Indian companies on Tuesday reduced natural gas supplies to industries in anticipation of tighter supplies from the Middle East after top producer Qatar halted production, Reuters reported, citing official sources.
India, the world’s fourth-largest buyer of LNG, relies heavily on the Middle East for its imports. The report stated that Petronet LNG, the top LNG importer, has informed GAIL (India) and other companies of lower supplies.
Qatar halted its liquefied natural gas production on Monday, as Iran continued to strike Gulf countries in retaliation for Israeli and US strikes against it. The attacks have also halted oil and gas shipments through the Strait of Hormuz, driving up global energy prices and shipping costs.
India is the top LNG client for Abu Dhabi National Oil Company and the second-largest buyer of Qatari LNG.
GAIL, Indian Oil supply cut range
The Reuters report said that GAIL and Indian Oil Corp informed customers of the gas supply cut late on Monday. The cuts range from 10 per cent to 30 per cent, the report added.
As per the report, the cuts have been set at minimum lifting quantities to shield suppliers from any penalties from customers under contractual terms.
To make up for the LNG shortfall, companies including Indian Oil, GAIL, and Petronet LNG are planning to issue spot tenders, the report added. However, the spot prices, freight, and insurance costs have surged.
Strait of Hormuz closure to add further pressure
Iran has announced the closure of the Strait of Hormuz, resulting in pressure on India’s oil and gas supply needs. The Strait holds strategic importance for the country, as 50 per cent of its crude oil imports and 85 per cent of its LPG supply pass through the troubled sea route.
“The Strait of Hormuz is closed. Our heroes in the Islamic Revolutionary Guard Corps Navy and the Army will set fire to any ships that wish to pass through this strait,” Irani Brigadier General Ebrahim Jabari” said on state television