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Indian Power Plants Steps on Gas as Coal Use Slows

Indian power plants used the most gas in at least 3-1/2 years in the June quarter, as operators along the west coast snapped up cheap liquefied natural gas (LNG) imports that have become competitive against coal, government data showed.

 

Power producers say the trend is likely to continue until at least September, and perhaps beyond, providing a bright spot for LNG sellers as demand elsewhere falls due to a global economic slowdown sparked by the coronavirus pandemic

 

Gas consumption by power plants rose 11.7% to 104.83 million standard cubic metres per day (mmscmd) in the three months to end-June from the same period last year, data from the Central Electricity Authority (CEA) showed. Imports accounted for 37.4% of overall gas consumption by power plants, up from 35% a year ago.

 

Power spot prices are making natural gas "lucrative" for power plants, according to India's largest gas importer Petronet LNG Ltd, which recently cancelled a tender to buy long-term LNG.

 

"I do believe there is some coal switching taking place and imported coal-based power plants may not be competitive vis a vis spot LNG (consuming power plants)," Vivek Mittal, general manager for marketing at Petronet, said on a recent conference call.

 

India's imports of spot gas more than doubled in the June quarter from a year ago to the highest in at least 14 quarters, while purchases under long-term contracts slumped by over a third to the lowest in the same period, a Reuters analysis of the available data showed.

 

Coal sales plunge

 

The increased use of gas comes as India's overall electricity demand is expected to fall this year for the first time in decades, with a likely fall in national coal-fired generation.

 

Sales at state-run Coal India, which sells most of its output to power companies, fell to the lowest level in nearly four years in the second quarter. Weaker sales could continue through end-September due to the annual monsoon, when coal demand and output typically falls and transportation is difficult.

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