Spot LNG prices continue to slide, drop 48% y-o-y

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New Delhi | Published: October 6, 2015 12:12:00 AM

India buying the minimum possible on its long-term contracts

There is some good news for the government which is looking to revive stranded gas-based power plants. The price of Asian spot liquified natural gas (LNG) cargoes for November delivery fell to about $6.7/mmBtu in the week ended October 2.

This is nearly 48% lower than the level a year ago. The week before the price was hovering at $6.8 per mmBtu, say analysts.

“November delivery spot LNG prices extended losses as new Australian supply hit the market and demand also remained subdued,” said a Mumbai-based analyst.

Meanwhile, India has been taking the minimum possible on its long-term contracts, buying instead on the spot market to take advantage of falling prices.

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The fall in LNG price would cushion the government, which has decided to roll out a subsidy scheme to bailout the fuel-starved power plants.

According to power industry officials, currently gas is supplied to these plants at around $8.5/mmBtu, excluding re-gassification and transportation charges.

The Centre has proposed to procure around 14 mmscmd of LNG to feed the gas-based plants under the new subsidy scheme.

The government will provide a subsidy of Rs 1,850 crore for both completely stranded and partially stranded plants to run at 35-50% plant load factor October-March period.

This cost may come down with the fall in spot LNG prices and lead to savings
on subsidy.

Alternatively, the power ministry may choose to increase volumes for better plant load factor while keeping the subsidy outgo at the same level.

India is the world’s fourth-largest LNG importer, following Japan, South Korea and China, and consumed almost 6% of the global market.

However, China imported 3.51% less LNG in the year-to-date, compared with 2014, pushing the prices down.
PSU gas marketing and trading company GAIL (India) is seeking an LNG cargo for delivery in November, said another official.

Petroleum minister Dharmendra Pradhan in December last year told the Lok Sabha that during the first half of the financial year (2014-15), 44.55 mmscmd of imported R-LNG was been supplied to various sectors.

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