Industry Odisha Bureau, Sep 15: India’s natural gas imports kept rising this fiscal year despite a sharp price surge. Demand was driven by the subsidised fertilizer sector and growing CNG vehicle sales. Limited alternative fuel supply and falling domestic gas output added further support.
Industry executives warn that rising spot LNG prices could dent future demand. Spot prices recently touched $25 per mmbtu, a steep jump. Consumers may increasingly shift toward alternative fuel supply options if prices stay elevated.
Spot Market Pressure Amid Gulf Supply Disruption
Gulf gas supplies remain disrupted due to the Iran war. India now sources 35 to 40% of its imports from the spot market. The Asian benchmark JKM averaged $19 per mmbtu between April and August. That marks a sharp rise from $12 a year earlier.
Long term contract gas remains cheaper than spot LNG purchases. Contract prices are linked to crude oil or US gas benchmarks. At $90 per barrel Brent, LNG would cost near $11 to 12 per mmbtu. The US gas benchmark has stayed largely flat year on year.
Some suppliers are blending expensive spot cargoes with cheaper long term supply. This strategy helps keep natural gas prices acceptable for customers.
Imports Rise in Value and Volume
LNG imports grew 5% by volume during April & July. Import value jumped 25% to $5.6 billion, oil ministry data showed. August imports rose another 5% over July, according to Kpler.
Overall domestic gas consumption also edged up slightly. Consumption rose 0.5% year on-year to 22.9 billion cubic metres.
“The resilience in India’s LNG imports is being driven primarily by continued growth in city-gas demand and broadly stable fertilizer consumption,” said Sonal Ranjan, analyst at Kpler.
City gas and fertilizer demand remain insulated from the price surge. City gas enjoys priority domestic allocation, cushioning cost impact. The fertilizer sector receives heavy government subsidy support.
Fertilizer Sector Leads Import Growth
The fertilizer sector remained the top driver of natural gas imports. It accounted for a quarter of total LNG imports during April-July.
Imported gas use by the fertilizer sector rose 5% year-on-year. Higher prices, however, could strain the government’s fertilizer subsidy bill further.
