India's LNG imports set for robust growth in 2024 amid favourable market conditions

NEW DELHI: India is anticipated to experience a notable upswing in liquefied natural gas (LNG) imports in 2024, with projections suggesting a substantial 7 per cent-8 per cent year-on-year increase. This surge is expected to be driven by heightened demand across key sectors, including power, industrial, and transportation, coupled with infrastructure development in anticipation of national elections, as per S&P Global.

Ayush Agarwal, an LNG analyst at S&P Global Commodity Insights, highlighted that while the fertilizer sector remains the largest consumer of LNG, the power and industrial sectors are poised to contribute significantly to the import upswing if spot prices align closely with the levels witnessed in 2023.

Agarwal said, "India's LNG imports will continue to increase, with an expected 8 per cent year-on-year growth in 2024. While the fertilizer sector will remain the largest consumer of LNG, the power and industrial sectors could contribute to an increase in imports if spot prices average close to 2023 levels". India's current gas-based power capacity stands at approximately 25 GW, translating to a demand for approximately 30 million-35 million mt/year of LNG. Industry sources based in Singapore suggest that a few gas-based power units, historically reliant on domestic gas due to high LNG prices, are likely to transition back to LNG consumption in 2024 owing to the anticipated weakness in LNG prices.

An industry source based in Singapore said, "India currently has about 25 GW of gas-based power capacity installed. This translates to about 30 million-35 million mt/year of LNG demand, and LNG A few gas-based power units ran on domestic gas because of high LNG prices in recent years. That should change in 2024 because of the LNG price weakness".

Regasified LNG consumption by the power sector witnessed a remarkable 128 per cent year-on-year jump over January-October, reaching 7.4 MMcm/d. Concurrently, India's peak power demand surged by 12.5 per cent on a yearly basis during the same period, reaching 243 GW.

Akshay Modi, a senior analyst covering South Asian natural gas, LNG, and hydrogen at S&P Global, anticipates continued growth in regasified LNG consumption for the power sector in 2024, especially with the Platts JKM (benchmark price for spot LNG delivered to Northeast Asia) expected to fall below USD 10/MMBtu during the summer. Modi said, "Over January-October, regasified LNG consumption by the power sector jumped 128 per cent on the year, hitting 7.4 MMcm/d, while India's peak demand grew 12.5 per cent on the year during the same period to reach 243 GW.

With the Platts JKM expected to fall below USD 10/MMBtu in 2024 summers, peak demand touching new highs and gas-supporting renewables intermittency, we expect higher regasified LNG consumption for the power sector to continue in 2024". Experts suggest that India's LNG consumption is likely to witness a significant boost if prices dip below the USD 10/MMBtu mark. The recent decline in prices has already led to increased spot buying, indicating a positive trend for the LNG market.

Major players in the LNG market, including Gujarat State Petroleum Corporation and Indian Oil, have made recent purchases at competitive prices. As prices continue to remain under pressure, sources anticipate higher utilization at LNG terminals, with expectations for increased operational periods and additional regasification capacity in the near future.

The positive outlook for LNG imports in 2024 is also supported by infrastructure developments, including the commissioning of HPCL's Chhara and GAIL's Ratnagiri breakwater facility. Additionally, the commissioning of IOC's Ennore-Tuticorin pipeline is targeted for 2024, further enhancing the country's regasification capabilities. India's northeast gas grid commissioning plan, which has been extended until 2025, will play a crucial role in shaping the gas-based economy in the region. The region's progress will be monitored closely as it aligns with the overall growth trajectory of India's LNG sector.

Amidst these developments, the upcoming general election in the summer of 2024 adds an additional layer of significance. The government's potential efforts to stimulate economic activity in the run-up to the election could further boost gas demand. With India's robust economic growth outlook for 2024, reaching a growth rate of 7.7 per cent during the first half of fiscal year 2023-24, the stage is set for sustained momentum in the LNG sector. The total consumption of natural gas in India is expected to witness a substantial increase, with a positive impact on LNG imports.

However, experts caution that uncertainties, such as potential weather events like the recurrence of the El Nino phenomenon, could influence gas consumption. Extended dry spells or reduced rainfall during the summer and monsoon seasons could impact hydroelectric output, increasing reliance on coal and gas for power generation. India's LNG sector is poised for a dynamic and growth-oriented year in 2024, with favourable market conditions, infrastructure development, and economic factors converging to drive substantial import increases across key sectors.