India Heat Wave Drives Up Gas-based Power Generation, LNG demand

India's natural gas-based power generation has surged in May due to intense heat wave conditions, significantly boosting the demand for more LNG cargoes for prompt deliveries in June from state-owned energy companies, according to S&P Global Commodity Insights.

As of 29 May, Indian gas-based power generation reached 4,646.53 million kilowatt-hour (kWhr) for the month, a substantial increase from 2,631 million kWhr a year earlier, according to data from the Central Electricity Authority (CEA).

The figures indicate a considerable rise compared to August and September 2023, when gas-based power generation did not exceed 4,000 million kWhr.

Market participants in the power sector suggest that generating 5 million units of electricity requires about 1 million cubic meters (MMcm) of natural gas.

This translates to a consumption of approximately 891.36 MMcm of gas during May, or 29.71 MMcm/day, equating to over 10 LNG cargoes for the month.

The CEA does not distinguish between power generation based on regasified LNG and domestically produced natural gas.

In the first quarter of 2024, total gas consumption in the power sector increased by 1.4 per cent year-on-year to 14.8 MMcm/day, according to S&P Global Commodity Insights.

The consumption of imported gas (RLNG) by power plants saw a 45.5 per cent rise year-on-year to about 2.7 MMcm/day, while domestic gas consumption saw a slight increase from 11.9 MMcm/day to 12.1 MMcm/day in the same period.

Currently, around 74 per cent of India's electricity mix is coal-based, 13 per cent from renewables like wind and solar, 8 per cent from hydro, 3 per cent from nuclear, and only 2 per cent from natural gas.

Andre Lambine, power analyst at Commodity Insights said, "The hot weather has caused power demand to reach new record highs."

The country met a record maximum power demand of 250 GW on Thursday (May 30).

He added, "During May 2023, daily power demand only reached a high of 215 aGW. Gas-fired power generation averaged 6.9 aGW between May 23-29, which is more than double compared to the same period in 2023."

Market sources reported that NTPC has been consuming 9-10 MMcm/day of RLNG on average, and Torrent Power has been consuming 5-7 MMcm/day.

A significant portion of gas-based power generation has relied on domestically produced gas. However, increasing amounts of this fuel have been redirected to the fertilizer and city gas distribution sectors, leading to gas power plants operating below capacity.

The current heatwave, coupled with lower global spot LNG prices and a government push to prevent power supply disruptions during the election season, has boosted overall gas-fired power generation.

This has created more opportunities for LNG to be used in power plants. Indian companies have ramped up spot market purchases due to dwindling inventories caused by higher gas demand from the power sector.

Indian gas importers have already purchased at least nine cargoes from the spot market for June deliveries, according to Commodity Insights trade data.

GAIL conducted an auction to purchase RLNG from the domestic market twice, acquiring around 80 MMcm for the second half of May, some of which is expected to be used in the power sector.

"India's recent heatwave has impacted areas in the Northwest the most. Between 23 and 29 May, Cooling Degree Days in Delhi and Bhopal increased by an average of 20 per cent year on year, but individual days were up to 50 per cent higher on the year," Lambine said.

Several towns and cities recorded maximum daily temperatures exceeding 49-50°C this week, disrupting daily life and increasing power demand for air conditioning and cooling devices.

One region in New Delhi logged a maximum temperature of 52.3°C mid-week, potentially the highest ever recorded in the city, prompting officials to verify the weather station's accuracy, as reported by local media.

Platts assessed the West India Marker, the benchmark price for LNG cargoes delivered to the western coast of India, Dubai, and Kuwait, for July at USD 11.788/MMBtu on May 30, as per S&P Global Commodity Insights data. (ANI)