India’s LNG dependence: Domestic shortfalls and global risks
This article is authored by Hriday Sarma, senior fellow, South Asia Democratic Forum, Brussels.
India stands at the cusp of an energy transformation, with natural gas emerging as a key pillar in its transition to a cleaner, low-carbon economy. The government has outlined an ambitious plan to raise the country's natural gas share in the energy mix from the current 6% to 15% by 2030, underscoring the need to reduce reliance on coal and oil.
As India cements its position as the world's fastest-growing major economy, its rising energy demand is closely linked to industrial and urban growth. However, this trajectory faces several challenges—declining domestic production, increasing dependence on liquefied natural gas (LNG) imports, and a volatile global geopolitical landscape. These factors, compounded by western sanctions on Russia, complicate India's efforts to ensure energy security and economic stability.
India’s domestic natural gas production is nowhere close to meeting its growing consumption needs. From April to January in FY25, domestic output rose slightly to 35.9 billion cubic meters (bcm), a 2.6% increase from the same period last year. Oil and Natural Gas Corporation (ONGC), a key producer, faced tighter supply conditions, producing 15,763 million cubic metres—just below the 16,189 million cubic metres recorded a year earlier.
A recent Wood Mackenzie projection indicates that India’s natural gas production will peak in 2025 before entering a long-term decline, falling at an average annual rate of 3.6% until 2030 and a steeper 9% per year until 2040. These trends highlight the significant challenges the country faces in expanding exploration and boosting capacity in mature fields. Despite policy reforms and regulatory easing under the Hydrocarbon Exploration and Licensing Policy (HELP), investment in domestic production remains sluggish, widening the gap that must increasingly be filled through imports.
This gap is being filled by a sharp rise in LNG imports, which surged by 21% to 31,347 million standard cubic metres in April–January FY25 compared to the same period in FY24. Over 51.2% of India’s natural gas consumption now depends on LNG imports, up from 46.5% in 2024. This growing reliance has made India the world’s fourth-largest LNG importer, accounting for 7% of global LNG trade. The International Energy Agency (IEA) projects India’s natural gas demand to grow 8% in 2025 and 60% by 2030, reaching 103 bcm annually. With domestic production expected at just 38 bcm, LNG imports must double to nearly 65 bcm to fill the gap.
However, India's growing reliance on LNG imports comes with risks. The import bill surged to $12.9 billion in April–January FY25, up 17% from $11 billion a year ago. While lower global LNG spot prices have provided short-term relief, rising competition in energy markets—exacerbated by geopolitical conflicts like the Russia-Ukraine war—poses challenges. Since 2022, western sanctions have disrupted global energy trade, pushing the European Union to cut Russian pipeline gas imports and turn to other LNG suppliers. This shift has tightened global LNG markets, increasing competition for supplies and affecting India.
Despite efforts to reduce reliance on Russian energy, Russia remains a key LNG supplier to Europe, with exports rising to 14.9 million metric tonnes (mt) in 2024 from 13.9 mt the previous year. This underscores the difficulty of fully severing energy ties with Moscow, even as United States (US) sanctions target Russian LNG operators and projects, including Gazprom’s Portovaya LNG plant, to limit its global influence. The uncertainty over future sanctions, especially with the prospect of stricter trade policies under the Trump administration, could further disrupt LNG markets, impacting prices and supply.
Against this volatile global backdrop, India is strengthening long-term LNG supply agreements. Indian Oil Corporation is in talks with US-based Cheniere Energy for a new deal and has secured a 14-year contract with ADNOC Gas for 1.2 mtpa of LNG from the Das Island facility in the United Arab Emirates, with deliveries starting in 2026. These agreements are crucial, as analysts warn that reliance on the spot market could lead to significant price fluctuations in the 2030s. At the same time, India is expanding its LNG infrastructure—quadrupling CNG stations, extending city gas networks, and enhancing regasification capacity. With seven operational terminals and a combined capacity of 47.7 million metric tonnes, the country is set to increase LNG imports by the mid-2020s.
The role of natural gas also ties directly into India's climate commitments. While LNG is marketed as a cleaner alternative to coal, its lifecycle emissions could hinder long-term decarbonisation. The International Panel on Climate Change (IPCC) has flagged methane leaks in LNG production as a key contributor to global warming, raising doubts about gas as a bridge fuel. While Prime Minister Narendra Modi has committed to reaching net-zero by 2070 and 500 GW of renewables by 2030, balancing LNG dependency with investments in solar, wind, and hydrogen will shape India's energy future.
This article is authored by Hriday Sarma, senior fellow, South Asia Democratic Forum, Brussels.
