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Global LNG markets heading towards supply glut
After two volatile years in terms of natural gas supplies and pricing in CY2022 and CY2023, the global liquified natural gas (LNG) markets are now moving towards significant supply glut with large capacity additions planned from CY2024 to CY2028, stated a report by ICRA. It further added that about 193 MMT of the LNG production and liquefaction capacity is expected to be added globally over the next four years. Significant capacity addition amid expectation of modest demand growth in the global natural gas consumption will keep the LNG prices under check and this will ultimately benefit India.
Girishkumar Kadam, Senior Vice President and Group Head, Corporate Ratings, ICRA Ltd, said, “Global natural gas consumption is expected to witness modest growth, given the focus of the major natural gas consumers in regions of European Union, Japan & Korea towards other sources of energy. Amidst these demand headwinds, the LNG capacity addition over the next four years, which is equivalent to ~41 per cent of the current global LNG production capacity, is expected to result in a downward pressure on the global LNG prices. India thus stands to benefit in terms of availability of LNG at reasonable prices over the medium term, notwithstanding the near-term volatility amid geo-political tensions in West Asia.”
After witnessing headwinds in FY2023 owing to the elevated LNG prices, India’s gas consumption recovered sharply to 187.9 mmscmd in FY2024 (~17 per cent increase YoY) with easing of LNG prices. Further, the report added that consumption in India is expected to grow by 6-8 per cent YoY in FY2025 on softer LNG prices and an uptick in the domestic gas production. This growth, per ICRA report, is supported by the City Gas distribution (CGD) sector, followed by the refineries’ offtake. The demand from the CGD sector is underpinned by the CNG segment, which remains robust owing to the strong economic advantage over alternate fuels, following the strong uptick in CNG vehicle sales in the last couple of years. “The increasing adoption of electric vehicles in the passenger vehicle and bus segments will remain key threats for the CNG offtake. Additionally, ability of the CGD entities to ensure availability of CNG at competitive prices going forward will remain a key challenge, given the falling share of the APM gas in the overall gas mix. The fertiliser segment will remain the largest off-taker of natural gas, albeit the demand from here on is not expected to grow, given there are no further capacity expansions in the urea segment,” ICRA stated in the report.
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