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India's Natural Gas Demand to Rebound 3-4% in FY27, Driven by CGD Expansion

India's natural gas consumption is projected to grow by 3-4% in FY2027, rebounding from a period of near-term moderation in FY2026. This recovery will be primarily driven by a pickup in industrial demand and the continued expansion of the City Gas Distribution (CGD) network. The report notes a current decline in consumption due to lower offtake from fertilizers, power, and refineries, alongside stagnant domestic gas production. A supportive global environment with moderated LNG and crude oil prices is expected to aid this demand recovery from FY27 onward.

Key Points: India's Natural Gas Consumption to Grow 3-4% in FY27: ICRA

  • Rebound after FY26 moderation
  • Driven by CGD & industrial offtake
  • Supportive global energy environment
  • Domestic production remains stagnant
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Domestic natural gas consumption to surge by 3-4% in FY27 by expansion of City Gas Distribution: ICRA

ICRA report forecasts a rebound in India's natural gas consumption by 3-4% in FY2027, driven by industrial pickup and City Gas Distribution network expansion.

"India's natural gas consumption is expected to grow by 3-4 per cent year-on-year in FY2027 - ICRA Report"

New Delhi, January 1

The domestic natural gas consumption is expected to rebound and grow by 3-4 per cent year-on-year in FY2027 after witnessing a phase of near-term moderation in FY2026, according to a report by ICRA.

The report highlighted that the recovery in gas consumption will be driven by a pickup in industrial offtake and the continued expansion of the City Gas Distribution (CGD) network. ICRA expects higher gas usage from key consuming sectors such as refining, fertilisers and CGD to support this growth in FY2027.

It stated "India's natural gas consumption is expected to grow by 3-4 per cent year-on-year in FY2027, following a period of near-term moderation in FY2026".

ICRA noted that during the first seven months of FY2026, gas consumption declined by 4.5 per cent year-on-year. This drop was mainly due to lower offtake from major consuming sectors including fertilisers, power generation and refineries.

While the CGD segment has continued to record healthy growth and remains a key driver of demand, overall gas consumption for FY2026 is expected to remain flat or witness low single-digit moderation.

The report also pointed out that domestic gas production has remained stagnant, with any incremental output likely to be offset by the natural decline from existing gas fields. This has contributed to the subdued consumption trend in the near term.

Looking ahead, ICRA said the broader energy environment is expected to be supportive. Crude oil prices are projected to average between USD 60-70 per barrel in FY2027 due to muted global demand growth amid rising supplies.

Even at these price levels, the profitability of domestic crude oil producers is expected to remain healthy, and their capital expenditure plans are likely to stay intact.

At the same time, domestic consumption of petroleum products is expected to grow by 1-2 per cent in FY2027.

On the global front, LNG prices have eased due to expectations of warmer winters in key regions and healthy inventory levels. Additionally, significant LNG capacity additions planned globally are expected to lead to a moderation in LNG prices from calendar year 2027. Domestic gas prices are also expected to soften in line with lower crude oil prices.

Overall, the report suggested that after a year of moderation, India's natural gas consumption is set to regain momentum in FY2027, led by industrial recovery and steady growth in the CGD segment.

- ANI

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Reader Comments

R
Rohit P
While the long-term outlook seems positive, the report clearly states domestic gas production is stagnant. We are celebrating consumption growth but where is the push for increasing our own production? Still heavily reliant on imports, which is a strategic vulnerability. Need more focus on exploration.
A
Aman W
The drop in FY26 is concerning, especially from power and fertilizers. These are critical sectors. Hope the projected lower LNG prices actually translate to cheaper gas for industries. That's the only way to make the switch from coal and other fuels sustainable for them.
S
Sarah B
Interesting analysis. The link between crude oil prices and domestic gas pricing is key. If global prices stay in that $60-70 range, it should help keep inflation in check. A stable energy cost environment is good for the overall economy.
K
Karthik V
CGD network expansion is a silent revolution. In my city, the switch to PNG was seamless and the bills are noticeably lower than LPG. More reliable too, no more waiting for the cylinder delivery. Hope they speed up the rollout to Tier 2 and 3 cities.
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Nisha Z
The report is optimistic about FY27, but what about the environmental benefits? Natural gas is a bridge fuel. This growth should be paired with massive investments in truly renewable sources like solar and green hydrogen. We can't just replace one fossil fuel with another in the long run.

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