India’s industrial demand for natural gas is weakening as factories increasingly turn to cheaper alternatives such as LPG and wood briquettes.
With crude steady at $65-70 a barrel, gas has become relatively expensive, pushing many industries towards liquid fuels like LPG and light diesel oil. Subsidised farm-waste briquettes-about a third cheaper than gas-are also gaining traction, according to industry executives.
Smaller industries such as ceramics, food processing and glass, which already have supply infrastructure for both natural gas and LPG, are maximising their use of the cheaper fuel. “At present, LPG is cheaper than natural gas, pushing up its consumption and forcing natural gas suppliers to cut rates to compete,” a city gas company executive said.
LPG, mostly produced at refineries, has turned more affordable with Saudi contract prices of propane and butane down 15-19 per cent since April. In contrast, Asian LNG prices have stayed flat at just above $11 per mmbtu-a level that starts eroding demand. Bulk LPG consumption for industrial use rose 65 per cent year-on-year in August, the oil ministry said in its analysis, attributing the growth to “LPG prices being substantially lower than natural gas.”
Biofuels are also hurting gas demand. Factories in the National Capital Region, western UP and Haryana are using more wood briquettes, cutting into sales for city gas distributors. The government has been supporting briquette production with financial aid to curb stubble burning and supplement farm incomes.
The industrial shift away from natural gas comes on top of a broader slowdown, pushing India’s overall gas consumption down 8 per cent so far this fiscal. The biggest drag, however, has been the power sector, where demand fell 20 per cent in April-August due to a mild summer. Refineries cut consumption 19.4 per cent by switching from gas to cheaper naphtha. Fertiliser demand fell 5.7 per cent.
Among major consumers, city gas distributors still posted 8 per cent growth, while petrochemicals saw a sharp 37 per cent surge. But with power the third-largest consumer and refineries the fourth, the decline in these segments has outweighed gains elsewhere.
