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Gas consumption up 19% in February on falling LNG prices |
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NEW DELHI: With spot liquefied natural gas (LNG) rates down to $4.5 per unit and long-term contract from Qatar renegotiated favourably, consumers are buying more and more gas, helping consumption rise 19% in February after staying little changed in the rest of the fiscal year.
India consumed 3,175 million metric standard cubic meters (mmscm) of natural gas in February, compared with 2,666 mmscm in the year-ago period, according to the oil ministry's Petroleum Planning and Analysis Cell (PPAC). The consumption, however, declined 0.8% for the 11months this fiscal.
Much of the consumption growth has come from increased imports of LNG that jumped to 1,788 mmscm in February from 1,100 mmscm a year ago.
The contribution of import to total gas consumption rose to 41% in February from 31% a year ago. "The key explanation lies in the reworked deal with RasGas and cheaper spot LNG prices, which has made natural gas attractive again for Indian consumers," said Ritesh Gupta, oil sector analyst at Ambit Capital.
Gas prices have fallen nearly three-fourths in two years globally but Indian consumers barely benefitted as state-run Petronet LNG, the key supplier to Indian consumers, was locked in an expensive long-term contract with Qatar's RasGas.
Petronet paid almost double the spot rate to RasGas until December, when the deal was reworked that helped halve the price, making it attractive for Indian consumers.
The fertilizer sector, the big gest consumer of gas in the country, bought 13% more gas in February "due to the new fertilizer pooling mechanism in which domestically available natural gas is pooled with costlier imported liquefied natural gas to supply gas at uniform price to urea manufacturers," the PPAC said in its monthly report.
The gas purchase rose only 4% for the sector between April 2015 and Februray 2016. Power plants consumed 26% more gas. Refiners also used 24% more gas for internal consumption "primarily due to increase in appetite for lower priced spot LNG," the PPAC said.
Natural gas prices are mostly linked with a longer-term crude oil prices and follow the latter's price trajectory with a lag. This is why gas prices didn't fall as quickly as crude oil did last year, leaving the likes of Petronet LNG with an expensive deal and fewer buyers.
This also resulted in many small industrial consumers switching from natural gas to the cheaper fuel oil in India. The trend is beginning to reverse now, reflected in 34% rise in purchases in February by city gas companies, which supply to small industrial units, besides households and transport.
"Spot LNG prices have become cheaper than fuel oil. This provides industrial consumers an opportunity to switch from fuel oil to gas," said Ritesh Gupta of Ambit Capital. In 2015, Petronet LNG lifted just 62% of the contracted amount from Qatar as it couldn't find takers for its expensive gas. But its senior executives say the company is now able to accept the entire contracted amount from Qatar as it has many willing customers now.
Source : economictimes.indiatimes.com
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