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India's Natural Gas Demand to Rebound by FY27, Fueled by Industrial & City Gas Growth

India's natural gas consumption is projected to rebound with 3-4% growth in FY27, following a near-term moderation in FY26. The recovery will be driven by increased industrial offtake and the continued expansion of the City Gas Distribution network. Concurrently, crude oil prices are expected to average $60-$70 per barrel, supporting sector stability. Despite rising debt levels from high capital expenditure, the industry's financial metrics are anticipated to remain healthy.

Key Points: India's Natural Gas Consumption to Rebound in FY27, Says ICRA

  • Rebound after FY26 moderation
  • Industrial & CGD network growth
  • Stable crude oil prices ($60-$70/bbl)
  • Rising debt but healthy metrics
2 min read

India's natural gas consumption projected to rebound in FY27

ICRA forecasts a 3-4% rebound in India's natural gas consumption by FY27, driven by industrial recovery and CGD expansion, amid stable crude prices.

India's natural gas consumption projected to rebound in FY27
"Natural gas consumption... is set to grow, supported by increased offtake from refining, fertiliser, and city gas distribution sectors. – Varun Gogia, ICRA"

New Delhi, Jan 2

India's natural gas consumption is expected to grow by 3-4 per cent in FY27, following near‑term moderation in FY26, driven by lower offtake from fertiliser, power and refineries, a new report has said.

The latest report from ICRA forecasts a rebound next year led by recovery in industrial offtake and continued expansion of the City Gas Distribution network, which will position natural gas as a focal point in India's evolving energy narrative.

Natural gas consumption in the country is set to grow, supported by increased offtake from the refining, fertiliser, and city gas distribution sectors, said Varun Gogia, Assistant Vice President and Sector Head, ICRA.

The report added that crude oil prices are projected to average $60-$70 a barrel in FY27, due to muted global demand growth amid increasing supplies. It will keep domestic crude producers' profitability and capex plans intact, while petroleum product consumption may rise 1-2 per cent.

"Singapore GRMs are expected to be in the range of $4-5/barrel" and that "the marketing margins on retail sales of auto fuels are expected to remain healthy owing to stable crude prices and under recoveries in domestic LPG are expected to reduce," Gogia informed.

Global LNG prices have eased on expectations of warmer winters in key regions and healthy inventory levels and the upcoming LNG capacity additions globally are expected to lead to a moderation in prices from 2027.

Concurrently, domestic gas prices are also expected to moderate as crude oil prices soften. The report noted that the sector's capital expenditure intensity is expected to remain high over the next three years, driven by ongoing investments in CGD infrastructure, gas pipelines, and petrochemical capacities.

Consequently, the industry's debt levels are projected to increase to approximately Rs. 300 billion by March 31, 2026, but debt metrics are expected to remain healthy.

- IANS

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Reader Comments

S
Sarah B
The focus on CGD infrastructure is a positive step for energy transition. However, the report mentions debt levels rising to ~₹300 billion. While metrics are "healthy," this needs careful monitoring. Public money should be used efficiently.
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Vikram M
Lower LPG under-recoveries is excellent news for the exchequer. But will this translate to stable or lower prices for us? The connection between global LNG prices and our domestic cylinder cost is something we never fully see.
R
Rohit P
As someone in manufacturing, a stable and lower-priced energy source is key. Natural gas is cleaner than coal. If industrial offtake recovers as predicted, it can boost Make in India while helping meet climate goals. A win-win if managed well.
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Priya S
Hope the expansion reaches smaller towns and not just metros. We in tier-2 cities also need access to piped natural gas. It's more convenient and safer than dealing with LPG cylinders every month.
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Michael C
Interesting analysis. The projection of stable crude oil prices ($60-$70) is a key assumption. Any geopolitical shock could change this entire outlook. India's energy planning needs robust contingency plans for such volatility.

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