PNG Gas In India: Production, Pricing, Benefits vs LPG Explained
Natural gas that is transported from production sites or import terminals through high-pressure pipelines is known as Piped Natural Gas (PNG). It is distributed to end users at low pressure through metered connections installed at their premises.
Under the City Gas Distribution system in India, high-pressure gas is first received at City Gate Stations. Here, the pressure is reduced to make it suitable for safe distribution.
The gas is then supplied to consumers through a network of steel pipelines, secondary polyethylene mains, and tertiary service lines that connect directly to household or commercial appliances.
Compared to LPG, PNG offers greater convenience and safety. While LPG is delivered periodically through booking, PNG offers an uninterrupted supply at pay-per-use, like electricity. Furthermore, due to their lower pressure, the storage and handling risks are lower in PNG. Additionally, PNG supplies also come with auto shut-off meters to optimise security. This blog decodes the pattern of PNG gas production in India.
The State of PNG Gas Production In India
In 2023-24, the natural gas production of India reached 36.43 Billion Cubic Meters (BCM) and is anticipated to hit 45.3 BCM in 2026.1 Despite this significant natural gas production in India, domestic demand continues to outgrow supply. Currently, the natural gas production of India meets only approximately 50% of its demand.2
The production of natural gas is primarily concentrated in certain key locations, namely the Krishna-Godavari Basin off the coast of Andhra Pradesh, Assam, Tripura, Rajasthan, and more. The map below shows the key natural gas locations in India and the state-wise PNG connection density.
The KG Basin: India's PNG Powerhouse
A major sedimentary basin spanning Andhra Pradesh and Telangana along the eastern coast is the Krishna-Godavari Basin. The Basin is renowned for its vast offshore deepwater reserves. While the onland part of the basin covers around 15000 sq. km, the offshore part covers approximately 25,000 sq. km.4 As of a 2019 declaration, the KG Basin has natural gas production at 9.8 million metric standard cubic metres per day, and its total recoverable crude oil and natural gas reserves are at 698 million metric tonnes.5,6
In 2002-03, Reliance made significant discoveries of deep-sea gas reserves in a specific part of the Krishna Godavari basin, known as the KG D6 Block. In this KG D6 Block, which is the first deep-water field in India, Reliance and Bharat Petroleum (BP) built three deep-water gas developments, namely the R Cluster, Satellites Cluster, and MJ fields. Together, they contribute approximately 30% of gas production in India. 7
The long-term potential of this domestic source is substantial, and the basin is expected to play a major role in the production of piped natural gas in India. A domestic supply of gas from the KG Basin is crucial not only for the energy security of the country but also for the growing commitment to PNG gas production in India.
Why India Is Accelerating PNG Expansion Right Now?
The conflict in West Asia between Iran and the US-Israel practically choked the critical supply point at the Strait of Hormuz.8 As India imports 60% of its LPG consumption, 90% of these imports are routed through the Hormuz.9 Therefore, the ongoing conflict and blockade at the Strait have major implications for India; the primary one being LPG shortages. In such a scenario, PNG gas production in India has emerged as a major alternative.
Compared to the 60% import dependency of LPG, the Indian natural gas production can meet about 50% of its domestic demand.10 Additionally, the PNG household connections in India can have several benefits over LPG, as shown in the table below.
| Particulars | PNG | LPG |
| Delivery | Continuous uninterrupted supply | Periodic delivery post booking |
| Safety | No storage or handling risk, along with auto shut-off meters | Higher risk from cylinder leaks, manual changes, and storage |
Therefore, the Government of India has renewed its push towards PNG. The Ministry of Petroleum & Natural Gas, along with the Ministry of Housing and Urban Affairs, has decided to expand PNG connections, with a target to reach 30 lakh connections in over 150 high-priority districts.11 Amid these trends, individuals and households might wonder about the cost impact of PNG.
How PNG Gas Is Priced And What It Costs Households?
Natural gas price in India operates on a dual structure. While older, legacy fields, like those of ONGC and Oil India, fall under the Administered Price Mechanism (APM), newer or more complex fields have market-linked prices. Under APM, the government periodically revises prices according to a set formula, but under market-linked prices, the market forces of demand and supply determine the price.
City gas companies, like Indraprastha Gas, Mahanagar Gas, Gujarat Gas, and others, procure a blend of APM and market-linked gas, based on which they determine the final retail price charged to the consumer.
As per industry reports, the PNG gas price in India can be INR 300-400 less for consumers, compared to the LPG prices.12,13 Let us take a hypothetical example of two Delhi households, one of which is a PNG user, while the other is an LPG user.
| PNG HOUSEHOLD DELHI | LPG HOUSEHOLD DELHI |
| PNG is billed based on consumption by volume. Given that a typical household can use about 6-10 standard cubic metres of PNG, the average monthly cost can be around INR 600-900 | A standard 14.2 kg LPG cylinder in Delhi costs around INR 800-900. Assuming a household can use about 1 to 1.5 cylinders a month, the average monthly cost can be up to INR 800-1350. |
Therefore, PNG can save up to INR 200-400 per month compared to LPG.
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FAQs On Piped Natural Gas (PNG) in India Everything You Need to Know
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Author: Grip Invest Editorial Team The Grip Invest Editorial Team is a group of Chartered Accountants, MBA (Finance) graduates, and Qualified Research Analysts dedicated to helping you invest smarter. We dive deep into India's fixed income landscape to deliver content that is accurate, up-to-date, and easy to understand. Whether you're exploring bonds, fixed deposits, or other fixed income opportunities, our guides cut through the noise and give you the clarity to make better financial decisions. |
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