After it was touted as the biggest driver of global oil demand growth, India, Asia's second-largest economy, is now emerging as a solid LNG consumer as well. Bloomberg reports that with a 45 percent surge in May imports of the fuel and a readiness to pay for it more than Europeans, it's up to India how much LNG goes into Europe.
Europe has traditionally been the biggest market for LNG but emerging economies in Asia are changing this. In May, LNG shipments to the Old continent remained pretty much flat, at around 3 billion cubic meter. This, according to Energy Aspects, is expected to have fallen by more than half in June, to 1.35 billion cubic meter. Shipments to Asian nations, especially India, looked better. At end-June, China, Taiwan, Japan, and South Korea accounted for over 65 percent of global LNG imports. India alone imported 2.08 billion cu m, according to data from the country's oil ministry cited by Bloomberg.
Wood Mackenzie has forecast that LNG demand in India will double by 2020, with the nation already having replaced South Korea as the second-biggest importer of the fuel. This growing thirst for LNG is a result of a combination of convenient factors.
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First, LNG prices are down by 65 percent over the last two years, with supply growing significantly and markets getting saturated. Second, LNG is a cleaner hydrocarbon than oil, so it's much in demand in a world bent on getting greener, even in industrial production-dependent economies such as India. Third, India pays more for its LNG: Qatar sells it the fuel at US$5/mmbtu. LNG prices at the British National Balancing Point trading hub, on the other hand, averaged US$4.37/mmbtu over the last three months.
As consumption grows, however, the price is set for a decline, according to Energy Aspects, which told Bloomberg this year Indian import prices would average US$4.8/mmbtu, falling further to US$4.6/mmbtu next year. This compares with an average of US$7.5/mmbtu in 2015, demonstrating how fast consumption is rising in the world's second-most populous country.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More