India’s three-week lockdown in response to the Covid-19 pandemic will result in 15 lost cargoes at the country’s LNG import terminals
If India’s countrywide Covid-19 quarantine is extended, LNG demand will worsen beyond the current anticipated 1M tonne loss, according to an analyst for shipbroker Poten & Partners.
“If the three-week shutdown is extended and a global recession follows, 2.3M tonnes of demand will be lost, making 2020 volumes slightly lower than 2019 volumes,” said Poten & Partners short-term forecasting manager Kristine Holmquist during a podcast. The largest number of Indian contracts are held by Qatar, followed by the US, said Ms Holmquist.
“Some sellers have received force majeure notices, but most have been rejected as they are the result of low demand, which is generally not an acceptable reason,” said Ms Holmquist. Instead of accepting force majeure, buyers and sellers are trying to work out short-term solutions, such as delaying or deferring cargoes. Similar arrangements were being worked out in Bangladesh and Pakistan, which receives their LNG from Qatar.
India’s largest LNG import terminal, Dahej, with a capacity of 17.5 mta, and Mundra would be hurt the most by the loss of demand, both of which accept Qatari volumes. With a capacity of 5 mta, Mundra accepted its first commissioning cargo from Qatargas in January.
Terminal congestion is also a growing problem. As a precaution against Covid-19, India’s terminals are operating with skeleton crews. “We are seeing operating issues at terminals for fears of spreading the virus,” said Ms Holmquist. “Crews have been cut way back, delaying the offloading of vessels. As a result, we are expecting to see additional port congestion,” she added.
|India’s LNG import terminals in operation or under construction|
|Dahej||17.5||Petronet LNG Ltd||2004|
|Hazira||5.0||Shell, Total Gaz Electricite||2005|
|Kochi||5.0||Petronet LNG Ltd||2013|
|Ennore||5.0||Indian Oil Corp||2019|
|Chhara||5.0||HPCL & Shapoorji Pallonji||2022|
|Jaigarh||4.0||H-Energy||2020||FSRU GDF Suez Cape Ann|
|Karaikal||1.0||AG&P||2021||FSU-based regas project|
|Sources: IEA, Petronet, LNG Shipping & Terminals|
Altogether, India has six operating LNG import terminals, with five under construction and several others proposed to underpin the government’s effort to grow the use of natural gas by 150% in the country’s energy mix by 2030.
In Poten & Partners’ base case, LNG demand in India was forecast to surpass 25 mta in 2020. However, Covid-19 demand destruction could well send the country’s demand to 23 mta, lower than 2019 levels. Ms Holmquist said LNG demand would recover in 2021 and 2022, but not to the base-case levels that Poten & Partners had previously forecasted.
In a normal year, the global LNG market would have been able to absorb a surplus of 1M to 2M tonnes of LNG, but 2020 is playing out to be anything but normal. Poten & Partners is expecting a global overhang of 19M tonnes of LNG, with India’s loss of demand accounting for upwards of 12%. Overall, global LNG demand in Poten’s low-case forecast will reach 346M tonnes in 2020 – far short of the actual 363M tonnes exported in 2019.