India’s energy-security value chain (Part-2): Natural gas, repeating crude oil’s mistakes?

19/10/2026

14–20 minutes

energy, methane, natural gas, strait of hormuz

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In part-1, we saw the ups and downs (mostly downs) of India’s decisions surrounding crude oil. Unfortunately for us, some of these mistakes were repeated in case of natural gas also. Natural gas occurs very frequently alongside oil in reservoirs. As India doesn’t have many reservoirs to speak of, we find ourselves lacking heavily in this department too.

Let us get into the nitty-gritty of it.

Definition of natural gas

Natural gas is not one single gas but a mixture of mainly hydrocarbons and some non-hydrocarbon gases like nitrogen, carbon dioxide, hydrogen sulphide, and water vapour. It occurs within sedimentary rock formations, either alongside crude oil or in reservoirs containing little or no oil. A full list of constituents is given below:

Table 1: Constituents of Natural Gas
Constituent group	Constituents and chemical formulae	Role / significance	Notes
Lighter alkanes	Methane (CH₄); ethane (C₂H₆); propane (C₃H₈); n-butane and isobutane (C₄H₁₀)	Main combustible hydrocarbons. Methane is usually the dominant component; ethane and heavier gases can also be valuable feedstocks.	Relative proportions vary by reservoir and processing.
Heavier alkanes	n-pentane, isopentane and neopentane (C₅H₁₂); hexanes (C₆H₁₄); heptanes (C₇H₁₆); octanes (C₈H₁₈); nonanes (C₉H₂₀); decanes and heavier (C₁₀H₂₂+)	Increase the gas’s hydrocarbon content and may be recovered as natural gas liquids or condensate.	Often grouped as C₅+ or heavier hydrocarbons; not all remain gaseous at surface conditions.
Other hydrocarbons	Cycloalkanes (various); benzene (C₆H₆); toluene (C₇H₈); xylenes (C₈H₁₀); other trace aromatic hydrocarbons	Minor hydrocarbons that may be present in richer gas streams; some have commercial value, while some require exposure controls.	Not universal constituents; aromatic compounds are hydrocarbons, not non-hydrocarbon impurities.
Common non-hydrocarbon gases	Carbon dioxide (CO₂); nitrogen (N₂); hydrogen sulphide (H₂S); water vapour (H₂O); helium (He)	CO₂ and N₂ can lower heating value; H₂S is toxic and corrosive; water can cause corrosion or hydrate formation; helium can be recovered.	Often treated or removed to meet pipeline and processing specifications.
Other gases and trace elements	Hydrogen (H₂); oxygen (O₂); argon (Ar); neon (Ne); krypton (Kr); xenon (Xe); radon (Rn)	Usually minor or trace components. Their significance depends on concentration and the gas’s intended use.	Oxygen may indicate air ingress or contamination; radon is radioactive.
Sulphur compounds	Carbonyl sulphide (COS); carbon disulphide (CS₂); mercaptans / thiols (R–SH); dimethyl sulphide ((CH₃)₂S); other organic sulphur compounds	May contribute to toxicity, odour, corrosion or sulphur emissions and may require removal.	Some mercaptans are deliberately added as odorants to otherwise odourless processed gas; they are not necessarily native constituents.
Other trace contaminants	Ammonia (NH₃); mercury (Hg); possible organic mercury compounds	May pose toxicity, environmental or equipment-compatibility concerns.	Occurrence and concentration are highly source-dependent.
Entrained material (not gas constituents)	Sand, dust, liquid hydrocarbon droplets, brine or other aerosols	Can damage equipment, cause erosion or create processing problems.	These are carried in the gas stream but are not chemical constituents of the gas phase itself.

Note: This is a broad reference list, not a recipe for every reservoir. Natural gas composition varies widely; many listed constituents occur only in trace amounts or are absent in a particular source.

This complex mixture of gases is refined thoroughly and separated out so only the lighter alkanes with trace amounts of benign gases are left with methane being the undisputed king.

Table 2: Natural Gas Composition
Component	Chemical Formula	Volume Percentage (%)
Methane	CH₄	93.1
Ethane	C₂H₆	3.2
Propane	C₃H₈	0.7
n-Butane	C₄H₁₀	0.4
Carbon dioxide	CO₂	1.0
Nitrogen	N₂	1.6
Methanethiol	CH₄S	5.75 × 10^-6
Total		100.00

Source: U.S. Department of Energy, National Energy Technology Laboratory (NETL), Table 1-4, Natural Gas Properties. Values are from a representative power-generation study and are not universal natural gas specifications.

These gases are then packaged and delivered in different forms. The names of these forms are what the public is most acquainted with:

Compressed Natural Gas (CNG): Natural gas is compressed to 200-250 bar for transport applications making it more practical.
Liquefied Natural Gas (LNG): Natural gas is cooled to approximately −162°C at near-atmospheric pressure to facilitate transportation and bulk usage in electricity generation.
Piped Natural Gas (PNG): Pipe delivery of natural gas to residential, commercial, and industrial areas. Pressure is regulated depending on target usage.

How does natural gas occur?

Geological occurences of natural gas are divided in 6 categories:

Associated gas: The name comes from the gas being found alongside crude oil either on top or dissolved in the oil. It is associated with crude oil.
Non-associated gas: Gas found in reservoirs which contain little or no crude oil. As hinted by the name, this gas is not associated with crude oil.
Coalbed Methane (CBM): Occurs within coal seams, where methane is stored mainly on the internal surfaces of the coal. A coal seam is a layer of coal occurring between layers of surrounding rock.
Shale gas: Found in organic-rich shale formations, where gas occupies tiny pores and fractures in the rock. Shale is a fine-grained sedimentary rock formed from compacted clay, mud and silt over geological time.
Tight gas: Found in very low-permeability sandstone or other reservoir rocks, from which gas cannot flow readily without suitable extraction techniques.
Gas Hydrates: Methane hydrates trapped within ice-like crystalline structures of water, found particularly in marine sediments beneath the seabed and in permafrost regions.

Schematic illustration of natural gas geology showing various gas types, including conventional nonassociated gas, coalbed methane, conventional associated gas, and oil, along with geological layers like seal, sandstone, tight sand gas, and gas-rich shale. — Figure 1: Occurence of natural gas (Reference: U.S. Energy Information Administration)

Diagram illustrating types of methane hydrate deposits, including hydrate mounds on the seafloor, deposits below the seafloor, and biogenic methane generation from bacterial action in shallow sediments. Features drill ship and drilling rig. — Figure 2: Occurence of methane hydrates (Reference: U.S. Department of Energy)

Similarities to crude oil cannot be ignored.

India’s production in natural gas shows similarities to crude oil. The same DGH of India’ outlook report 2024-25 used in part-1 will be our guide alongwith the Ministry of Petroleum and Natural Gas’ Annual Report of 2024-25 in figuring out India’s domestic production and consumption.

Table 3: Natural gas production in India
Year	ONGC Gas (BCM)	OIL Gas (BCM)	PSC Gas (BCM)	CBM (BCM)	Total Domestic Gas Production (BCM)	LNG Imports (MMT)	Assumed LNG Equivalent (BCM)	Natural Gas Consumption (BCM)
2014-15	22.02	2.72	8.68	0.23	33.65	13.29	18.34	50.30
2015-16	21.18	2.84	7.84	0.39	32.25	14.38	19.84	50.18
2016-17	22.09	2.94	6.31	0.56	31.90	17.78	24.54	54.41
2017-18	23.43	2.88	5.60	0.73	32.65	20.18	27.85	58.47
2018-19	24.67	2.73	4.77	0.71	32.88	21.54	29.73	60.60
2019-20	23.75	2.67	4.12	0.66	31.19	24.42	33.70	62.61
2020-21	21.87	2.48	3.68	0.64	28.67	25.05	34.57	60.98
2021-22	20.63	2.89	9.82	0.68	34.02	23.42	32.32	64.16
2022-23	19.97	3.04	10.77	0.67	34.45	19.85	27.39	59.97
2023-24	19.32	3.09	13.38	0.65	36.44	24.00	33.12	67.51
2024-25 (P)	18.795	3.171	13.378	0.756	36.109	26.96	37.20	71.31

Line graph showing the distribution of total domestic gas production, assumed LNG equivalent, and natural gas consumption from 2014-15 to 2024-25. Total gas production is represented by a black line, assumed LNG by a red line, and natural gas consumption by a green line, indicating trends over the years. — Figure 3: Graph describing the variation of production, imports, and the national consumption from table 3.

Consumption has increased by quite a bit. Not to the same level as crude oil but it still is a sizeable growth of around 41.8% from 2014 to 2025. The import and production is quite equal in its distribution, a far cry from crude oil’s 88.7% foreign import. Domestic production has never matched demand; it did not match it when import was low and it does not match now when demand has increased.

Division of natural gas usage by sector

Natural gas is very important because of its various applications in our day-to-day life. These sectors must have a percentage use of its own and if there is a crisis in supply of natural gas, these sectors get immediately impacted. We will use PPAC’s sectoral consumption excel file to figure it out.

Table 4: Sectoral division of natural gas usage
Financial year	Power	CGD	Refinery	I/C for P/L System	Agriculture (Tea Plantation)	Industrial	Manufacturing	Other/Misc	Fertilizer	Petrochemical	LPG Shrinkage	Sponge Iron/Steel	Total
2015–16	10.89	5.46	5.08	0.41	0.00	0.40	0.14	4.30	16.13	3.73	0.75	0.54	47.85
2016–17	11.62	7.35	5.37	0.47	0.00	0.69	0.11	3.93	15.43	4.17	0.76	0.89	50.78
2017–18	12.03	8.58	6.53	0.50	0.19	0.87	0.13	3.23	14.68	4.02	0.80	1.28	52.83
2018–19	12.00	9.21	7.05	0.54	0.19	0.94	0.14	3.39	14.99	3.39	0.87	1.12	53.84
2019–20	11.08	10.88	7.79	0.53	0.20	0.57	0.13	4.21	16.12	3.57	0.86	0.57	56.49
2020–21	10.84	9.23	7.91	0.44	0.18	0.45	0.10	4.57	17.78	3.07	0.90	0.65	56.12
2021–22	10.16	12.17	5.31	0.49	0.16	0.83	0.12	9.11	18.08	2.86	1.07	1.13	61.49
2022–23	8.15	12.03	3.91	1.76	0.15	0.67	0.19	8.53	19.40	1.96	0.98	0.96	58.70
2023–24	9.08	13.49	5.55	1.92	0.14	1.05	0.41	10.97	21.04	2.97	1.00	1.18	68.81
2024–25 (P)	8.89	15.05	5.86	1.97	0.15	1.12	1.68	10.38	20.48	3.36	0.92	1.33	71.20
2025–26 (P)	7.96	16.52	5.53	1.83	0.13	0.78	1.60	9.72	19.65	3.90	0.76	0.68	69.05

Unit: BCM (billion cubic metres). PPAC’s annual table reports volumes in MMSCM; values above are converted by dividing by 1,000 and rounded to two decimal places. (P) denotes provisional figures.

Source: Petroleum Planning & Analysis Cell (PPAC), “NG-H Sectoral Consumption,” annual summary.

Well that is interesting. Power generation is at the top of every country’s consumption distribution of natural gas and, at first glance, it seems to be India’s largest consumer too. Going down the column we see power generation dropping off significantly while city gas distribution (CGD) keeps increasing and another sector takes the crown. Scrolling horizontally shows us the truth. Too lazy? Don’t worry, I have you covered.

India’s Natural Gas Consumption by Sector

FY 2025–26 (Provisional) · Values in BCM

Select or hover over a pie slice to see its details.

Source: Petroleum Planning & Analysis Cell (PPAC), “NG-H Sectoral Consumption,” annual data. FY 2025–26 figures are provisional. Values converted from MMSCM to BCM and rounded for display.

Line graph depicting natural gas usage in three sectors: CGD, Power, and Fertilizer from the financial year 2015-16 to 2025-26, measured in BCM. — Figure 4: Graph showing the usage of natural gas by fertilizers, power, and CGD from table 4.

Fertilizer is quite steady in its natural gas consumption. There is no better commercial alternative currently for fertilizer production than natural gas. It is used to produce hydrogen (H₂) to make ammonia (NH₃) which is later used to synthesize urea.

First produce hydrogen by decomposing methane and convert carbon monoxide into dioxide by using water-gas shift reaction.

CH_{4} + H_{2}O\ \rightarrow CO+ 3H_{2}

CO+H_{2}O\rightarrow\ CO_2 + H_2

Use the hydrogen to produce ammonia

\mathrm{N_2+3H_2\rightleftharpoons 2NH_3}

Finally, make urea fertilizer

\mathrm{2NH_3+CO_2\rightarrow CO(NH_2)_2+H_2O}

Urea fertilizer is needed for growing rice, wheat, sugarcane, maize, and cotton among others. With India’s staple diet consisting mainly of the first two mentioned, we might have a problem. The solution to this will be to find other ways to produce hydrogen or ammonia in bulk instead of using natural gas-based methane. Alternatives are being researched into like green ammonia, green hydrogen, or implementing coal gasification.

Methane usage to generate electricity has been decreasing steadily. The reasons include hike in LNG prices, the increase in renewable and nuclear energy, and coal being the economically better choice.

City gas distribution has increased and taken second place because of increased pipe connections. Instead of an LPG cylinder being delivered to your house, now a gas pipeline sends the fuel through underground installations. CGD also covers CNG vehicles and transport which have also seen large upticks.

Table 5: Reasons for CGD increase
Financial Year	Registered CNG Vehicles	Domestic PNG Connections (Lakh)	Commercial PNG Connections
1999–2000	74	N/A	N/A
2000–2001	295	N/A	N/A
2001–2002	379	N/A	N/A
2002–2003	619	N/A	N/A
2003–2004	772	N/A	N/A
2004–2005	1,087	N/A	N/A
2005–2006	2,330	N/A	N/A
2006–2007	4,141	N/A	N/A
2007–2008	3,517	N/A	N/A
2008–2009	3,997	N/A	N/A
2009–2010	6,035	N/A	N/A
2010–2011	8,204	N/A	N/A
2011–2012	22,908	N/A	N/A
2012–2013	22,714	N/A	N/A
2013–2014	20,825	N/A	N/A
2014–2015	24,265	N/A	N/A
2015–2016	28,754	N/A	N/A
2016–2017	29,318	N/A	N/A
2017–2018	27,781	N/A	N/A
2018–2019	32,694	42.02	27,260
2019–2020	38,675	54.04	28,085
2020–2021	60,128	65.59	30,703
2021–2022	205,042	78.2	32,339
2022–2023	324,969	93.03	34,854
2023–2024	440,500	1,10.29	37,772
2024–2025	495,312	1,29.23	41,360
2025–2026	493,317	N/A	N/A
2026–2027*	260,850	N/A	N/A

Source: VAHAN registration data, Parivahan Sewa; Petroleum and Natural Gas Regulatory Board (PNGRB), Annual Report 2023–24. PNG connection data are available for March 2018–March 2024 in the cited report. N/A indicates that no datapoint is included here.

VAHAN source: Parivahan VAHAN Public Report

PNG source: PNGRB Annual Report 2023–24 (PDF)

Line graph showing the number of registered CNG vehicles by fiscal year from 1999 to 2026, with a significant increase in recent years. — Figure 5: The increase in CND vehicles over the years, data from table 5.

Line graph showing CGD connections versus fiscal year from 2017 to 2024, comparing Domestic PNG connections (in lakh) and Commercial PNG connections (in lakh). — Figure 6: Increase in CGD usage due to PNG connections, data from table 5.

A good linear rise in natural gas usage for the residential and commercial sectors. Surely our imports and production can supply for this demand, right?

Dire straits: India’s import sources

India manages her energy needs by importing half her required LNG from foreign sources. The table below shows India’s LNG import vendors.

Table 6: India’s LNG Imports by Source Country, 2018–2025
Country	2018	2019	2020	2021	2022	2023	2024	2025
Algeria	0.22850	0.21198	0.19639	0.07094	0.21361	0.34767	N/A	N/A
Angola	1.38179	2.22553	2.37629	1.05650	0.68150	0.76775	1.96815	1.75629
Australia	1.47131	1.01942	0.78706	0.45893	0.43687	0.34900	0.12287	0.39427
Belgium	0.06257	N/A	0.28773	0.21053	0.13463	0.06421	0.06969	N/A
Brunei	N/A	N/A	0.06945	N/A	N/A	N/A	N/A	N/A
Cameroon	0.27328	0.38852	0.40878	0.20510	0.37843	0.41153	0.79494	0.33000
China	N/A	0.12000	N/A	N/A	N/A	0.05000	N/A	N/A
Egypt, Arab Rep.	0.17271	0.19996	0.11849	1.07050	0.17176	0.19665	N/A	N/A
Equatorial Guinea	0.89194	0.50413	0.53767	0.34655	0.14333	0.21790	0.96722	0.14921
France	0.34159	0.24210	0.34430	0.44006	0.21375	N/A	N/A	N/A
Germany	0.18000	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Guinea	N/A	N/A	N/A	N/A	N/A	0.06911	N/A	N/A
Indonesia	N/A	N/A	N/A	N/A	0.06925	N/A	0.06287	0.00902
Malaysia	0.26621	0.32547	N/A	0.06097	0.06508	N/A	N/A	N/A
Mauritania	N/A	N/A	N/A	N/A	N/A	N/A	N/A	0.03686
Mozambique	N/A	N/A	N/A	N/A	N/A	0.27992	0.58782	0.70330
Netherlands	0.29743	N/A	0.03851	N/A	N/A	N/A	N/A	N/A
Nigeria	3.02631	2.43860	2.92027	1.46689	1.12461	0.75403	1.42387	1.88700
Norway	0.06918	0.06889	N/A	N/A	N/A	N/A	N/A	N/A
Oman	1.07147	0.84368	1.32922	1.24677	0.93377	0.81038	1.45891	1.94170
Papua New Guinea	N/A	N/A	0.07796	N/A	N/A	N/A	N/A	N/A
Peru	N/A	N/A	N/A	N/A	N/A	N/A	N/A	0.00630
Qatar	10.70530	9.35742	10.22520	9.92691	10.67180	10.90150	11.30440	11.85610
Russian Federation	0.06500	0.03588	0.06647	0.07065	0.06576	0.42168	0.06893	N/A
Senegal	N/A	N/A	N/A	N/A	N/A	N/A	N/A	0.10483
Singapore	0.06584	N/A	N/A	N/A	N/A	0.01149	N/A	N/A
South Africa	0.06779	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Spain	N/A	N/A	N/A	0.21715	N/A	N/A	N/A	N/A
Switzerland	0.06149	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Trinidad and Tobago	0.33707	0.13779	0.50104	0.32315	0.11085	0.26708	0.38026	0.06376
Turkey	N/A	N/A	N/A	N/A	0.06895	N/A	N/A	N/A
United Arab Emirates	0.30782	2.46105	3.24692	3.31088	2.67953	3.04482	3.16371	3.13489
United Kingdom	0.20884	N/A	N/A	N/A	N/A	N/A	N/A	N/A
United States	0.95488	1.84472	2.36488	4.05454	2.38364	3.17618	5.42030	3.21587
Total	22.32830	22.30520	25.89660	24.53700	20.54710	22.14090	27.79390	25.58940

Unit: million tonnes (Mt). N/A indicates that no datapoint is listed in the supplied dataset.

Source: World Bank WITS / UN Comtrade — India imports of liquefied natural gas (HS 271111), 2025

The number of countries keep changing every year with new countries appearing and disappearing after just one year like Spain, South Africa, and Turkey. Only 8 countries have seen continuous business from India: Angola, Australia, Cameroon, Nigeria, Oman, Qatar, Trinidad and Tobago, United Arab Emirates (UAE), and the United States (US).

Line graph showing India's imports of natural gas from various countries (2018-2025), including Qatar, the United States, and others, measured in million tonnes. — Figure 7: India’s LNG imports from the countries present in 2018 to 2025, data from table 6.

As you can see from Figure 7, Qatar stands head and shoulders above every other country. Qatar has access to the world’s largest non-associated natural gas reservoir, North Field. Ras Laffan LNG complex is the world’s largest LNG refinery and QatarEnergy LNG is the world’s largest LNG producer with its stated production capacity of 77 million metric tonnes. Yet, Qatar is oddly enough not the world’s biggest LNG exporter, USA is. But Qatar is the biggest exporter to India. So what happens if Qatar for some reason cannot send LNG to India anymore?

The Strait of Hormuz is a narrow maritime passage connecting the Persian Gulf to the Gulf of Oman and, beyond it, the Arabian Sea. This Strait made its existence known to the average person after the US and Israeli strikes on Iran. The Strait was closed down and global energy prices surged. Qatar depends almost entirely on this Strait to export its fossil fuel products. As if things weren’t bad enough, the Ras Laffan LNG plant was attacked by Iran using ballistic missiles. The attacks damaged two LNG producing trains, which totaled around 12.8 million tons per annum (MTPA) of production, representing approximately 17% of Qatar’s exports.

These two events together caused India a fair bit of grief regarding its imports of fossil fuels. She managed to import LNG from Oman, Nigeria, and the U.S.A. to compensate for Qatar’s share. These three countries have been mainstays of India’s LNG imports, atleast since 2018.

It was a good thing that India managed to import the required LNG, but what if that was not the case? The worst case scenario would have turned normal life upside down with calls of rationing supplies and shutting down of fertiliser plants and petrochemical industries. Taiwan suffered the consequences of this shortage since they had only 11 days of strategic LNG supplies (95% of their energy needs are imported). Such a situation would be catastrophic for India with her more than 1.4 billion population.

Well, is India responding?

The direction India has taken to increase its natural gas production is quite similar to the steps regarding crude oil. The OALPs and the DSF measures are identical for coalbed methane and shale deposits. I would instead suggest you seriously consider the alternative to natural gas — biogas — but that is a topic for another time.

Conclusion

Natural gas has similar upstream problems to crude oil — insufficient domestic production and a large increase in usage. Electricity generation is not the main use of natural gas in India as opposed to other countries importing LNG en masse. Here, the fertiliser industry and city gas distribution (CGD) take the top two spots respectively. India’s upstream weakness and dependence on Qatar’s exports could have spelled doom after the US and Iran conflict, but India stabilized herself by increasing imports from her other LNG vendors.

Frequently Asked Questions (FAQ)

Ques: What are coal seams?

Coal seams are layers of coal found between layers of sedimentary rock underground. They form from accumulated plant material that is buried and transformed by heat and pressure over millions of years. Coal seams are mined for coal, while those containing methane can also be sources of coal bed methane (CBM).

Ques: What are shales?

Shales are fine-grained sedimentary rocks formed from compacted clay, mud and silt. Some shales contain significant quantities of organic matter that can generate natural gas and oil. Shale gas is extracted from these rocks, generally using horizontal drilling and hydraulic fracturing to release gas trapped within the rock.

Ques: Where is urea fertilizer used?

Urea is a nitrogen-rich fertilizer used in agriculture to promote plant growth, particularly the development of leaves and stems. It is applied to crops such as rice, wheat, maize, sugarcane and cotton. Natural gas is an important feedstock for producing urea because it provides the hydrogen needed to manufacture ammonia, which is then converted into urea.

Ques: Will the destruction of Ras Laffan affect natural gas exports?

Yes, the damage to Ras Laffan Industrial City in Qatar has affected LNG production facilities, reducing the country’s export capacity by 17%. Since Qatar is a major LNG supplier to India and other countries, the disruption can reduce available supplies, increase international LNG prices and force importing countries to seek alternative suppliers. The extent and duration of the impact depend on repair timelines, shipping access through the Strait of Hormuz and the availability of replacement cargoes.

Interesting things in the world of electronics served as easy to digest articles with a touch of wit.

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