Indian LNG cargo diversions expected amid lockdown

Several LNG carriers that have arrived, or are scheduled to arrive, at India's LNG terminals within the next 11 days are on a watchlist. Industry participants expect cargoes to be diverted to other destinations amid India's 21-day nationwide lockdown that has already hit gas demand and led state-controlled importer Petronet and several ports to declare force majeure.

India imposed a 21-day nationwide lockdown that started yesterday to curb the spread of the coronavirus outbreak.

Industry participants are especially keeping a close eye on the 210,200m³ Al Ghariya LNG tanker and the 216,200m³ Al Sahla. The Al Ghariya loaded at state-owned Qatargas' Ras Laffan export facility on 17 March and is idling outside Ras Laffan, while Al Sahla is indicating a 1 April discharge at the 5mn t/yr Hazira terminal in west India's Gujarat but is also still idling outside Ras Laffan. The vessel loaded at Ras Laffan on 23 March.

Petronet has declared force majeure on its LNG term deliveries and is in talks with Qatargas to defer its April deliveries by a few weeks. But it plans to take delivery of around eight spot and term cargoes that are expected to arrive in India by 31 March. The firm has a contract for 7.5mn t/yr of LNG, which it sells to state-controlled buyers Gail, IOC and Bharat Petroleum. It also has a contract with ExxonMobil for 1.44mn t/yr of LNG from the Chevron-operated Gorgon plant in Australia.

State-controlled buyers Gail and IOC have not declared force majeures, but LNG buyers have alerted their sellers to a likely sharp fall in demand.

"We have spoken to buyers and their feedback is still the same — possible small delays," a trader with an international trading firm said. "Any impact of deferments could be on term sellers."

The Mundra terminal, co-owned by state-controlled GSPC and private-sector conglomerate Adani, is the only one among India's six LNG terminals to declare force majeure. But there are expectations that other terminals may do so as India's shipping ministry has asked major ports to consider this. Gangavaram, Krishnapatnam, Karaikal, Dhamra and Gopalpur and Krishnapatnam ports have all declared force majeure.

Several Qatari cargoes and those from Gorgon have emerged on the spot market in recent days, with eight Qatari cargoes on offer to northeast Asian buyers for delivery in April alone, industry participant said. Sellers are also marketing two April cargoes and one May cargo from Gorgon.

It is unclear if these offers are directly related to India's lockdown and drop in gas demand. Europe also receives LNG cargoes from Qatar. European gas demand has taken a hit as a result of its worsening coronavirus situation, which has led to lockdowns across several countries.

Asian spot prices have fallen since the end of last week as more cargoes have surfaced. Sellers had been holding back cargoes, waiting for an increase in demand that never really came, industry participants said.

Indian buyers have been active in the spot market this year, picking up spot cargoes as prices have fallen. They have bought around 12-15 cargoes for delivery in April and another nine cargoes for delivery in May. They bought up to five cargoes for deliveries across 25-31 March.

Industry participants expect that portfolio suppliers or consumers with available storage may be in a position to pick up any cargoes that are diverted away from India, especially as spot prices are expected to fall further. But northeast Asian demand is soft, even though a few Chinese buyers have started to emerge to buy cargoes as industrial activity in the country picks up again.

The front-half month ANEA price, the Argus assessment for northeast Asian spot deliveries, has fallen by around 21pc, or 79.5¢/mn Btu, since its recent peak at $3.755/mn Btu on 19 March. It was at $2.96/mn Btu today, just 28.5¢/mn Btu below its all-time low on 17 February.

By Camille Klass