All eyes on natural gas: Combining emission reduction and reliable energy supply

India is balancing rapid economic growth with the need to reduce emissions.
Natural gas can help advance India’s economic and environmental goals.
Realizing the potential of natural gas in India will require stronger policy support and faster expansion of gas infrastructure.

Matthew Chandler

Managing Director, LNG, ExxonMobil India

News

3 min read

• Feb. 7, 2025

India is seeking to swiftly advance its economy into that of a developed nation while also looking to decarbonize. There are few countries of its scale that are balancing these two priorities at the same time. This makes India’s energy story stand out: it must forge an original path to manage its energy transition.

Natural gas can help. Affordable and available, gas has significant potential to help reduce emissions while meeting India’s rising energy demand.

Opportunities for gas

As it transitions to a gas-based economy, India aims to grow gas’ share in the energy mix to 15% by 2030. Sectors such as industry, transport and power will help drive this transition.

Industry is expected to be at the forefront of gas demand growth. For example, India’s fertilizer factories accounted for nearly 31% of its total gas consumption in the last fiscal year. As India commits to self-sufficiency in fertilizer production, this sector will in a large part power the country’s industrial demand for gas.

In transport, compressed natural gas (CNG) is increasingly becoming the fuel of choice for India’s growing middle class. Last year, demand for CNG cars outstripped that of all other variants in this passenger-vehicle category.

India also plans to make a large-scale switch from diesel to LNG in heavy-duty trucking. With 17 million trucks estimated to be on Indian roads by 2050, LNG—which has a significantly lower emissions factor than diesel—can have a pronounced impact on reducing emissions from road transport.

Let’s look at electricity generation now. Gas currently accounts for only 2% of India’s electricity mix. Renewables account for more than 45% and coal for the remaining. Gas has the twin positives of lacking the intermittency issues associated with many renewables while emitting up to 60% less CO₂ than coal. Given that India has nearly 15 GW of stranded gas-power capacity, gas can do more to reduce its electricity emissions.

So why is it that despite the growing demand for gas, it continues to make up only 6% of India’s energy mix? And what can India do to help unleash the full potential of natural gas?

India is already considering bringing gas under the goods and services tax (GST) regime. This is an important step towards consolidating multiple direct taxes on gas into one, making its price more stable across different states and ensuring it’s not disadvantaged relative to alternatives already included under the GST. However, India can do more to make gas more competitive, such as:

Accelerate infrastructure expansion

India is adding more pipelines, LNG import terminals, fueling stations, pipelines, CGD networks and infrastructure to advance small-scale LNG. But this expansion needs to happen at a faster pace so that gas can readily move to emerging demand centers.
Open access to infrastructure

Widening access to gas infrastructure would bring additional service providers into the space and improve utilization rates for existing gas infrastructure. This would also contribute to healthy competition along India’s gas value chain, which could have a positive impact on gas access and affordability.
Long-term LNG

With LNG likely to make up more than 50% of India’s gas supply by 2030, India should continue building long-term LNG supplies. In addition, it should explore economic-collaboration frameworks with new gas-producing nations whose geographical proximity can make LNG shipping to India more affordable.
Sustain fast-paced growth

Maintaining high growth rates will help ensure India has the resources needed to develop its energy industry. This includes the gas sector, which is crucial to meeting its emission goals. As purchasing power grows, Indian consumers would be more willing to pay for lower-emission options such as gas.
Attractive climate for upstream investment

Globally competitive investor protections could help pull in the right partners to unlock India’s domestic oil and gas resources. If such resources are found and developed, it can create new supplies to meet domestic demand.

At ExxonMobil, we don’t see natural gas as just a transition fuel bridging the gap between more carbon-intensive fossil fuels and renewable energy. It can not only help reduce emissions today but also continue to be used in the future to meet energy demand.

Gas has the potential to play a key role in India’s economic development and emission-reduction journey. But that needs to be underpinned by more supportive policy to encourage gas adoption.