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LNG importers rush to buy spot cargoes as price hits 3-year low
Power companies and refineries are doubling down on spot liquefied natural gas (LNG) as prices have hit a three-year low, according to industry officials aware of the development.
LNG importers Gail, Gujarat State Petroleum Corporation (GSPC), Torrent Gas, Bharat Petroleum Corp (BPCL) and Indian Oil Corp (IOC), among others, are buying spot cargoes as the Asia spot LNG price has declined between $8.3 and $9 per million British thermal units (mmBtu) due to weak demand and high inventory in both Asia and Europe, giving these companies room to expand sourcing and sales to the power, fertiliser, refining and other sectors.
During the same period last year, spot LNG prices averaged $18.75 per mmBtu. In 2022, spot LNG prices touched a record $70 per mmBtu on the back of the Russia-Ukraine war.
LNG is mostly traded through long-term contracts of 20-25 years and in the spot market. The price of spot LNG is higher than long-term LNG.
“This price drop in LNG is aiding power units, refineries, petrochemical and fertiliser plants,” said one of the persons cited above. “Reliance Industries and HPCL (Hindustan Petroleum Corp) have sought cargoes from GSPC, and Indian Oil is also procuring LNG cargoes for its refineries.”
As demand for power rises amid higher temperature, power companies including Torrent Power and NTPC are also buying more LNG. India has 25,000 MW of installed gas-based power capacity. While NTPC owns 5,000 MW, the rest is with private as well as state government entities.
“The government wants power generation companies to buy gas and commission their stranded power units. We are anticipating record power demand this summer,” he said. The Central Electricity Authority (CEA) has said power demand may see a spike between March and June.
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