India’s domestic gas availability improves, tempers RLNG demand

Some Indian end users of natural gas have been offered an additional 20% domestically produced gas over Sept. 16-30, which has tempered the demand for regasified LNG temporarily, sources told S&P Global Commodity Insights.

At least one gas aggregator was told by an end-consumer that RLNG would not be required from them for a few days due to availability of domestic gas.

Surplus domestic gas became available with GAIL due to "certain operational issues" and shutdown/less uptake by some anchor customers, resulting in a "critical linepack situation," GAIL communicated to some market participants.

Market participants said this situation developed after several fertilizer plants and a refinery saw lower gas consumption in August-September amid a few shutdowns, maintenances and use of alternative fuels.

The increase in allocation of administered pricing mechanism (APM) gas now would mean lower consumption of regasified LNG. This is because end-users would prefer using APM gas with a ceiling price of $6.5/MMBtu, sources said. APM gas also compares favorably to high-pressure high temperature (HPHT) gas, for which the current ceiling price is $9.87/MMBtu.

Platts assessed the West India Marker, the benchmark LNG price for India, at $12.46/MMBtu for November Sept. 17, S&P Global Commodity Insights data showed.

"A buyer would prefer domestic gas, of course. Contractually, it is possible the end users have lower take-or-pay as is the case in EPMC tenders in the fertilizer sector or take-or-pay contractually can be managed on a quarterly basis," an Indian market source said.

"Currently the HPHT ceiling price is also lower than the spot price so people would readily take HPHT gas price. From an inventory point of view, the supplier of RLNG would have to keep its inventory at the terminal itself."

Market participants said this signals muted demand for LNG for the time being and if the situation continues, it could mean deferment of some cargoes by a few days. Market sources estimated the impact on RLNG consumption would be roughly the equivalent of three cargoes.

Power demand muted

Market sources said the inventory at Dahej terminal was high as power demand did not pick up for September, as was expected earlier.

The power generated through gas-based power plants was at 970.52 million units against the planned 1,244.62 million units for September as on Sept. 13, data by Central Electricity Authority showed.

Market participants also said there was no significant increase in natural gas domestic production during August. Gas production stood at 3,030 million standard cu. m in July while consumption was at 6,120 million cu m, Petroleum Planning and Analysis Cell data showed.