LNG imports by India -- the world's third-biggest energy consumer -- likely hovered near multiyear lows in August while natural gas inflows so far this year are also seen falling over 10% on the year, sources said citing the impact of shrinking global supplies and elevated prices.
Buyers in the country, which meets nearly half of its annual LNG demand through imports, haven't awarded most of their buy-tenders for spot cargoes this year and have neither made an outright spot purchase since July, according to industry participants.
The most recent buy-tenders awarded were by GAIL and GSPC concluded in late-July for August and September deliveries, respectively. The only other tenders awarded in the past month by GAIL were swap arrangements for its existing US FOB contracts in exchange for India-delivered cargoes, sources said.
As a result, the weak spot demand has significantly reduced the country's import of LNG. India's August LNG imports were only around 1.45 million mt, the lowest since at least 2018, compared to 1.84 million mt in July, according to shipping data from S&P Global Commodity Insights.
The official Petroleum Planning and Analysis Cell data for August will likely be released later this month.
Indian buyers attributed their unwillingness to purchase expensive LNG spot cargoes to the inability to pass down costs to industrial and residential customers, as well as lower domestic gas prices due to existing price ceilings.
"In 2022, we expect LNG imports to decline by 13% from 2021 and average just below 30 Bcm/year," said Ayush Agarwal, LNG analyst at S&P Global.
"For the remainder of the year, we expect LNG imports to average at 81 mcm/d, 4 mcm/d below last year's levels. We believe there is still some downside risk to our present forecast," he added.
The PPAC data for the April-July period showed LNG imports fell 7.9% on the year to 9.97 Bcm.
"The demand destruction has already happened in price-sensitive sectors like power and refining, where users can easily switch to cheaper alternate fuels. However, these prolonged levels of high prices have started to affect demand in other industrial sectors as well, where switching is a cost and time-intensive process," Agarwal said.
The Platts JKM for October was assessed at $62.77/MMBtu Sept. 5, S&P Global data showed. Asian spot prices have more than doubled since the beginning of the year, with the LNG West India marker assessed lower at $58.275/MMBtu.
With India LNG prices remaining over $4/MMBtu lower than delivered prices in Northeast Asia and Europe, suppliers have been pushing spot volumes to destinations where buyers are willing to pay a price premium.
An industry source noted that Europe had the ability to pay a much higher price compared to India after Russia limited supplies.
"It's all high and dry," another source said, noting that India was shying away from imports due to prevailing high prices.
Mulling options as spot market heats up
Buyers in India are looking to sign term contracts to meet the growing demand and reduce their spot exposure.
In August, India's largest LNG importer Petronet LNG said it was negotiating with Qatar for the extension of its long-term LNG deal to beyond 2028 and a task force had already been formed to advance these talks.
The existing long contract with Qatar is for 8.5 million mt/year.
Meanwhile, GAIL -- India's largest gas distributor and operator of pipelines -- has reduced supplies to 'take or pay' basis to the user industries.
The company cut LNG supplies to user industries by a tenth while supplies to its own petrochemical unit at Pata in northern state of Uttar Pradesh were reduced by a half to avoid spot buying of the clean fuel due to high global prices, Rakesh Kumar Jain, Finance Director GAIL, said at an investors' call in August.
"Companies don't have many options other than rationing or optimizing their current term supplies to meet the demand. Indian importers like GSPC awarded last outright buy tenders around $35/MMBtu. GAIL is leveraging its US contracts to meet domestic demand," Agarwal said.