BT EXPLAINER: Why India's domestic gas production lags demand

India's natural gas consumption is forecast to increase by nearly 60% by 2030, driven by robust growth in city gas distribution, industrial demand, and power generation. However, the domestic gas production will increase only by 8%, leading to increased dependence on imports.

The conflict in West Asia impacting the energy supplies has brought focus on India’s roadmap on ramping domestic gas exploration and production to meet the growing energy demand as we march towards becoming a developed nation by 2047.

The Government has set a highly ambitious target to increase the share of natural gas in the country's energy mix to 15% by 2030, up from the 2022 level of 6.4%, according to the International Energy Agency.

What is India’s domestic gas production?

For 2026, India's total net gas production is projected to be around 35 bcm. This production is primarily driven by the deepwater fields in the Krishna-Godavari basin, which account for nearly 25% of the total production, according to the Petroleum Planning & Analysis Cell under the Ministry of Petroleum & Natural Gas.

Between 2024 and 2030, only moderate growth is expected, supported by increasing onshore production from coal bed methane (CBM) and discovered small fields (DSF). Offshore production will also rise with additional supplies from ONGC’s deepwater KG-D5 project.

However, overall growth will be tempered by plateauing output from the KG-D6 fields and declining production from legacy assets like ONGC’s Mumbai offshore fields, leaving production in 2030 (at just under 38 bcm) only around 8% higher than 2023 levels.

Who are the main operators in the gas sector in India?

India’s upstream sector is dominated by the state-owned ONGC, Oil India and private companies led by Reliance Industries (in partnership with BP).

State-owned ONGC and Oil India are the leading operators in the key Mumbai offshore, Assam, Tripura and Cambay basins. These basins have been major contributors to gas production in the country. Some of the fields in these basins have been producing gas since the 1960s.

In the early 2000s, Reliance discovered the Dhirubhai 1 and 3 gas fields in the KG-D6 block of the deepwater Krishna-Godavari basin. However, production from the KG-D6 fields peaked at less than 70 mcm/d during 2010 due to reservoir issues before heading into terminal decline, falling short of the planned peak of 88 mcm/d.

To boost domestic gas production, the government has provided several incentives since 2016, including a seven-year royalty holiday for deepwater and ultra-deepwater blocks, concessional royalty rates and fiscal incentives for the early monetisation of fields.

What are the government policies to push gas production?

In 2016, key changes to gas pricing for undeveloped deepwater and high-pressure-high-temperature fields enabled the second phase of Reliance’s and BP’s KG-D6 project and ONGC’s KG-D5 Cluster 2 development to reach final investment decisions (FID).

These projects have progressively come online and ramped up production since 2020. After nearly a decade of decline and stagnation, domestic gas production returned to growth in 2021. This growth is underpinned by production from the Reliance BP deepwater fields located in the KG-D6 block off India’s east coast.

The three fields – R Cluster, Satellites Cluster, and MJ – are expected to produce a combined 85 bcm over their lifetime. These fields accounted for nearly 25% of India’s total net production of 36 bcm in 2024. As a result, India’s total gas production has increased by nearly 30% between 2020 and 2024.

What is the potential for domestic natural gas production?

Further growth in domestic gas production is possible if demand can be unlocked in India’s relatively disconnected northeastern region. In recent years, the Assam and Tripura basins have contributed nearly 47% of India’s onshore production and 13% of its total gas supply.

According to the Directorate General of Hydrocarbons (DGH), these basins hold a combined risked undiscovered in-place hydrocarbon resource potential of 1 874 MMtoe.

India’s national oil companies are well-positioned to increase supply from these basins, contingent on further economic and infrastructure-led development unlocking regional demand. However, significant supply growth in the northeast is unlikely to materialise before 2030.

What is the strategy for underground gas storage?

India currently lacks underground gas storage (UGS) facilities and has only limited LNG storage capacity, equivalent to around 1.9 bcm. In July 2023, the PNGRB proposed developing strategic gas reserves to enhance energy security and mitigate price volatility.

In November 2023, the Indian Ministry of Petroleum and Natural Gas (MoPNG) instructed ONGC, Oil India and GAIL to conduct a feasibility study for strategic gas stocks with a capacity of 3-4 bcm.