BLOG
LNG regarded as fuel for future amid crisis
What’s buzzing:
With forecast of tight LNG supplies during CY21-25, geopolitical uncertainties have again risked supply disruptions, leading to increased volatility in LNG prices.
Context:
Since late CY21, spot LNG prices have skyrocketed to over US$30/mmbtu (from an average US$4-12/mmbtu in the last two years) amid post-pandemic recovery in demand and low inventory storage. As per media sources, Europe LNG demand in CY22, is expected to grow at least 20% due to reduced Russian Gas, which is further creating higher competition for limited LNG supplies.
Our Perspective:
Total worldwide LNG supplies (Q4CY20-Q3CY21) were at 372 MMT (expected to double till 2030). India’s LNG imports were at ~25 MMT for the same period (50-55% of India’s total gas demand). Part of LNG imports are long term (oil-linked contracts via Qatar, Gail from Gazprom and swapping of US Sabine Pass and Cove Point cargoes through tenders) while the rest is spot LNG. While LT cargo remains relatively cheaper (at US$10-12/mmbtu), prices are expected to go up, with continued higher oil & gas prices. Affordability of LNG remains key to its future uptake by emerging markets such as India, as power producers can break even only below US$6-7/mmbtu LNG (as per media reports) while refineries can afford US$15/mmbtu (post which they switch to fuel oil and naphtha). CGD, on the other hand, can handle higher LNG prices as they are subsidised by the Government of India (via cheaper domestic gas allocation) while fertiliser sector fortunes remain uncertain (due to higher mix of LNG). Higher LNG prices pose a risk to India’s target of raising share of gas to 15% of India’s energy mix 2030 from current ~6%. India’s current LNG capacity is at 42 MMT with new terminals of 19 MMT under construction and 9-10 MMT at the design stage.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
Related content
Blogs
Articles - Stocks
Advantages and Disadvantages of NPS
It is a long established fact that a reader will be distracted by the readable content of a page when looking at it...
Articles - Stocks
Advantages and Disadvantages of NPS
It is a long established fact that a reader will be distracted by the readable content of a page when looking at it...
Articles - Stocks
Advantages and Disadvantages of NPS
It is a long established fact that a reader will be distracted by the readable content of a page when looking at it...
Video
Video - Stocks
What is Book Value?
Book Value Explained – Find out what is book value in stocks in this video by ICICIdirect.com.
Video - Stocks
What is Book Value?
Book Value Explained – Find out what is book value in stocks in this video by ICICIdirect.com.
Video - Stocks
What is Book Value?
Book Value Explained – Find out what is book value in stocks in this video by ICICIdirect.com.