India consumed 5.18 billion cubic meters (BCM) of natural gas in January, up 6.4% from a year earlier, according to the oil ministry data. Imports of LNG rose 7.9% to 2.27 BCM. A 4% year-on-year rise in the local production of natural gas in January also helped boost consumption.
“Prices have fallen in the past few months, and this has been the biggest confidence booster for consumers,” said an industry executive. Prices are still high compared to the average in the last few years, and they must drop further to trigger a major demand boost, he added.
Before the pandemic, India imported about 50% of the gas it consumed. The share of the import dropped to 45% this fiscal year as international prices shot up.
Most of the LNG India imports are under the long-term supply pact and linked to crude prices, which have fallen from the highs of $130 per barrel in March last year to around $81 now. Oil prices have remained below $90 per barrel for the past three months, keeping LNG imported under the long-term contract below $12-13 per mmbtu.
Even the Asian benchmark rates of LNG in the spot market, which has been extremely volatile for one-and-a-half years, have fallen to around $15 per mmbtu from $54 in August. India’s LNG imports had dropped 19% year-on-year in August.
Prices of locally produced natural gas have, however, risen sharply in a year but have mostly remained lower than international rates.As natural gas became expensive during the year, several commercial consumers switched to alternative fuels such as liquefied petroleum gas (LPG) and fuel oil, pushing up demand for both fuels. The demand for natural gas is now beginning to return, an industry executive said, warning that prices must stay stable for the recovery to become durable.
LNG imports for the April-January period are 14% lower than a year earlier. Domestic natural gas consumption is 6.1% lower for the same period.