Paucity of Capacity: LNG infrastructure expansion plans and import trends

LNG infrastructure expansion plans and import trends

The demand for natural gas in India far exceeds domestic supply. To cater to the unmet demand, the country relies on imports of liquefied natural gas (LNG). The share of LNG in total natural gas consumption increased to 47 per cent in 2018-19 from 30.4 per cent in 2012-13. During the period 2014-15 to 2017-18, annual LNG imports grew from 14.04 million tonnes (mt) to 21.6 mt, registering a compound annual growth rate (CAGR) of 11.44 per cent. India began importing LNG in 2004 and is now the fourth largest LNG importer globally with a share of 7.1 per cent in total LNG imports. It is a key player in the Asia-Pacific LNG market and, in 2018, its share in total imports in the region was 9.36 per cent. Further, to make it less expensive for Indian companies to import natural gas from international markets, the central government reduced the basic customs duty on LNG imports from 5 per cent to 2.5 per cent in 2017-18.

LNG imports: 2018-19 versus 2017-18

India imported around 21.65 mt of LNG in 2018-19 as compared to 20.7 mt in the previous year. This represents a growth rate of 4.58 per cent. Imports in the latter part of 2018-19 have been less than the imports in the same months of the previous year due to an increase in global LNG spot prices. However, imports have started increasing in 2019-20 due to the downward trend in prices. LNG imports for April 2018 were 2,280 million metric standard cubic metres (mmscm) while imports in April 2019 were 2,502.3 mmscm, 9.75 per cent higher than the previous year.

During the period 2014-15 to 2017-18, annual LNG imports grew from 14.04 mt to 21.6 mt, registering a CAGR of 11.44 per cent.

LNG sourcing options

India is a key market in the Asia-Pacific region, apart from Japan and China. The biggest source of India’s LNG imports has been Qatar, which meets about 48 per cent (or 14.8 billion cubic metres [bcm]) of the LNG requirements. Other key suppliers include Nigeria (4 bcm), Angola (2.2 bcm) and Oman (1.5 bcm). In the past few years, India has also started importing LNG from countries such as the US, Russia and Australia. Large offtake of the fuel by India has also changed some dynamics in recent years. This enabled successful renegotiation of LNG contracts leading to lower prices for imported LNG. Qatar’s RasGas and Petronet LNG Limited (PLL) signed a revised sale purchase agreement in December 2015, according to which PLL will get LNG at $6-$7 per [million metric British thermal units] (mmBtu). Under the original contract signed between the two companies in 1999, PLL would have received LNG at $12-$13 per mmBtu. Later, in 2017, PLL renegotiated its LNG contract with Exxon Mobil as well. GAIL also renegotiated the terms of the LNG purchase deal with Russia’s Gazprom in January 2018.

Existing LNG regasification capacity

At present, the country has four onshore regasification terminals with a total nameplate capacity of 40 million tonnes per annum (mtpa). These are the PLL-owned Dahej terminal, Gujarat; the Shell-operated Hazira terminal, Gujarat; the Ratnagiri Gas and Power-operated Dabhol terminal, Maharashtra; the PLL-owned Kochi terminal, Kerala; the Gujarat State Petroleum Corporation and Adani Enterprises’ jointly owned Mundra terminal, Gujarat; and the recently commissioned Indian Oil Corporation Limited’s Ennore terminal.

Upcoming LNG regasification capacity

India plans to increase its LNG import and regasification capacity to 56.5 mtpa by 2025 to meet the energy needs of the growing economy. The capacity of regasified-LNG (R-LNG) terminals is expected to increase from 17.3 mtpa in 2012-13 to 83 mtpa in 2029-30 assuming that all the planned terminals come on stream. Several new LNG terminals are at the construction or planning stage. The floating LNG terminal at Jaigarh is likely to become operational in the current fiscal year. India is also looking to expand import capacity on the east coast with terminals being planned at Dhamra, Haldia and Hooghly. While the Dahej terminal has been operating at more than 100 per cent capacity, utilisation levels of other terminals have remained low.

Outlook

While bringing more gas into the fuel mix is a top priority for the government, the source from which the incremental demand is to be met warrants clarity. Increasing the output from domestic sources is of prime importance, though this will take some time to be realised. In the meantime, LNG imports can be relied upon, which, in turn, calls for speedy execution of planned terminals. In a bid to increase capacity utilisation of these facilities, timely implementation of the under-construction pipeline network will be essential.