No immediate impact of US decision to pause LNG export permits: Officials

Officials however said major LNG routes into India do not cross the main maritime area affe ted Houthi strikes in and around the Red Sea and Gulf of Aden

India will not be immediately affected by the United States’ decision to freeze permits for the export of liquefied natural gas (LNG) to countries with which it doesn't have a free-trade agreement (FTA), officials said.

While India imports the largest chunk of LNG from Qatar, the US is the third-largest source of the fuel.

Officials at the Petroleum and Natural Gas Ministry said the move is not expected to affect spot volumes, which have already been bought.

“There will be no direct impact in the short-to-medium term for India, in terms of supply,” an official said.

However, the move may raise LNG spot prices globally. “This may push up the overall cost of buying LNG. Shipping charges are already rising due to tensions in West Asia,” he added.

On Friday, the Joe Biden administration announced a temporary pause on the pending decisions on export of LNG to non-FTA nations. This is until the US Department of Energy updates the underlying analyses for authorisations. India does not have an FTA with the US.

Officials, however, said major LNG routes into India do not cross the main maritime area affected by Houthi strikes in and around the Red Sea and Gulf of Aden.

They cautioned the latest decision is still being studied and further guidance to companies will soon follow.

In the first eight months of the current financial year, more than 45 per cent of India's LNG imports originated from Qatar, followed by the United Arab Emirates (14.1 per cent), commerce department data shows.

Meanwhile, shipments from the US made up 11.6 per cent of the total import volumes.

The US is the largest LNG exporter worldwide, with shipments expected to double by the end of this decade.

Data from the US Energy Information Administration shows LNG shipments to India began rising fast from early 2020 as Covid struck.

Monthly exported volumes to India had risen to 28,259 million cubic feet of gas in May 2021, before falling. As of October 2023, export volumes stood at 13,698 million cubic feet of gas.

The White House said the current economic and environmental analysis used to underpin its LNG export authorisations is around five years old.

The department of energy has said it will conduct a review during the pause to look at the economic and environmental impacts of projects seeking approval to export LNG to Europe and Asia. It has said the review will take a few months.

However, the US has committed unwavering support to its allies around the world. “The announcement will not impact our ability to continue supplying LNG to our allies in the near term,” the official announcement from the White House said.

The latest move will further spur Indian gas importers, such as state-owned GAIL, to diversify imports, in order to avoid supply disruptions.

Earlier this month, GAIL signed a long-term deal with Vitol Asia Private Ltd to secure one million metric tonnes of LNG annually for 10 years.

Industry insiders said spot buying of Nigerian and Angolan LNG shipments may rise further as a result. Nearer to home, more shipments may come from Oman.

All the three nations are among the top-six sources of LNG for India in recent years. 

Rising demand

India's LNG imports in 2024 are expected to get a boost if prices stay under pressure with year-on-year (Y-o-Y) inflows likely to grow around 7-8 per cent. Imports will be driven by higher demand in the power, industrial and transportation sectors, while infrastructure spending also strengthens in a year due for national elections, a note by S&P Global Commodity Insights said last month.

During the next five years, India is set to add over 20 billion cubic meters of natural gas (bcm) incremental demand, the International Energy Agency said.

Following a steep 6 per cent decline in 2022, LNG imports into India increased by 8 per cent in the first eight months of 2023 Y-o-Y and primary gas supply increased by 2 per cent, IEA data shows.

Since mid-2023, spot LNG prices have fallen to below the $15 per Metric Million British Thermal Unit (MMBTU) threshold. This led to a positive demand response from industry and the power sector.