India's gas demand picks up gradually; relaxation in lockdown curbs help resume economic, industrial activities

An executive from India’s top gas importer Petronet also said there had been some recovery in demand compared to last month.

Reuters May 15, 2020 17:09:42 IST
India's gas demand picks up gradually; relaxation in lockdown curbs help resume economic, industrial activities

Singapore/New Delhi: India’s natural gas consumption is recovering slowly as the world’s biggest lockdown starts to ease with the gradual resumption of economic and industrial activity, several industry sources said.

Prime Minister Narendra Modi’s government is starting to pull back from one of the world’s tightest lockdowns of 1.3 billion people, which has left millions out of work and stranded in cities far from home while infections keep rising.

The government has already allowed some economic activity to resume in areas where there are few cases of COVID-19, the disease caused by the coronavirus.

“Gas demand is rising as some industries are back, like chemicals and pharmaceuticals. Every industry wants to start operations,” a liquefied natural gas (LNG) industry official based in India said.

“Some textile, ceramic, and steel (businesses) have started operations, (and) demand from refineries is back to normal.”

Indias gas demand picks up gradually relaxation in lockdown curbs help resume economic industrial activities

Representative image. Reuters

Daily gas consumption in Morbi in western Gujarat state, the country’s largest ceramic industry cluster, has for instance risen to 0.9 million standard cubic meters from zero in April, the official said. Industry players last year pegged its usual gas requirements at 6.5-6.8 million scm per day.

Indian refineries such as Indian Oil Corp and Bharat Petroleum Corp Ltd have come back into the spot market over the past two weeks to seek LNG cargoes for May to June delivery, traders said.

The country’s state oil refiners, which together own about 60 percent of India’s refining capacity and are among the biggest buyers of gas, are scaling up crude processing as local fuel demand begins to improve.

India’s Gujarat State Petroleum Corp (GSPC) is seeking five LNG cargoes for delivery over July to December, its first requirement since March, when it issued force majeure notices to its suppliers.

An executive from India’s top gas importer Petronet, which declared force majeure on purchases from Qatar under long-term deals in late March, also said there had been some recovery in demand compared to last month.

“As and when lockdown eases we hope this demand will recover further,” the executive said. “Some industries in Rajasthan and other states have resumed operations.”

With Asian spot LNG prices jumping 20 percent this week on the back of tighter supply, Indian importers may also be hurrying to lock in lower prices, a source familiar with the Indian market said.

“Gas is also finding preference over some of the older coal-based power plants which are less economical or use older technology,” he said, adding that air-conditioning use from residential sectors are also rising.

However, with Indian utility GAIL (India) halting LNG imports at its 5 million tonne-a-year Ratnagiri terminal until end-September, any rise in imports of super cooled gas into the country will be limited, sources said.

“Full revival of demand will take a few weeks or months, depending on the sector and location,” one said.

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