With India's domestic gas production set to rise to 37 Bcm by 2021 and consumption to hit 72 Bcm over the same period, additional gas demand will have to be met by rising LNG imports. In this video, analyst Max Gostelow looks at India's LNG supply-demand gap, the competition faced by Indian importers, and how S&P Global Platts has updated its methodology to help improve transparency in India's LNG market.
Related subscriber note: Platts launches new DES West India LNG assessment June 16
India natural gas: A 5-year outlook on supply and demand
By Max Gostelow
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Indian LNG imports should rise by 10% annually over the next few years, surpassing 30 million mt/year by 2020, versus 19 million mt/year in 2016. Growth is driven by fast-rising energy demand -- the government increasingly focusing on environmental issues and existing infrastructure bottlenecks.
Meanwhile Indian domestic and piped gas supplies remain constrained.
Indian gas production has declined in recent years. Disappointing geological survey results and low domestic gas prices have provided insufficient incentive to boost production from the Krishna Godavari basin offshore the east coast.
Looking to 2021, domestic production growth of 3% per year will be led by increasing output from ONGC’s western offshore fields AND rising coalbed methane output.
India has no international piped gas imports and is not expected to have one over the forecast period, primarily because its neighboring countries are also gas-short.
Indian gas demand, meanwhile, is expected to hit 72 Bcm by 2021 – that’s an average 7% annual growth from 2016 levels. The fertilizer sector will continue to post the highest demand, but the city gas sector will see the highest growth rate over this time. The government is shifting its domestic gas allocation priorities to city gas supply, including for auto transport as CNG.
This ramp-up in Indian LNG demand will be facilitated by the country’s regas capacity growing by almost 60% to over 45 million mt in 2021 and a large expansion of domestic gas pipelines.
To meet this growing gas supply-demand gap, Indian LNG demand should outpace the volumes supplied under current long-term LNG contracts signed by Petronet, Gail, and GSPC. By 2020, currently contracted volumes will stand at nearly 22 million mt, but with demand rising to over 30 million mt, around 8.5 million tons of demand would have to be met by spot market purchases in 2021.
As current importers face more competition from new entrants who are not restricted by long-term oil-indexed or gas-indexed contracts, they will have to make a decision as to whether to allocate a greater percentage of their contracted volume to procurement on a spot basis.
Following efforts by Indian buyers to re-negotiate the pricing terms of their existing LNG contracts with Qatari and Australian suppliers, Platts is helping introduce more Indian LNG transparency, and , in June 2017, launched an additional five new half-month DES West India assessments. Platts DES West India LNG assessment, published since 2010, are already being used by the government in the determination of the ceiling price for gas produced from deepwater, ultra deepwater, and high pressure-high temperature areas.
Details of the methodology changes are on Platts.com.
Until next time on the snapshot – we’ll be keeping an eye on the markets.