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Is This The End Of The LNG Boom?

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Gaurav Agnihotri

Gaurav Agnihotri

Gaurav Agnihotri, a Mechanical engineer and an MBA -Marketing from ICFAI (Institute of Chartered Financial Accountants), Mumbai, is a result oriented and a business focused…

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Growing India Becomes Major LNG Player

In 2014, Asia was highest regional importer of LNG with a record 182 million tonnes, a report from BG group stated. Japan has long been the main source of that demand, but India is rapidly emerging as a new source of growth for LNG.

India – A growing market for LNG

India was one of the biggest importers of LNG in Asia buying approximately10.4 million tonnes in 2014. India’s LNG sector is undergoing a major transformation as it is set to occupy a crucial part in the country’s energy portfolio after the federal government approved the use of imported gas for power generation and fertilizer production.

In fact, research agency Moody’s has even stated that India’s LNG imports would increase to 24 million tonnes per year (mtpa) by 2020, more than doubling from the current figures because of “low and sustained LNG prices, rising industrial demand and falling domestic gas production levels.” Related: Peak Oil: Myth Or Coming Reality?

State-owned GAIL is India’s largest gas processing and distribution company. In fact, GAIL has signed around 25 sale purchase agreements with global LNG suppliers like Total, Shell and BG Group (Soon to be a part of Shell) among others.

Through long-term agreements, GAIL has ensured LNG supply from Gazprom (2.5 mtpa), Dominion Resources (2.3 mtpa), and Cheniere Energy (3.5 mtpa) which are expected to commence from 2018.

In another interesting move, GAIL recently signed an agreement to sell its LNG (obtained from its U.S. imports) to Royal Dutch Shell. Although GAIL refused to disclose the price, quantity, and duration of the deal, Reuters reported that GAIL could have sold approximately 0.5 mtpa of LNG to Shell with more such deals likely in the future. This development highlights that India is keen to sell its imported LNG in addition to using it in its domestic market.

India asks Qatar to reduce LNG Prices

With a view to improving its profitability and creating a competitive market for LNG, India has recently asked Qatar, its biggest supplier of LNG, to reduce its selling price.

India currently buys around 7.5 mtpa of LNG per year from Qatar at a rate of $13 per million British thermal unit (MMBtu) as a part of a long term 25 year contract. However, the current price of LNG in a spot or current market is $6 to $7 per MMBtu. The high price has pushed GAIL to find other sources of LNG. GAIL says that LNG imports from Qatar have in fact been reduced by almost 35 percent, with the balance made up by more reasonably priced cargoes on the spot market. Related: Texas Production Down, Gas Takes Biggest Hit

Image Source: www.theedge.me

GAIL to re-issue a multi-billion dollar tender to buy LNG ships

Under its ‘Make in India’ campaign, the Indian government wanted foreign manufacturers, especially from Korea and Japan, to form a joint venture with the Indian Shipbuilders and build LNG vessels in India.

However, foreign companies were not very keen to transfer their technology to India, so the tender that was opened on October 30, 2014 ended with no takers. The multi-billion dollar tender will therefore be re-issued this July with several amendments. Related: How Driverless Cars Will Upend Energy Markets

The newly made LNG vessels would be used to import LNG from the U.S. starting in 2018. If new LNG vessels are not ready by that time, GAIL will hire other LNG ships on a short-term basis. However, GAIL’s Chairman B.C. Tripathi was quoted as saying that Indian shipbuilders like Pipavav Shipyard, Larsen and Toubro and Cochin Shipyard are joining hands with Korean Shipbuilders to manufacture LNG vessels in India.

India recently surpassed Japan as the world’s third largest crude oil importer, behind the United States and China. With rapidly increasing domestic energy demand and robust economic growth, India may also be a land of opportunity for LNG in the coming few years.

By Gaurav Agnihotri for Oilprice.com

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  • Bob on June 21 2015 said:
    Excellent and valuable reporting on a subject far from the mainstream media.

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