LNG importers rush to buy spot cargoes as price hits 3-year low

LNG importers rush to buy spot cargoes as price hits 3-year low

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Electrical companies and refineries They're doubling down on the spot-on smoothie natural gas (LNG), as prices have reached their lowest level in three years, according to industry officials aware of this situation.

LNG importers Gail, Gujarat State Petroleum Corporation (GSPC), Torrent Gas, Bharat Petroleum Corp (BPCL) and Indian Oil Corp (IOC), among others, are buying spot cargoes as the spot price of LNG in Asia has declined by $8.3-$9 per million thermal units British (mmBtu) due to weak demand. and high inventory in both Asia and Europe, giving these companies room to expand sourcing and sales to the energy, fertilizer, refining and other sectors.

During the same period last year, LNG spot prices averaged $18.75 per mmBtu. In 2022, LNG spot prices hit a record high of $70 per mmBtu in the wake of the war between Russia and Ukraine.

LNG is mainly traded through long-term contracts of 20 to 25 years and in the spot market. The price of spot LNG is higher than that of long-term LNG.

“This drop in the price of LNG is helping power units, refineries, petrochemicals and fertilizer plants“said one of the people cited above.”Trusted Industries and HPCL (Hindustan Petroleum Corp) have sought cargoes from GSPC, and Indian Oil is also procuring LNG cargoes for its refineries.”

As energy demand increases amid higher temperatures, power companies including Torrent Power and NTPC They are also buying more LNG. India has 25,000 MW of installed gas-based power capacity. While NTPC owns 5,000 MW, the rest is in the hands of private and state government entities.

“The government wants power generation companies to buy gas and bring their idled power units back online. We anticipate record demand for power this summer,” he said. The Central Electricity Authority (CEA) has said that power demand could see an increase between March and June.

Gail, GSPC, Torrent Gas and BPCL did not respond to queries.

India's LNG demand in January 2024 continued to rise sharply to 95 million cubic meters per day (mmcmd) from 90 mmcmd in December 2023 due to moderation in LNG spot prices to $10-16 per mmBtu since 16-17 dollars per mmBtu in November.

This was driven by higher demand in the power, fertilizer and other industrial segments. However, total gas demand for the urban gas distribution sector remains stable with a reduction in managed pricing mechanism (APM) gas allocation offset by higher LNG consumption. APM gas is sourced from domestic gas fields of oil and gas exploration companies and its price is determined by the Petroleum Planning and Analysis Cell (PPAC), a unit of the Ministry of Petroleum and Natural Gas.

Internationally, the price of US Henry Hub gas fell to $1.9 per mmBtu due to weak domestic demand following a mild winter, leading to high inventories and a temporary pause in the approval of new LNG. export plants to consider the environmental and economic impacts of such facilities, JM Financial he said in a March 6 report.

India aims to increase the share of natural gas in its primary energy mix from 6% to 15% by 2030, focusing on key end-use sectors such as fertilizers, city gas distribution, power, refineries and petrochemicals.

“After digesting the impacts of the Covid-19 pandemic and the Russia-Ukraine war, gas consumption in FY24 is expected to be the highest ever recorded in the country.” Attention ratings he said in a March 19 report.

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