LNG imports slide on weak rupee, lower demand

NEW DELHI: Indian imports of liquefied natural gas ( LNG) have fallen in recent months as the weak rupee has made the fuel more costly, while demand from factories and power stations has declined due to the industrial slowdown. Imports are projected to fall further in winter, when prices usually rise, industry officials said.


A top executive with an LNG import terminal on the west coast said demand for costly power from gas-fired plants had fallen because of higher availability from other sources. “Good rains have improved hydropower generation, which has not compelled distribution companies to buy expensive electricity from natural gas-fired plants. Also, industrial customers are able to buy cheaper power from spot market instead of running their natural gas-based captive power projects. Hence, bulk of LNG consumers has reduced their demands,” the executive said.

India imported an average of 0.91 million tonnes of LNG a month between April and August, which is on the lines of previous three fiscals. However, India imported only 0.70 million tonne of the LNG in July, according to data from Petroleum Planning and Analysis Cell “As per the historical trend, LNG price is expected to go up by 10% during winters when the western world demands more natural gas for heating. Normally, higher LNG prices in winters encourages Indian industries to reduce their dependence on expensive imports.

However, we have already started witnessing weak LNG demands for coming months,” said an official associated with LNG imports. The price of LNG is currently about $15.5 per unit, according to an official in the energy department of the government of Gujarat that owns Gujarat State Petroleum Corporation (GSPC), the country’s largest LNG importer in the spot market. The price is expected to go up further after Diwali. At present, GSPC imports limited LNG cargoes just to meet the demands from the city gas distribution companies.

Domestic natural gas is available at $4.2 per unit, but the supply is far short of the demand, which had encouraged companies to bank on LNG. Domestic prices are likely to rise to about $8.4 per unit from next April, when local rates will be linked to international benchmarks, as recommended by the Rangarajan panel. Even after the price is increased, domestic gas would be much cheaper than the current LNG rates.

Gas customers do not have many options as domestic supply is not likely to rise significantly before 2016-17. This will put pressure on gas users to depend on imported LNG. Industry sources said oil refineries that used to meet bulk of their LNG demands from Dahej and Hazira terminals of Petronet LNG and Shell respectively are using more of furnace oil since it enjoys price parity with expensive imports. Reliance and Essar that operate large private refineries in Gujarat did not respond to ET’s email queries. India imported 11.63 million tonnes of LNG in 2011-12, which dropped marginally to 10.90 million tonnes in 2012-13.