India's appetite for liquefied natural gas (LNG) is growing. The country is already the world's fourth-largest importer of LNG, but its demand is set to increase even further as it shifts away from coal and oil to meet its climate targets.
However, the competition for LNG supplies is intensifying. China, the world's top LNG buyer, and Europe, which is also looking to reduce its dependence on coal and gas, are both vying for access to LNG cargoes.
So, how is India positioning itself in this global race for LNG?
One way India is securing its LNG supplies is through long-term contracts. For example, Indian Oil Corp (IOC) signed a 20-year deal to import LNG from the US in 2019. But the country is also increasingly turning to the spot market as a way to diversify its sources, especially amid the current volatility in global gas prices.
Earlier this year, Indian LNG buyers issued two spot tenders for cargoes that are due to be delivered between April and June. The tenders were notable for several reasons. Firstly, they were both oversubscribed, indicating strong demand for LNG in India. Secondly, the prices at which the cargoes were procured were relatively low, signalling India's ability to secure competitive deals in the spot market.
For instance, India's Gail (India) Ltd bought a cargo from Russia's Sakhalin Energy for $6.00 per million British thermal units (mmBtu) in March, which was reportedly among the lowest prices paid for LNG since late 2020. The other tender, from Shell, went for $6.50 mmBtu, marking a significant discount compared to the previous month's prices.
These tenders demonstrate how India is becoming savvier and more competitive in its LNG procurement strategies, while also offering some relief to its energy-hungry industries and households.
LNG is playing a key role in India's energy transition. The country aims to increase the share of natural gas in its energy mix from 6% to 15% by 2030, as part of its commitment to reduce carbon emissions and improve air quality.
In addition to reducing greenhouse gas emissions, natural gas has other benefits for India. It is a reliable and flexible energy source that can help balance intermittent renewables such as solar and wind. It can also help to address India's air pollution crisis, which is responsible for over a million premature deaths each year.
However, the challenge for India is to ensure that its growing demand for LNG does not come at the expense of other energy sources, particularly renewables. The country has set a target to install 450 GW of renewable energy capacity by 2030, but it will need to invest in infrastructure and storage capabilities to achieve this.
Furthermore, as India scales up its gas infrastructure, it will need to ensure that it promotes the adoption of cleaner and more efficient gas technologies, such as natural gas vehicles and industrial processes that reduce emissions.
India's rising LNG demand also has geopolitical implications. As China continues to flex its muscles in the energy sector, India is looking to diversify its sources of LNG supplies. This includes exploring new partnerships with gas-rich countries such as the US and Australia, which can offer a strategic alternative to supplies from the Middle East and Russia.
India's growing LNG imports could also have implications for its foreign policy. The country is increasingly becoming a key player in the Indo-Pacific region, and its demand for LNG could give it greater leverage and bargaining power in its relationships with gas-exporting countries such as Qatar and Russia.
At the same time, India's pivot towards LNG could also help to strengthen its role as a responsible player in the global energy transition. By diversifying its energy mix and reducing its reliance on coal and oil, India is sending a signal to the rest of the world that it is serious about tackling climate change and improving air quality.
Curated by Team Akash.Mittal.Blog
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