India is set to import record volumes of liquefied natural gas (LNG) this month, data shows, taking advantage of the super-chilled fuel’s price hitting all-time lows due to the coronavirus outbreak dampening demand in China.
The South Asian nation is estimated to import about 2.36 million tonnes in February, ship tracking data from Refinitiv Eikon showed. That would exceed India’s LNG imports in October of about 2.3 million tonnes, the previous highest monthly total.
The country’s annual LNG imports is expected to rise by 10%-15% this year, said Poorna Rajendran of consultancy firm FGE.
“The low spot prices are creating some downstream demand especially from the city-gas sector,” a source familiar with LNG imports into India told Reuters. India regasifies LNG and uses it primarily in the city-gas distribution, fertilizer, power and industrial sectors.
Asian spot LNG prices fell to a record low this month after China’s top LNG buyer declared force majeure on some LNG deliveries following the coronavirus outbreak.
That prompted some of the cargoes bound for China to be diverted to India and also some Indian buyers to issue tenders seeking spot cargoes, traders said. Some of them are even seeking cargoes for several months, they added.
For instance, Reliance Industries issued a tender seeking five cargoes for April to June delivery while Gujarat State Petroleum Corp (GSPC) sought nine cargoes for February to April, traders said. GSPC likely did not award the tender, however, and may have re-issued it, the traders said.
The potential uptick in demand also likely prompted Emirates National Oil Company (ENOC) to issue a tender seeking eight cargoes for delivery into India over April to November, the traders said. Infrastructure constraints, however, will limit LNG purchases by buyers in India, FGE’s Rajendran said.
“While weakness in Asian spot LNG prices will increase India’s appetite for prompt LNG imports, infrastructure constraints will limit LNG demand growth,” he said.
“This remained a key bottleneck in 2019 when low spot prices struggled to boost India’s LNG demand significantly. The start-up of Mundra LNG terminal and H-Energy’s Jaigarh terminal and the completion of GAIL’s Kochi-Mangaluru pipeline will determine Indian LNG demand growth in 2020.”
India wants to raise the share of gas in its energy mix as it battles high levels of pollution in many big cities and is working to expand its pipeline network and build new terminals.