Slower LNG demand from India is mainly the result of price-driven demand destruction, a senior official at state-controlled importer Petronet said.
The recent rally in global LNG prices has triggered a demand response from Indian buyers, the official said. LNG delivered prices "within $8-10/mn Btu maximum are still manageable", but if above that level then Indian firms typically seek alternative fuels, he said. The Argus India front-half month des price rose above $10/mn Btu in early June and has remained consistently above that level since then. It was assessed at $32.90/mn Btu today.
Indian domestic gas production has also increased in recent months, following the start-up of new fields in the Krishna-Godavari offshore basin, but the main issue remains price, the official said.
LNG deliveries to India have held lower than a year earlier since June, and dropped to 1.61mn t in November — the lowest level since February 2019 — preliminary ship tracking figures from oil analytics firm Vortexa show.
Aggregate LNG consumption has also been lower than a year earlier since August. It fell to 2.69bn m³ of equivalent pipeline gas in October from 3.2bn m³ a year earlier, mainly driven by weaker demand from refineries, the most recent figures from India's oil ministry show.
Stronger domestic production may have allowed some sectors to reduce use of more expensive LNG. Consumption of domestic gas rose to 2.6bn m³ last month from 1.78bn m³ a year earlier, more than offsetting the drop in LNG consumption. That said, gas use in refineries only rose by approximately 41mn m³, offsetting only a fraction of their lower LNG use.
Utilisation rates at some newer Indian terminals have been slow to ramp up in recent months, partly as a result of delays in the construction of downstream pipeline connections. But infrastructure development has continued steadily and will allow greater import capacity, which can be utilised once prices are more competitive, the official said.
India is pushing to expand the share of gas in the energy mix to 15pc by 2030, which will require demand to increase to around 600mn m³/d. Total gas consumption in the country fell to 166mn m³/d in April 2020-March 2021, from 175mn m³/d a year earlier.
