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| LNG imports may double this year |
| Kalpana Pathak / Mumbai Mar 02, 2009, 00:33 IST |
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India’s import of Liquefied Natural Gas (LNG) could more than double this year due to the increase in supply globally, say market players.
Last year, India imported between 6.5 and 7 million metric tonnes per annum (mmtpa) of LNG. This year it could go over 13 mmtpa, according to analysts.
“We expect the demand for LNG to be far greater this year than what it was last year on account of a shortfall in domestic gas supply,” said a senior official from Royal Dutch Shell, India, on the condition of anonymity. “The overall economic slowdown in the West will favour LNG supplies to India as new capacities are also being commissioned the world over,” he added.
Shell and Total are operators of the Hazira LNG terminal in Gujarat with a capacity of 2.5 million tonnes (mt) a year. Shell completed ‘de-bottlenecking’ of its terminal in December, increasing its capacity to 3.6 mt per year.
Historically, LNG demand has largely emanated from the Asia-Pacific region, primarily due to Japanese and South Korean requirements, which account for over 50 per cent of the world LNG trade. “With falling industrial demand coupled with the fall in crude oil prices, spot demand from these two regions has suffered,” said a senior official from Gujarat State Petronet Ltd.
India is a gas deficit country. Power and fertiliser plants consume 70 per cent of the gas available in the country. Inadequate supply of gas forces them to operate at 50-60 per cent of capacity. At present, power plants in the country are getting 34-35 million standard cubic metres per day (mcmd) supply against the requirement of 70 mcmd.
Currently, spot LNG is trading at $8 per million British thermal units (mBtu), whereas naphtha is trading at $13 per mBtu in the spot market. In December, LNG was trading at $10 per mBtu, whereas naphtha was trading at $7.04 per mBtu.
While industry players believe that the gas-based power companies are waiting to operate on full capacity and expansion of city gas distribution in the country will boost demand for LNG, some analysts believe that demand for LNG could be high only if domestic natural gas from Reliance Industries’ Krishna Godavari basin fails to meet the demand.
“When RIL ramps up its production from the KG basin, which will be available at a cheaper rate, demand for spot LNG might suffer,” said Vinay Nair from Khandwala Securities.
Reliance will sell natural gas from the field at $4.20 per mBtu, excluding delivery costs and taxes.
According to the gas utilisation policy, the first tranche of gas from RIL’s KG basin, which is said to be 14 mcmd per day, will be made available only to 15 urea units of major fertiliser companies. RIL is likely to ramp up production to 80 mcmd within a year.
LNG demand will also increase with the Rs 2,700-crore Dabhol LNG import terminal due to be commissioned in Maharashtra in March and Petronet in final stages of expanding its Dahej facility to 10 mmtpa.
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