India’s natural gas demand is expected to decline by around 8% year-on-year in 2026, according to the latest Q3 2026 gas market report released by the International Energy Agency (IEA). The agency identified the fertilizer sector as the most affected segment, while disruptions in West Asia and the temporary closure of the Strait of Hormuz significantly altered India’s LNG supply dynamics.
West Asia Conflict Reshapes LNG Supply
The conflict in West Asia and the disruption of shipments through the Strait of Hormuz nearly choked off about half of India’s LNG imports from the region. As a result, India, the world’s fourth-largest LNG importer, faced higher import costs and changing supply patterns. However, despite weaker consumption, India continued importing LNG because domestic natural gas production remained insufficient to meet demand.
Demand Weakens Across Key Sectors
Between January and April 2026, India’s natural gas demand declined 4% year-on-year, reflecting strong price sensitivity among major consuming industries. The fertilizer industry recorded the steepest decline even though it was classified as a critical sector under the Natural Gas (Supply Regulation) Order 2026, introduced by the government in March 2026 to safeguard agricultural productivity and food security.
Petrochemical Production Contracts Sharply
Petrochemical output fell 21% year-on-year, making it one of the hardest-hit industrial segments. Higher LNG prices reduced operating rates in gas-intensive industries and encouraged fuel switching in some applications. In contrast, demand from city gas distribution networks, including CNG for transportation and PNG for households and small businesses, continued to grow.
Domestic Gas Production Continues to Decline
The IEA highlighted that India’s domestic natural gas production has been falling steadily, recording 22 consecutive months of year-on-year contraction since July 2024. In 2026, domestic output declined 4% year-on-year, increasing the country’s dependence on imported LNG. Despite supply disruptions from West Asia, India imported approximately 11 billion cubic metres (bcm) of LNG during the period, representing a 1% increase year-on-year.
Long-Term Outlook Remains Positive
The IEA had projected in February 2026 that India’s natural gas consumption could reach 103 bcm annually by 2030, implying an average annual growth rate of nearly 7% between 2023 and 2030. The current decline therefore appears to reflect short-term price pressures and supply disruptions rather than a fundamental reversal in India’s long-term gas demand outlook.
Asia-Wide Demand Also Expected to Ease
The IEA expects Asia’s natural gas demand to decline by 0.5% in 2026 as elevated LNG prices encourage gas-to-coal switching in power generation and lower utilization rates across energy-intensive industries. While India’s natural gas demand is likely to contract in 2026, the country’s continued reliance on LNG imports highlights the importance of strengthening domestic production, diversifying supply sources, and expanding energy infrastructure. As reported by thehindubusinessline.com, the fertilizer and petrochemical sectors will remain particularly sensitive to LNG price movements, whereas city gas distribution demand is expected to continue growing alongside urbanization and transportation needs.
