State-controlled gas distributor Gail is optimistic about India's gas market, with chairman Sandeep Kumar Gupta noting strong demand growth in both conventional sectors and emerging industries such as data centres, although challenges around taxation and price sensitivity remain. Speaking to Argus on the sidelines of the Adipec conference in Abu Dhabi, Gupta also discussed other LNG market trends and expansion plans at the Dabhol LNG terminal.
Looking ahead, how do you see India's LNG demand evolving in the short and long term?
We are very positive about the potential for gas consumption, both in conventional sectors and emerging areas such as steel, cement, refineries, petrochemicals, and increasingly, data centres.
There is significant growth potential. But India remains a highly price-sensitive market, which has not made good headway in gas consumption in the power sector, which could otherwise be a major consumer. Ultimately, growth depends on both pricing and taxation support. Currently, gas is not included under the goods and services tax (GST), and the largest consuming sector after fertilizers is City Gas Distribution (CGD), where [compressed natural gas] CNG is still taxed at 14pc on compression. If taxation reliefs were implemented and gas were brought under GST, the cost of CNG would fall. If that happens, we are sure that there will be a huge uptick in gas demand in the country.
There are reports about India planning to scrap tax on LNG imports from the US. How does Gail view that potential policy change?
It would certainly be a very positive development for Gail, as we currently import around 5.8mn t/yr of LNG from the US. Such a move would benefit not only Gail but also the country as a whole. That said, this remains subject to bilateral discussions between the two governments, and I am not certain about the current stage of that development.
Is Gail interested in buying LNG from the Alaska LNG project in the US?
We are examining the possibilities but it's a challenging project. Both the terminal and the north–south pipeline in Alaska need to be developed. Ultimately, it boils down to commercial viability, if the economics are favourable and if there is demand to support that, we would definitely consider it. We are continually evaluating multiple geographies based on India's LNG demand growth, and Alaska could be one of the potential sources.
What are the short-term operational targets for the Dabhol LNG terminal?
The terminal has a rated capacity of 5mn t/yr. Initially, it could not operate at full capacity because the breakwater facility was incomplete. That has now been finished, making it an all-weather terminal. But we currently do not have our own heating system — we had been relying on the nearby RGPPL [gas-fired power plant] for the heat required to gasify LNG. We are now installing our own heating facility, and by the end of next year, we expect to operate the terminal at its full 5mn t/yr.
Would you say India is heading towards LNG oversupply?
With new LNG supply coming from the US and Qatar from 2027 onwards, supply will certainly rise. But both in India and globally, we expect strong demand growth, not only in conventional sectors but also in emerging areas such as data centres. Gas-fired power will continue to play an important role, despite the growth of renewables. Overall, we believe that gas demand will keep pace with the increasing supply.
How do you view the shift in LNG pricing from crude-linked contracts to US indexes such as Henry Hub?
Our portfolio includes both types of linkages, Brent-linked as well as Henry Hub-linked contracts, so it is balanced. While we have exposure to US gas prices, we cannot predict how Henry Hub prices will evolve in the future. With increasing demand from export terminals, there is some uncertainty about how comfortable Henry Hub pricing will remain over the long term.
Does Gail have any new long-term LNG agreements in the pipeline?
We have recently signed two contracts, with Vitol and Adnoc, with supply expected to begin next year. Depending on how gas demand develops in the country, we will adjust and potentially increase our imports from various countries, without overly focusing on any one supplier or suppliers.
