LNG Will Make Up Half of India's Share of Gas Consumption by 2017-18
Low prices will push share of LNG in India’s gas consumption basket to 47 percent in fiscal 2017-18 (Apr-Mar) from 33 percent in 2013-14, said Raghu Yabaluri, Director Strategy and Operations, Deloitte Touche Tohmatsu India during the 5th Annual Conference on LNG Business in India: Amid Low Oil Prices held on 26-27 August in New Delhi.
“LNG imports are critical to bridging gas demand-supply gap in India,” Yabaluri stressed.
India's gas consumption in 2013-14 was 144 mmscmd, while it is estimated to reach 262 mmscmd by 2017-18, according to Deloitte.
Yabaluri added that long term and spot LNG prices are competitive vis-a-vis traditional fuels in India such as furnace oil, naphtha, liquefied petroleum gas and high speed diesel. Coal is the only traditional fuel source still cheaper than LNG but, according to Yabaluri, environmental concerns will gradually restrict its usage.
Domestic sources of gas supplies include ONGC, Oil India Ltd. (OIL) and private operators such as Reliance Industries and Essar.
Opportunity for Asian buyers
Sharp drop in global oil and gas prices has put lot of LNG project across the globe in jeopardy. Low oil prices are putting pressure on large projects due to difficulty in entering firm supply contracts, limited funding and low profitability. However, the current situation offers a great opportunity for Asian LNG buyers, who will account for 75 percent of global LNG demand by 2035, to lock in attractive deals, Yabaluri said.
“Now is the time for Asian buyers to enter into long term contracts at attractive prices,” he said.
He further stated that regasification capacity addition in the big Asian LNG consuming nations – Japan, South Korea, India and China- should progress as planned. India will see the biggest jump in capacity from 25 Mtpa in 2014 to 53 Mtpa in 2018. China’s regasification capacity will rise from 32 Mtpa to 40 Mtpa during the same period. Japanese regasification capacity in 2018 will be 140 Mtpa versus 134 Mtpa in 2014 while South Korea’s regasification capacity will rise to 100 Mtpa from 92 Mtpa.
Reduced competitiveness of US LNG
Touching upon the global LNG supply scenario, Yabaluri argued that drop in oil prices has rendered Henry Hub contracts less competitive versus crude indexed contracts. This, he said, will lead Asian buyers contracting from Australia and Qatar.
With shrinking Asian premiums not allowing for profitability, US exports will to cater to Atlantic consumers with lower shipping costs, he said.
Low Henry Hub prices (below $3/mmBtu) is affecting viability of shale gas extraction with only liquid rich regions being economical. Production decline of 1.3 bcfd is expected in 2016 due to unviability of production, Yabaluri said.