India’s consumption of Liquefied Natural Gas (LNG) is expected to rise further in the coming months on the back of growing demand from the fertiliser and power industries, analysts say. Anticipated lower spot LNG prices will further add to this growth.
“Our current forecast for December, January, and February averages at 76 MMcm/d, with an upside risk of 4 MMcm/d to this forecast, as spot prices are now expected to average around $16/MMBtu for the next three months, incentivizing spot buying for the industrial sector,” S&P Global said in a note.
Not just analysts see a rise in the LNG consumption but also in its imports in order to fulfill the rising demand from various sectors.
“In Summer 2024, imports are expected to increase by a further 3 MMcm/d compared with 2023, driven by sustained demand in the power sector and continued growth in the industrial and fertilizer sectors,” S&P Global said. However, in the final quarter of the year 2024, the firm sees imports averaging 80 MMcm/d, 4 MMcm/d lower than in 2023.
The rise in imports will likely be driven by the anticipated rise in available LNG supply during the last quarter of 2024, putting a downward pressure on spot LNG prices.
“If spot prices in Q4 2024 average around $15/MMBtu, it may encourage an additional 5-6 MMcm/d of spot imports,” S&P Global said. “Consequently, there is an overall potential upside of roughly 3-4 MMcm/d to our 2024 forecast, currently set at 87 MMcm/d. This adjusted forecast could imply a year-on-year growth of approximately 10% in Indian LNG imports for 2024.”
India imported 2,337 MMSCM of LNG in the month of October, up by 18.2% from the corresponding period last year, data from the Petroleum Planning and Analysis Cell showed. During the April to October period, the country imported 17,753 MMSCM, a 13.4% increase compared with the corresponding period of the previous year.
The surge in imports can be attributed to increased gas consumption in the fertilizer and power sectors. Higher gas generation in the power sector was driven by higher peak thermal demand amid reduced hydro power generation.
India generated 101,969.4 GWh of hydro power during April to October, a decline of 15% from 119,432.4 GWh in the same period a year ago.
“Lower spot LNG prices and the resumption of 9 MMcm/d of term supplies from SEFE played pivotal roles in driving this increased gas demand in the power sector,” analysts at S&P Global said. Power sector consumed an average of around 23 MMcm/d in the third quarter of FY23, reflecting an increase of roughly 8 MMcm/d from the previous year.
Moreover, Indian Oil Corporation and Bharat Petroleum have been keen on purchasing spot LNG cargoes even as the prices remain elevated at $16 per MMBtu, reflecting their appetite to consume LNG at higher range.
Indian Oil has awarded tenders for three cargoes for November and December delivery at around $15.5/MMBtu whereas BPCL has awarded a spot cargo for November delivery in mid-$16/MMBtu, analysts said.
Furthermore, as India plans to phase out urea imports by 2025, the country’s dependence on domestically produced urea will increase, supporting the rise in gas consumption in the fertilizer sector.
“The sector’s consumption averaged roughly 48 MMcm/d, a 9 MMcm/d increase from Q3 2022,” said S&P Global. “The remaining increase in consumption was distributed among the refinery and other industrial sectors, further incentivized by lower spot LNG prices.”
The country’s power sector has consumed 1,947 MMSCM of R-LNG (Regassified Liquified Natural Gas) during the first seven months of FY24 against 1,235 MMSCM last year. The fertiliser sector consumed 10,336 MMSCM of R-LNG till October, as per data from PPAC.
Source: The Financial Express
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