India’s LNG imports at 44-month high in June as gas-based power output jumps amid severe heatwave | Business News

For the April-June quarter (Q1)—the peak summer quarter in most parts of India—power generation by gas-based plants jumped 62.5 per cent year-on-year to 13.49 billion units. The overall plant load factor (PLF)—capacity utilisation of power generation units—for gas-based plants in Q1 this year was almost 25 per cent, up from 15.3 per cent in the year-ago quarter. PLF for gas-based power plants in June this year was 25.8 per cent, up from 17 per cent in June 2023.

To be sure, gas-based power plants use domestic natural gas as well as imported LNG as feedstock. The CEA’s provisional data for June did not mention the total natural gas volumes consumed by the power sector as well as the split between domestic natural gas and LNG. In June of last year, over 53 per cent of natural gas consumed by gas-based power plants was imported LNG. In April 2024—the last month for which detailed fuel consumption data for gas-based units is available—imported LNG accounted for nearly 56 per cent of the total natural gas consumed by power plants.

As domestic natural gas production is able to meet just around half of India’s total gas consumption, the cheaper local gas is allocated as per a priority list in which city gas distribution and fertiliser sectors have a higher priority than the power sector. As imported LNG is usually costlier than domestic gas, gas-based power plants have been operating at very low capacity use levels mainly due to unfavourable economics.

In anticipation of a severe summer, the Power Ministry had invoked the Section 11 of the Electricity Act, 2003, on April 12, issuing a set of instructions to the power generation companies to ensure that electricity demand is met. As part of the instructions, idling gas-based power plants were asked to operate from May till the end of June. At almost 25 gigawatts, India’s gas-based power generation capacity accounts for 5.6 per cent of the country’s overall installed generation capacity, as per Power Ministry data.

In May, S&P Global Commodity Insights had said that with subdued prices of LNG in the spot market and growing demand for the fuel in India, there was a ramp-up in India’s spot LNG purchases, with deliveries for a number of cargoes scheduled in June.

“India has already set several all-time highs this year when it comes to power generation as coal-based energy alone cannot meet the country’s rising needs. It is a combination of more coal, more gas, more renewables, anything that is handy to avoid shortages,” said Viktor Katona, head of crude analysis at Kpler.

Going forward, however, LNG deliveries to India are expected to be lower than volumes seen in June due to relatively higher spot prices of the fuel as well as expectations that power demand in the country will cool off slightly in the main monsoon months.

“LNG prices across Asia have edged higher in June amid widespread heatwaves and consequently higher power generation needs…maximizing LNG imports is no longer that attractive commercially. Current outflows en route to India suggest both July and August would be lower than June (in terms of LNG import volumes),” Katona said.