Hovering international LNG costs push India’s regasification plan off observe

Excessive fuel costs impede infrastructure development

India’s 2022 LNG imports set to drop 12% on 12 months: S&P World

Rationing of provides amid tight availability

Lofty international LNG costs and restricted provides threaten to derail India’s regasification capability plans, with present regas ranges operating low and a few of the beforehand deliberate new quantity additions progressing at a slower tempo, an evaluation by S&P World Commodity Insights confirmed.

The latest worth hike and tight market circumstances have impeded infrastructure development in rising markets like India, Ayush Agarwal, LNG analyst at S&P World mentioned Aug. 25.

“Earlier than Russia invaded Ukraine, 17 million mt/12 months of regas terminals have been anticipated to return on-line in 2022; nonetheless, now we anticipate 10 million mt/12 months to fee in 2022,” Agarwal mentioned.

“We imagine there’s nonetheless important threat across the commissioning of those terminals as a result of, within the absence of time period contracts, they are going to be pressured to import LNG from the spot market however will not be capable of go on such excessive costs to price-sensitive downstream customers,” he added.

The nation presently operates six terminals — at Dahej, Hazira, Dabhol, Kochi, Ennore, Mundra — with a mixed nameplate capability of about 42.7 million mt/12 months. Nonetheless, in Might, three of those terminals at Kochi, Ennore and Mundra, which collectively maintain a capability of 15 million mt/12 months, operated at solely round 12%-20% of their capability, based on sources.

In accordance with some sources, the goal was to achieve a nameplate capability of over 75 million mt/12 months by 2030.

In the meantime, the Hoegh Large floating storage and regasification unit, or FSRU, with a storage capability of 170,000 cu m and put in re-gasification capability of 750 million cubic toes/day, arrived at H-Power’s Jaigarh terminal in Maharashtra in March. It was meant to ship re-gasified LNG to the 56-km lengthy Jaigarh-Dabhol pure fuel pipeline, connecting the LNG terminal to the nationwide fuel grid.

Nonetheless, based on sources, the FSRU didn’t get commissioned.

Swan Power’s 5 million mt/12 months FSRU situated at Jafrabad, Gujarat, is anticipated to be commissioned this 12 months, based on native media studies. The corporate was additionally heard to have signed regasification agreements with the Gujarat State Petroleum Corp., Indian Oil Corp., Bharat Petroleum Corp., and Oil and Pure Fuel Corp. overlaying its whole quantity for 20 years.

“The undertaking is being pushed aggressively and may very well be commissioned this year-end or early subsequent 12 months,” a supply at one of many state-owned refiners mentioned.

Each H-Power and Swan Power didn’t remark on the time of writing.

LNG imports drop however development momentum exists

In H1 2022, India’s LNG imports fell 8.5% on the 12 months to 14.98 Bcm, knowledge from the Petroleum Planning and Evaluation Cell, or PPAC, confirmed.

In accordance with S&P World knowledge, India’s LNG imports are set to common 81 mcm/d this 12 months, down 12% from a 12 months in the past. For H2 2022, imports are forecast to drop 7 mcm/d from the earlier 12 months, averaging 82 mcm/d, the info confirmed.

“India has all the time been a worth delicate market. Europe pays a a lot larger worth as Russia limits provides, proscribing availability for India,” the supply mentioned, including that demand destruction was inevitable and a few of it was already taking place.

“There’s little or no spot demand as a result of there are not any spot volumes which can be out there,” one other supply mentioned.

The prevailing excessive worldwide costs usually are not getting mirrored in India’s pure fuel market, as a requirement lull has already set in however long-term development momentum nonetheless exists, the sourced added.

The Platts JKM surged this week on the again of tighter Atlantic basin and reached a brand new excessive of $61.03/MMBtu on Aug. 22. The Platts JKM for October was assessed at $55.828/MMBtu Aug. 24, S&P World knowledge confirmed.

Spot imports dry up

After the latest meteoric rise of spot LNG costs, spot imports have dried up within the Indian market.

GAIL is leveraging its US contracts to rearrange for swap cargoes, sources mentioned.

In any other case, importers like GSPC and IOC, who nearly purchased a spot cargo a month final winter, have lately stayed out of the spot market, they mentioned.

In the meantime, Petronet, India’s largest LNG importer, is negotiating its 11.7 billion cu m/12 months time period contract for decrease slopes with Qatargas, which is anticipated to run out in 2028. To barter for higher slopes and meet the rising demand, Petronet might have to extend the amount of its contract with Qatargas. Petronet’s present deal is listed to Brent at 12.6% slope.

Petronet LNG has pushed again plans to import 1 million mt/12 months of LNG probably focused towards small industrial customers after a surge in international costs, its finance director Vinod Kumar Mishra mentioned throughout an investor name lately.

GAIL has already began rationing fuel to fertilizer vegetation and industrial purchasers. In Might, the corporate mentioned that provides to its personal petrochemical unit at Pata in Uttar Pradesh had been halved to keep away from spot shopping for amid prevailing excessive LNG costs.