Europe’s surge in natural gas imports hits India’s supplies

It is becoming increasingly difficult for Indian importers to source natural gas from international markets as Europe attracts much of the world’s supply to its shores ahead of winter amid supply cuts Russians.

IndianOil’s tender for a spot cargo of liquefied natural gas (LNG) received no bids recently, according to people familiar with the matter. Even LNG contracted under long-term agreements is no longer safe because Russia’s Gazprom has suspended deliveries to GAIL, they said. This resulted in

cutting gas supplies to industries, including fertilizer, power and petrochemical plants, the people quoted above said. Supplies for use in CNG vehicles and homes are maintained. But the industrial segments served by town gas companies are affected, they said.

In FY22, India consumed 63.9 billion cubic meters of gas, of which 48% was imported.

IndianOil and GAIL did not respond to questions.

Scarcity is the new challenge for Indian gas consumers already strained by high prices, currently at around $42 per mmBtu in the Asian LNG spot market.

Users reducing consumption

The LNG spot price has doubled since mid-May and is up 23% since the start of the year.

Supply cuts by Russia have caused panic in Europe, which is driving up LNG prices and pulling shipments from all directions to fill its storage ahead of winter, when increased heating needs boost demand gas.

LNG suppliers are increasingly tempted to refuse long-term contracts to serve Europe, as the high prices offered by buyers on the continent can more than offset penalties for lack of supply to long-term customers. , said an industry official.

European LNG imports are said to have increased by 56% in the first seven months of this year compared to the period of the previous year.

GAIL has a 20-year contract with Gazprom for 2.5 million tonnes of LNG per year. This represents almost a fifth of GAIL’s global LNG portfolio.

“Gazprom’s gas is difficult to replace because it is tied to oil prices and therefore much cheaper than spot market rates today,” said one of the people quoted above.

Customers are unwilling to take replacement supplies at double or triple the expected rate, leaving GAIL to reorganize the available pool among buyers as much as possible.

Indian consumers are also responding by adjusting demand. Refiners, generators, petrochemicals and other manufacturers are reducing their gas consumption and switching to alternative fuels such as naphtha, fuel oil, LPG and coal.

LNG imports fell 10% in June compared to a year ago, according to official data.

Shell and did not import any LNG in June compared to combined imports of 281 million standard metric cubic meters in the same month last year.

Supplies from other long-term suppliers such as Qatar, the United States and Australia are being received in accordance with contracts, executives said.