In Q3 2023, India's average LNG imports reached 91 MMcm/d, marking a notable increase of approximately 20 MMcm/d compared with the same period last year. This surge in imports can be attributed to increased gas consumption in the fertilizer and power sectors.
Higher gas generation in the power sector was driven by higher peak thermal demand amid reduced hydropower generation.
Lower spot LNG prices and the resumption of 9 MMcm/d of term supplies from SEFE played pivotal roles in driving this increased gas demand in the power sector. The sector consumed an average of around 23 MMcm/d in Q3 2023, reflecting an increase of roughly 8 MMcm/d from the previous year.
Additionally, as India plans to phase out urea imports by 2025, the dependence on domestically produced urea will increase, supporting the rise in gas consumption in India’s fertilizer sector. Since this sector is subsidized by the government, spot LNG prices will have a limited impact on its growth.
The sector's consumption averaged roughly 48 MMcm/d, a 9 MMcm/d increase from Q3 2022. The remaining increase in consumption was distributed among the refinery and other industrial sectors, further incentivized by lower spot LNG prices.
Furthermore, Indian buyers like IOCL and BPCL have continued to purchase spot LNG cargoes for Q4 2023 delivery, despite JKM hovering in the USD 15-16/MMBtu range, highlighting their appetite to consume LNG even at elevated prices. Indian Oil awarded tenders for three cargoes for November and December delivery at around USD 15.5/MMBtu. BPCL awarded a spot cargo for November delivery in mid-USD16/MMBtu. Our current forecast for December, January and February averages at 76 MMcm/d, with an upside risk of 4 MMcm/d to this forecast, as spot prices are now expected to average around USD 16/MMBtu for the next three months, incentivizing spot buying for the industrial sector.
In Summer 2024, imports are expected to increase by a further 3 MMcm/d compared with 2023, driven by sustained demand in the power sector and continued growth in the industrial and fertilizer sectors. However, there is an upside to our Q4 2024 forecast, with imports averaging 80 MMcm/d, 4 MMcm/d lower than in 2023.
This potential increase is driven by the anticipated rise in available LNG supply during the last quarter of 2024, putting downward pressure on spot LNG prices. If spot prices in Q4 2024 average around $15/MMBtu, it may encourage an additional 5-6 MMcm/d of spot imports. Consequently, there is an overall potential upside of roughly 3-4 MMcm/d to our 2024 forecast, currently set at 87 MMcm/d. This adjusted forecast could imply a year-on-year growth of approximately 10% in Indian LNG imports for 2024.
