needs. Despite being one of the biggest LPG consumers worldwide, India imports between 60-65% of its LPG requirements. A large portion of these imports pass through the Strait of Hormuz, making India vulnerable to disruptions.

However, the IGU report suggests that if the Gulf issue abates, the situation may improve in the long run. With a surge of additional LNG export capacity expected to come online throughout the rest of the decade, global LNG markets are likely to become well-supplied, driving down prices and boosting the economics of gas use in India.