The world finally seems to be entering the high LNG price regime as Japan is guzzling more gas to meet its power demand to offset the fall of output from its nuclear power plants damaged by a deadly earthquake in March.
While this is good news for LNG producers across the world, India is caught at the wrong time as a falling output from KG-D6 field is forcing the country to import more LNG at high spot prices.
LNG, or liquefied natural gas, is increasingly being used as a cheaper replacement of crude and other forms of energy such as coal.
“Japan’s nuclear power generating capacity has come down by 30% and due to the recent damages to nuclear plants, the Japanese are toying with the option of going for more LNG and coal-based power plants,” said Vandana Hari, Asia editorial director, Platts, a Singapore-based global information provider on energy and metals.
According to Platts Spot JKM Index, the Japanese LNG import price has risen by 55% since the March 11 earthquake.
Between March 2011 and July 2011, the price of spot LNG has risen from $9.5 per mmBtu to $15.8 per mmBtu, a rise of 66.32%, according to Platts data.
According to another data, the movement of shipment of all crude and LNG cargoes are concentrated towards the Southeast Asian economies.
The current ceiling price in India for domestic gas from the Panna-Mukta field is $5.73 per mmBtu, $5.57 per mmBtu for Tapti field and $4.2 per mmBtu for KG D6 as against the current international spot price of $16 per mmBtu, a difference of 180%.
Hari said the surging LNG prices are sure to impact India as while the gas demand has increased sharply, its domestic supply has not risen in tandem.
While high prices will hurt domestic power and fertiliser players, the biggest consumers of gas, the LNG firms such as Petronet LNG and Shell are set to benefit.
Also, city-gas distribution companies such as Gujarat Gas, Indraprastha Gas, the city-gas arm of Adani are likely to have a dream run in the next few years.
Companies such as Gujarat Gas, which sourced some of its requirement of natural gas from the Panna, Mukta and Tapti fields, had said in April it will be difficult to continue to sell cheaper gas as output is falling and the only option is imported LNG.
“India currently imports close to a million metric tonne of LNG every month and this is expected to go up as the outlook from KG D6 is not impressive,” Hari said.
Satish Mishra, a fertiliser and gas analyst from brokerage Pinc Research, said, “India’s current gas demand consumption stands at 170 million metric standard cubic metres per day (mmscmd) out of which Reliance is supplying close to 48 mmscmd, as against the projected 50-55 mmscmd earlier.’’
He said while Shell is still supplying 1.2-1.3 million tonne per annum (mtpa) of imported LNG to Indian customers, Petronet LNG, India’s biggest LNG player, is operating at full capacity of 10 mtpa, against an fiscal 2011 figure of 8 mtpa.
“Most of the companies had set up capacities expecting gas from Reliance, but with Reliance’s production falling they have to either shut operations or switch to spot LNG,” Mishra said,adding that the price of spot LNG is expected to hover at $12-$14 per mmBtu.
However, Hari from Platts said rise in shale gas exports from the US can ease the situation.
“But it would take time. For now, LNG is a seller’s market,” she said.
While this is good news for LNG producers across the world, India is caught at the wrong time as a falling output from KG-D6 field is forcing the country to import more LNG at high spot prices.
LNG, or liquefied natural gas, is increasingly being used as a cheaper replacement of crude and other forms of energy such as coal.
“Japan’s nuclear power generating capacity has come down by 30% and due to the recent damages to nuclear plants, the Japanese are toying with the option of going for more LNG and coal-based power plants,” said Vandana Hari, Asia editorial director, Platts, a Singapore-based global information provider on energy and metals.
According to Platts Spot JKM Index, the Japanese LNG import price has risen by 55% since the March 11 earthquake.
Between March 2011 and July 2011, the price of spot LNG has risen from $9.5 per mmBtu to $15.8 per mmBtu, a rise of 66.32%, according to Platts data.
According to another data, the movement of shipment of all crude and LNG cargoes are concentrated towards the Southeast Asian economies.
The current ceiling price in India for domestic gas from the Panna-Mukta field is $5.73 per mmBtu, $5.57 per mmBtu for Tapti field and $4.2 per mmBtu for KG D6 as against the current international spot price of $16 per mmBtu, a difference of 180%.
Hari said the surging LNG prices are sure to impact India as while the gas demand has increased sharply, its domestic supply has not risen in tandem.
While high prices will hurt domestic power and fertiliser players, the biggest consumers of gas, the LNG firms such as Petronet LNG and Shell are set to benefit.
Also, city-gas distribution companies such as Gujarat Gas, Indraprastha Gas, the city-gas arm of Adani are likely to have a dream run in the next few years.
Companies such as Gujarat Gas, which sourced some of its requirement of natural gas from the Panna, Mukta and Tapti fields, had said in April it will be difficult to continue to sell cheaper gas as output is falling and the only option is imported LNG.
“India currently imports close to a million metric tonne of LNG every month and this is expected to go up as the outlook from KG D6 is not impressive,” Hari said.
Satish Mishra, a fertiliser and gas analyst from brokerage Pinc Research, said, “India’s current gas demand consumption stands at 170 million metric standard cubic metres per day (mmscmd) out of which Reliance is supplying close to 48 mmscmd, as against the projected 50-55 mmscmd earlier.’’
He said while Shell is still supplying 1.2-1.3 million tonne per annum (mtpa) of imported LNG to Indian customers, Petronet LNG, India’s biggest LNG player, is operating at full capacity of 10 mtpa, against an fiscal 2011 figure of 8 mtpa.
“Most of the companies had set up capacities expecting gas from Reliance, but with Reliance’s production falling they have to either shut operations or switch to spot LNG,” Mishra said,adding that the price of spot LNG is expected to hover at $12-$14 per mmBtu.
However, Hari from Platts said rise in shale gas exports from the US can ease the situation.
“But it would take time. For now, LNG is a seller’s market,” she said.
No comments:
Post a Comment