Indian liquefied natural gas importers have declared force majeure on imports as a nationwide lockdown on the 1.3 billion-strong nation has slashed consumption of the fuel, Reuters reported, citing an unnamed source familiar with the situation.
India is among the largest importers of liquefied natural gas, as is China, where importers issued a force majeure on imports earlier this year, in the peak of the coronavirus outbreak.
This force majeure will immediately place additional pressure on already depressed gas prices, suffering the combination of excessive supply and subdued demand, pretty much like crude oil, except for the price war.
“India had been the saving grace for the spot LNG market over the past month, buying the fuel when it was cheap,” Reuters quoted an S&P Global Platts analyst as saying. Ira Joseph, head of global gas and power analytics, referred to India as “the most aggressive, price-sensitive buyer out of the market.”
Indeed, low gas prices were a bounty for mega importers, just as low oil prices prompted China and India to fill up their storage facilities. However, the demand collapse has put an end to that, and LNG prices, which in late January fell to the lowest in a decade, continued down, after a brief respite driven by increased buying from India.
“Only fertiliser, power and refineries are running at parcel loads. Other local buyers have already issued force majeure so where should we sell LNG?” Reuters’ source said.
Another source, a prominent Indian LNG importer, told Reuters that most of its clients have shut down because of the lockdown as their business does not qualify as essential commodities.
These developments, as expected, will cast a shadow on the future of LNG production projects at the planning stage, already uncertain because of the glut-driven gas price slump.
The Indian lockdown will be in effect for 21 days.
By Irina Slav for Oilprice.com
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