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Global LNG Markets heading towards Supply Glut
Context:
According to the rating agency, ICRA India is expected to benefit from a global LNG supply glut, with prices likely to remain subdued due to significant capacity additions of about 193 MMT over the next four years.
India’s LNG market and Government steps to boost market:
- Fourth-Largest LNG Market: As of 2023, India is among the world’s top five LNG importers, with a current import capacity of approximately 48 million tons per year (MMTPA). This capacity is projected to increase to 66 MTPA by 2030.
- Presently in India the share of natural gas in the energy basket is 6.7%. The Government has set a target to raise the share of natural gas in the energy mix to 15% in 2030.
- To achieve this, the government has undertaken several initiatives:
- National Gas Grid Expansion: 24,623 km of the grid is operational, with 10,860 km under construction.
- City Gas Distribution (CGD) Network: Expansion to 300 geographical areas, targeting 12.50 crore PNG connections, 17,751 CNG stations, and 5.42 lakh inch-km pipelines by 2023.
- LNG Terminals: Increasing capacity from 47.7 MMTPA to 66.7 MMTPA.
- Boosting Domestic Production: A 20% increase in natural gas production from 28.7 BCM in 2020-21 to 34.45 BCM in 2022-23.
- Indias is exploring LNG production possibilities at Khambhat Basin.
- Reforms under the Hydrocarbon Exploration and Licensing Policy (HELP) and 2019 policy reforms provide incentives like concessional royalty, relaxed approvals, and marketing and pricing freedom to encourage production.
- Spot Market Reliance: India has increasingly turned to the spot market for LNG, especially when prices are favourable, contributing to fluctuations in the percentage shares of different suppliers.
- According to the Draft LNG policy of the Ministry of Petroleum and Natural Gas the government aims to establish LNG terminals with a total regasification capacity of 70 MMTPA by 2030 and 100 MTPA by 2040.
- LNG stations:The policy aims to establish 1000 LNG stations for ensuring availability of LNG for long haul , heavy duty trucks etc.
- Promoting the adoption of LNG in green-field sectors where it is currently underutilised.0
World LNG market:
- Capacity Expansion: The global LNG sector is projected to add approximately 193 million metric tons (MMT) of capacity between 2024 and 2028.
- Three countries—the U.S., Australia and Qatar—produced three-fifths of the world’s LNG in 2023 .
- Global LNG supply is at risk from disruptions at key maritime chokepoints.
- The Panama Canal saw reduced LNG transits in 2023-2024 due to El Niño, a problem likely to worsen with climate change.
- Additionally, attacks on vessels in the Red Sea have prompted shippers to avoid the Suez Canal.
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China – Qatar LNG deals vs India – Qatar LNG deal Model: China-Qatar LNG Deals:
India-Qatar LNG Deals
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