Furnace oil consumption jumps 29.8% in July as industry switches off natural gas amid West Asia crisis

New Delhi: As industry switched from natural gas to furnace oil, with the pollution regulators formally allowing it, consumption of furnace oil and low sulphur heavy stock (FO/LSHS) rose 29.8 percent in July to 634 thousand metric tonnes (TMT), against 489 TMT a year earlier, data released by the Petroleum Planning and Analysis Cell (PPAC) for July showed. Over April-July, consumption was 11.9 percent higher at 2,222 TMT.

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Furnace oil is one of the few products in the barrel that grew. Naphtha consumption fell 13.8 percent in the month, petcoke 3.6 percent and light diesel oil 23.3 percent.

Gas was rationed by gazette order in March

The Ministry of Petroleum and Natural Gas notified the Natural Gas (Supply Regulation) Order, 2026 on March 10, invoking Section 3 of the Essential Commodities Act, 1955. It followed LNG shipment disruption through the Strait of Hormuz and force majeure notices from suppliers.

The order set a priority hierarchy. Domestic PNG, CNG for transport, LPG production and essential pipeline operations were placed in the first tier at full allocation. Fertiliser plants were placed at 70 percent. Tea manufacturing and other grid-connected industrial consumers were set at 80 percent, as were industrial and commercial consumers drawing gas through city gas distribution networks.

Two pollution regulators cleared alternate fuels within four days

The Commission for Air Quality Management (CAQM) amended its Direction No 65 on March 13, three days after the gas order. The amendment permits industries, hotels, restaurants and other commercial establishments across NCR, including Delhi, to temporarily use high speed diesel, biomass and refuse-derived fuel pellets in place of natural gas. Coal and kerosene may be used if those fuels are scarce.

The Gujarat Pollution Control Board followed on March 14 with a three-month permission covering boilers, furnaces and similar gas-dependent utilities. Its list of permitted substitutes runs wider and names furnace oil directly, alongside coal, lignite, light diesel oil, kerosene, naphtha, biogas, briquettes and charcoal. Petcoke was allowed only in cement, thermal power, glass and refractories, and only below 7 percent sulphur.

The NCR relaxation is still running, five months on

CAQM's amendment was originally valid for one month. It remains in force. The Commission noted the relaxation, now extended to September 13, at the 29th meeting of its Full Commission, held on August 18. The Commission attributed the continuing relaxation to the extraordinary global energy supply situation arising from the conflict in the Middle East.

Gas supply has partly recovered

Total natural gas consumption in July was 5,740 million standard cubic metres (MMSCM), 1.05 percent below the same month last year. Over April-July, consumption was marginally higher at 22,958 MMSCM against 22,869 MMSCM.

Gross domestic production fell. July output was 2,864 MMSCM against 2,967 MMSCM, down 3.5 percent, with the April-July figure down 4.3 percent at 11,245 MMSCM.

LNG imports moved the other way. July imports were 2,915 MMSCM, 1.5 percent above last year, and April-July imports rose 5.3 percent to 11,867 MMSCM. Import dependency on natural gas rose to 51.7 percent over April-July, from 49.3 percent a year earlier.

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Gas that industry can buy is priced well above the capped domestic rate

The administered price mechanism ceiling for ONGC and Oil India was held at USD 7.00 per MMBTU through the period, even as the calculated formula price ran at USD 10.76 in April, USD 11.59 in May, USD 10.93 in June and USD 8.73 in July.

Spot gas cleared far higher. The Indian Gas Exchange recorded a weighted average price of Rs 1,837 per MMBtu, or USD 19.2 per MMBtu, on 247 MMSCM of volume in July.

Furnace oil supply came from Indian refineries, not imports

FO/LSHS production rose to 3.9 million metric tonnes over April-July from 3.3 MMT a year earlier.

Imports went the other way. PPAC reported that imports of petroleum products fell 45.1 percent over April-July, and attributed the decline mainly to lower imports of LPG, petcoke and fuel oil.

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