GAIL India Ltd is looking for options to source liquefied natural gas (LNG) after Russian giant Gazprom halted supplies in May, three officials aware of the plans said.
Efforts are underway to resume supplies, but no headway has been made, the official said, seeking anonymity. To bridge the deficit, state-run GAIL has also resorted to spot purchases in Qatar, the US and Australia, among others.
The default in Gazprom’s contracted supplies has caused disquiet among stakeholders in the Indian energy sector.
“Whenever there is a supply crunch, GAIL has to resort to minor supply cuts to its customers and also buy from the spot. They are just trying to manage. In cases where GAIL has back-to-back contracts, GAIL cannot cut supplies or else GAIL would have to pay the penalty here. So, wherever it cannot lower the supplies, there it is supplying after buying from the spot,” said one of the three officials, all of whom spoke on the condition of anonymity.
Supplies from Gazprom have been stalled since May. In 2012, GAIL signed a contract with Gazprom Marketing and Trading Singapore, a subsidiary of Gazprom for the supply 2.5 million tonnes of liquefied natural gas annually for 20 years.
Under the contract, two cargoes of LNG are to be supplied every month.
Amid the crunch, India is also looking at diversifying its sources of gas and is looking for long-term contracts, the official cited above said.
“National gas companies are working with different players…the US, Qatar, Mozambique. We are trying to get supplies from wherever possible at the best-suited prices. Nobody is willing to commit big long-term volumes before 2-3 years’ time,” the official added.
Traditional sources of gas for India include Australia, Saudi Arabia, UAE, the US and Russia. GAIL has long-term contracts for around 14 million tonnes of LNG, and the Gazprom contract of 2.5 million tonnes accounts for 17.85% of its total contracted supplies.
“The global energy markets are in such a situation that suppliers are willing to pay the penalty than honouring their long-term contracts. We are looking at all possible solutions to ensure we receive the contracted supplies,” a second official said.
Noting that the Russian company’s unit Gazprom Germania falls under German jurisdiction, the official said that given the coming winter, Germany is looking to cater to its domestic demand.
“The contract is still valid. While today there is high demand in the gas market, over the medium and long term, the demand will cool, and the largest taker will be India,” a third official said. GAIL is looking at all options to buy gas at an affordable price, the official said, adding the problem is not availability but the price.
Queries sent to GAIL, Gazprom, the ministry of petroleum and natural gas, the ministry of external affairs and the Russian embassy in Delhi remained unanswered till press time.
The crunch comes even as India’s natural gas consumption has been rising, with a policy focus on developing a gas-based economy, with the country consuming 163.06 million standard cu. m per day (mscmd) in FY22. Gas comprises about 6.2% of India’s primary energy mix, far behind the global average of 24%. The government plans to increase this share to 15% by 2030.
With India being the world’s fourth-largest LNG importer, Indian firms have inked long-term LNG contracts totalling 22 million tonnes per annum.
India’s gas demand is expected to be driven by the fertilizer, power, city gas distribution, and steel sectors. Its import and production of natural gas in 2021-22 resulted in supplies of 64.8 billion cu. m in the country. India produced 34,024 mscm of gas in 2021-22 and is also expanding its national gas grid to 35,000 km from the current 20,000 km.
Source: Livemint