India's industrial gas customers have been buying less LNG from storage sites due to high spot prices, which has sent LNG storage levels at import terminals to near capacity, traders familiar with the situation told Bloomberg on Thursday.
The very high spot gas prices have resulted in demand destruction for India's industrial customers who have resorted to alternative fuels such as oil products and domestic supplies of gas, according to the traders.
The lower demand for LNG has created a glut of the imported fuel with some storage tanks full and potentially delaying additional LNG imports into India, Bloomberg's sources said.
Lower demand from India could be a relief for global LNG prices just as the winter in Europe approaches.
This year, Europe has been outbidding Asian customers as it has scrambled to secure gas supply with very low pipeline imports from Russia. High spot rates for LNG have discouraged many buyers and users of the super-chilled fuel in Asia, including in India.
India could be forced to boost coal production in the face of high LNG import costs, officials told Hindustan Times earlier this week.
India's LNG import costs surged by 70% to reach $13.4 billion in 2021-22, compared to $7.9 billion in 2020-21, despite the fact that import volumes declined by around 7%.
Between January and August this year, Indian LNG imports plunged by 18%, according to Wood Mackenzie.
"India has reduced LNG usage by 30 to 40% year-on-year in refineries and petrochemical plants. Large-scale industries have replaced LNG with domestic gas, produced in India's eastern offshore. And other small industries are switching to fuel oil and liquefied petroleum gas (LPG) for heating," Lucy Cullen, Principal Analyst, APAC Gas & LNG Research at WoodMac, said in September.
India and China saw the largest reductions in LNG consumption as consumers switch to coal and fuel oil in power and non-power sectors, Cullen noted.
By Tsvetana Paraskova for Oilprice.com
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