Domestic natural gas consumption to surge by 3-4% in FY27 by expansion of City Gas Distribution: ICRA

The domestic natural gas consumption is expected to rebound and grow by 3-4% 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.