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Measures to Contain COVID-19 Outbreak Weakens Indian LNG Demand

The stringent measures adopted to contain COVID-19 pandemic in India has led to a sharp decline in natural gas demand due to fall in industrial and domestic consumption.

With LNG storage tanks almost full, Indian LNG importers are being forced to refuse cargoes citing force majeure clauses. Despite these initiatives, LNG supply still exceeds demand, causing the demand to go down further in the coming months, says GlobalData, a leading data and analytics company. 

Haseeb Ahmed, Oil and Gas Analyst at GlobalData, comments: “The extensions of lockdown and travel restrictions have impacted port operations In India. Further, the closure of gas-based industries such as ceramics and chemicals has resulted in the slump of LNG demand. This led to some of the Indian LNG importers issuing force majeure notices to their suppliers.”

Besides soliciting delayed gas deliveries, Petronet LNG issued a force majeure notice to its supplier – Qatargas, in late March 2020. Similarly, Gujarat State Petroleum Corp (GSPC) has issued force majeure notices to its LNG suppliers besides cancelling a contract for the import of 11 LNG cargoes scheduled to be delivered between May 2020 and March 2021.

Ahmed concludes: “Already the lockdown had serious impact on Indian LNG importers and its extension till May 3 can jolt the companies even more. This may lead to further reduction of natural gas consumption and put the LNG imports at danger of declining to a level lower than a year ago. However, a long-term scenario might provide an optimistic view of the Indian LNG sector, once the travel restrictions are eased and demand gradually recoups.” 

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