Indian power sector demand set to boost LNG procurement: analysts

Rising Indian power demand for natural gas generation is likely to support LNG procurement from the market, according to analysts and market sources.

"There could be some extra demand for LNG. Some of the additional gas used for power generation has probably come from imported LNG, but there is likely also higher use of domestic pipeline gas," according to Andre Lambine, senior analyst for Gas, Power, and Climate Solutions at S&P Global Commodity Insights.

For the fourth quarter of 2023, India's power demand should grow by around 7% year on year, which is close to the average growth from January to August, according to Lambine.

Market participants said that demand for natural gas from gas-based power plants rises during hours when solar power is unavailable. Further, the time that it takes for a gas-based power plant to reach peak output is significantly less than that of a thermal coal-based power plant.

On Sept. 14, NTPC's Vyapar Nagam Ltd., a subsidiary of state-owned electricity producer NTPC, floated a tender to purchase 4 GW power from gas-fired plants over Sept. 30-Nov. 30, to cover a power crunch, as per the tender document on the company's website.

A source from a power-producing company said that demand for natural gas from power plants would likely remain supported if the weather continues to be hot and humid.

"The demand for gas fell because of some rains but I expect that demand will come back once rains stop and the weather becomes hot and humid," the source said.

A market source said that the current natural gas offtake is near 2-3 million standard cu m/day.

Torrent Power awarded an LNG purchase tender on Sept. 15 for delivery to Dahej on Oct. 29 at mid-to-high $12/MMBtu, market sources said.

On Sept. 14, GAIL awarded an LNG purchase tender for delivery to Dahej in the Oct. 1-10 delivery window at mid-$12/MMBtu, sources said.

Market participants have said they expect more LNG purchase tenders to be issued if natural gas demand from the power sector stays firm.

According to data from the Central Electricity Authority of India, or CEA, power generation through natural gas was at 85.4 million kWh as against the program target of 84.2 million kWh on Sept. 14. In the period of Sept. 1-14, the power generation through natural gas was 1.68 billion kWh as against the program target of 1.17 billion kWh.

India has an installed capacity to produce 24.071 GW through gas-based power plants.