Shell’s 5.2 million tonnes a year (mt/y) LNG terminal at Hazira, the country’s second-largest, used only 63% of its capacity this financial year from April through December as against 89% in the same period last year. Capacity utilization at Petronet LNG’s terminal at Dahej (17.5 mt/y), the country’s largest, also dropped 6% to 90% this year.
Domestic customers’ aversion to pricey spot LNG cargoes caused a decline in business at these terminals, according to industry executives who didn’t want to be named.
Shell terminal’s almost complete dependence on the spot and short-term cargoes showed up in a much sharper drop in business than Petronet’s terminal that has been saved by the volumes procured under long-term contracts where price increases haven’t been as sharp, they said. Long-term LNG imported from Qatar is linked to crude prices and currently costs about $11 per mmBtu while spot LNG costs $20 currently and had stayed above $30 for months this year.
A 21% jump in domestic gas production also helped replace LNG import, which has dropped 3% this year. Shell’s terminal lost business from Reliance Industries, a key customer, which began using more domestic gas, according to executives cited earlier. Shell declined to comment.
Some industry executives are confident that the slowdown will not last. “What we have seen in the past few months is an aberration. Prices have already fallen to $20 per mmBtu in the spot market and will fall further as winter comes to an end,” said Vinod Mishra, finance chief at Petronet LNG. “We are hopeful that spot and short-term cargoes will return to India after March. We are also confident that the recent volatility is not going to hurt Indian businesses’ plan to add LNG terminal capacity.”
India plans to boost capacity to 65 million tonnes per annum over the next few years. It currently operates six terminals with a combined nameplate capacity of 40.6 million tonnes. Three of these terminals at Kochi, Ennore and Mundra, with a combined capacity of 15 million tonnes, have operated at 14-22% capacity this year.