India's LNG imports set for 7%-8% boost in 2024 on hopes of softer prices

India's LNG imports in 2024 are expected to get a boost if prices stay pressured, with year-on-year inflows likely to grow up to 7%-8%, driven by higher demand in the power, industrial and transportation sectors while infrastructure spending also strengthens in a year due for national elections.

"India's LNG imports will continue to increase, with an expected 8% year-on-year growth in 2024," Ayush Agarwal, an LNG analyst at S&P Global Commodity Insights, said.

"While the fertilizer sector will remain the largest consumer of LNG, the power and industrial sectors could contribute to an increase in imports if spot prices average close to 2023 levels," Agarwal said.

The Platts JKM, the benchmark price reflecting spot LNG delivered to Northeast Asia, averaged $13.801/MMBtu from Jan. 3 to Dec. 22 this year while the Platts West India Marker averaged $13.167/MMBtu during the same period in 2023, according to data from S&P Global.

India currently has about 25 GW of gas-based power capacity installed. This translates to about 30 million-35 million mt/year of LNG demand, an LNG industry source based in Singapore said.

A few gas-based power units ran on domestic gas because of high LNG prices in recent years. That should change in 2024 because of the LNG price weakness, he added.

Over January-October, regasified LNG consumption by the power sector jumped 128% on the year, hitting 7.4 MMcm/d, while India's peak demand grew 12.5% on the year during the same period to reach 243 GW, said Akshay Modi, a senior analyst covering South Asian natural gas, LNG and hydrogen at S&P Global.

"With the Platts JKM expected to fall below $10/MMBtu in 2024 summers, peak demand touching new highs and gas supporting renewables intermittency, we expect higher regasified LNG consumption for power sector to continue in 2024," Modi said.

Demand spurts on low prices

India's LNG consumption was set to jump if prices dropped below the $10/MMBtu mark, industry sources said.

The recent fall in prices has already sparked increased spot buying although some Indian buyers were exhibiting an appetite to consume LNG when JKM prices were relatively elevated, in the range of $15-$16/MMBtu.

Among recent market activity, Gujarat State Petroleum Corp. has bought a January-delivery cargo at $11.10-$11.20/MMBtu for delivery to Mundra.

In December, Indian Oil purchased a cargo at $11.20-$11.30/MMBtu for delivery to Ennore and GAIL bought a cargo at $11.40-$11.50/MMBtu for delivery to Dabhol in January.

Sources are also expecting higher utilization at the LNG terminals.

"Next year, we expect Dabhol terminal to be operational through the monsoon period as well ... Dhamra will also be more utilized because of obligations to bring cargoes for GAIL, IOC," one of the sources said.

After the commissioning of HPCL's Chhara and GAIL's Ratnagiri breakwater facility, the regasification capacity will likely rise to 52.5 million mt/year, S&P Global's Modi said, adding that IOC's Ennore-Tuticorin pipeline is also targeted for commission in 2024.

The country's northeast gas grid commissioning plan has been granted an extension by the Petroleum & Natural Gas Regulatory Board until 2025. However, its progress will be crucial for the development of a gas-based economy in the region, Modi added.

Meanwhile, from mid-December 2023, Administered Pricing Mechanism, or APM, gas supplies to the transport and residential sector have been reduced to about 75% of demand compared to 88% earlier, Modi said, noting that the APM supply cut might see more city-gas entities tying up mid- to long-term offtake contracts.

The additional APM deficit for transport and domestic sector is around 3 MMcm/d and some of the volumes will likely be tied up by CGD's in the expected upcoming ONGC auction in 2024, while the remaining will be catered through regasified LNG supplies, Modi added.

Election, weather events in focus

With over 400 CNG stations and 878,175 residential connections being commissioned from April to October 2023, India continues to aggressively strengthen its distribution network infrastructure, which is positive for rising gas consumption, market sources said.

In addition, the summer of 2024 brings India's landmark general election. The government could ratchet efforts to boost economic activity before that, spurring more gas demand, they said.

India's economic growth outlook for 2024 also stays robust. Real GDP clocked a growth of 7.7% during first-half FY 2023-24 starting April 1, the Reserve Bank of India said in its December bulletin.

"High frequency indicators suggest that this build-up in momentum will sustain over the rest of the year," it said.

India's total consumption of natural gas was about 60 Bcm in fiscal 2022-23 ended March 31 and 64.2 Bcm in fiscal 2021-22 against a gross natural domestic gas production of around 34.45 Bcm in FY 2022-23 and 34.024 Bcm in FY 2021-22, according to data from the Petroleum Planning & Analysis Cell.

The start of gas production from the cluster 2 field of ONGC's KG-DWN-98/2 deepwater project will add to domestic gas supply. However, it is not going to be that significant and won't have much of an impact on LNG imports, sources said.

Meanwhile, weather uncertainty could also impact gas consumption.

A potential recurrence of the El Nino climate phenomenon next year could result in extended dry spells during summer or could translate into reduced rainfall during monsoons, trimming hydroelectric output and thereby increasing reliance on coal and gas, sources added.