India LNG demand to dip on phase out of subsidy for power sector

By Mark Tay

CHIBA, Japan (Reuters) - India's liquefied natural gas (LNG) demand could ease as the government has scrapped subsidies on gas sales to power companies, the chief executive of the country's biggest gas importer said on Wednesday at a gas conference in Japan.

Natural gas accounts for about 6.5 percent of India's overall energy needs, far lower than the global average. India plans to raise the share of gas in its energy mix to 15 percent over the next three years, but a major challenge to that goal is the price sensitivity of Indian consumers.

India has for the last two fiscal years been giving discounts on the sale of imported LNG to revive more than 14 gigawatts of stranded power generation capacity that had been hit by domestic gas shortages.

But a power ministry official confirmed that the LNG subsidy has not been extended beyond March 31, and Prabhat Singh, chief executive of Petronet LNG, said these gas-based projects cannot compete with plants using cheaper coal.

"If (the power subsidies in India) don't happen, then definitely around a million to 2 million tonnes of LNG which was going there will be lost," Singh told reporters at Gastech in Japan.

After the subsidies were first put in place, India's annual LNG imports surged 15 percent to 16.08 million tonnes in 2015/16. Then for the first 11 months of the 2016/2017 fiscal year - the April-February period - India imported 17 million tonnes. Data for March is not yet available.

(Reporting by Mark Tay; Addition reporting by Sudarshan Varadhan in NEW DELHI; Writing by Nidhi Verma in NEW DELHI; Editing by Tom Hogue)