From an LNG seller’s perspective, India is one of the few beacons of hope. The vast country, which has a very price sensitive approach to buying liquid gas, is taking more cargoes both on a contract and spot basis.
A recent move by the Indian government to change the pricing formula of domestically-produced gas from new and hard-to-access fields could lead to a short-term fall in pricing but will mean a long-term link to the price of imported competing fuels.
The domestic price for all other gas produced in India is expected to fall from the start of April.
While the fall ties in with lower upstream energy prices across the world, India companies who have invested in domestic production will say this reduces the incentive to proceed. Gas output in the country has been in decline in recent years.
On the other side, the push from government to reinstate unused India gas-fired power generation is another boost for LNG importers such as GAIL and Reliance. A lower domestic price should boost demand across the gas sector – and if this cannot be covered by domestic production, LNG is the most obvious alternative.
This also comes at a time of global LNG oversupply with spot and contract prices at more than six-year lows. Contract renegotiations with Qatar and the start of US exports, where GAIL has two long-term purchase contracts, will allow Indian buyers to ramp up their consumption.
For more on ICIS’ analysis of the Indian gas market, here’s a link to a dedicated webinar: https://www.icis.com/press-releases/webinar-on-india-lng-market/