India Sees 7.2% Drop In May LNG Imports As Demand Stagnates, Domestic Production Rises

LNG imports dropped by 7.2 per cent in May compared to the same period last year, as domestic natural gas production saw an increase and overall demand remained flat. 

The country imported 2,650 million metric standard cubic meters (MMSCM) of LNG, down from 2,854 MMSCM a year earlier, according to recent data from the oil ministry. Despite a slight rise in total natural gas consumption to 5,708 MMSCM, just 0.3 per cent higher than last May, the anticipated spike in gas demand due to a scorching summer did not materialise.

The boost in electricity demand across India, typically expected to drive up gas consumption for power generation, had minimal impact. 

This sectoral reduction coincides with a 6.7 per cent increase in domestic natural gas production, which reached 3,105 MMSCM in May, partially offsetting the drop in LNG imports.

Rising LNG prices have further complicated the market dynamics. The Asian spot LNG benchmark, JKM, averaged USD 11.9 per million British thermal units (mmbtu) in May, up from USD 8.4 in February and USD 9.3 in May 2023. By June, prices had exceeded USD 12 per mmbtu. This price increase, driven by higher demand for cooling energy during the intense summer months, has likely influenced import patterns as sectors look for cost-effective energy solutions.

India's gas-fired power generators, which often lie idle, are finding an opportunity to profit during the summer as buyers are willing to pay higher prices for electricity. However, in other seasons, gas struggles to compete with cheaper alternatives.