India LNG imports hit four-year high amid pre-monsoon heat

India’s monthly LNG imports in May, June and July this year hit a four year record, averaging 2.57mt. This was largely driven by record high temperatures that plagued the country since May, resulting in a spike in gas-fired power generation to meet increased cooling demand. This comes despite Asian spot LNG prices reaching a seven month high of around $12/mmBtu.

The previous LNG import highs across 2020 occurred in a significantly different market where LNG prices fell to record lows, creating an incentive for coal-to-gas switching in power generation across India.

India LNG imports by origin country (LHS, mt) and LNG des Northeast Asia Index (RHS, $/mmBtu) Source: Vortexa, Argus Media

Record high temperatures led to an uptick in total power generation across the country in May and June. While the increased demand was met largely by hydropower, the share of gas-fired power generation doubled from level in the first quarter.

India power demand (LHS, GW) and share of gas-fired power generation (RHS) Source: India Ministry of Petroleum & Natural Gas, compiled by Argus Media

In June, the United States overtook Qatar as India’s largest LNG supplier, importing a monthly record 851kt in 12 cargoes. The majority of volumes came from Sabine Pass and Cove Point LNG terminals, with which India’s state-controlled gas distributor GAIL has term contracts totaling 5.8mtpa.

India LNG imports from the United States by terminal (kt) Source: Vortexa

Historically, GAIL has optimised their contracted volumes by swapping United States term cargoes with supplies in closer proximity. June marks the first time that monthly flows from Sabine Pass and Cove Point combined in mtpa equivalent have reached total contracted volumes, potentially indicating full offtake.

India LNG imports from Sabine Pass LNG and Cove Point LNG (mtpa) Source: Vortexa

India’s power demand fell in July with the start of the monsoon season and easing temperatures, thereby putting downward pressure on gas-fired power generation. While LNG imports remained strong, demand is likely to taper off as the current price point is unattractive to most buyers in the country. GAIL and state-owned refiner IOC did not award their recent tenders seeking cargoes in September and October, as offers were deemed unattractive.