The IEA predicts that rising natural gas prices will reduce demand in 2022

India, the third-largest energy user in the world, saw a 6% year-over-year decline in natural gas consumption in 2022 as a result of high costs, according to the International Energy Agency (IEA). According to data from the Petroleum Planning and Analysis Cell (PPAC), India used 60,523 million standard cubic meters of natural gas in the most recent calendar year as opposed to 64,658 mscm in 2021. After the Russia-Ukraine war, which started in February of last year, Europe secured supplies for the winters at record-high costs (the average price in 2022 will be $34 per mBtu). This led to a drop in consumption, particularly in the power, refining, and petrochemical sectors.

According to the IEA’s gas market report for Q1 2023, “India’s gas consumption is estimated to have decreased by 6 percent in 2022 as high prices squeezed gas demand for power generation (down 24 percent year over year), refining (down 30 percent year over year), and the petrochemicals sector (down 32 percent year over year in particular). The report added that while city gas demand was largely unchanged in 2022, consumption in the fertilizer sector and other end uses (such as agriculture, upstream operations, and other industries) experienced modest growth.

Nevertheless, these improvements were insufficient to make up for the sharp declines in the economy’s more price-sensitive sectors’ demand, which were, however, offset by the growth seen in other end uses. In Asia, spot LNG prices in 2022 were $34 per mBtu, more than five times the five-year average between 2016 and 2020. A slight rebound in gas usage by the power sector and ongoing, if slow, development in the industrial and city gas sectors are likely to contribute to a 4% increase in overall gas consumption in 2023, according to the international body monitoring the energy industry.

According to the IEA, price-driven fuel switching was the main factor in reducing LNG consumption, but a minor 3 percent gain in local production was also a factor. India’s gas production, which meets half of the nation’s demand, increased from 32,362 mscm in 2021 to 33,362 mscm in 2022, according to PPAC. The IEA analysis found that in 2022, India’s LNG imports fell by 17%, the sharpest dip ever and the first decline to span two years in India’s two-decade history as an LNG importer. In 2022, India imported 27,161 mscm of LNG compared to 32,655 mscmin in 2021.

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