Key Points
Spot LNG trading at 18% of Brent crude prices
Gujarat Gas faces 20-30% spot LNG dependency
Global LNG supply needs 230 mmt annual increase
European imports recovering despite demand decline
The report highlighted that Gujarat Gas (GGas), in particular, faces higher exposure, with 20-30 per cent dependency on spot LNG purchases.
It said "Sustained high spot LNG price is a key concern for all gas companies in India as it could impact domestic LNG demand, and volume/margins of CGD companies".
The report stated that spot LNG has been trading at around 18 per cent of Brent crude prices, significantly higher than the historical average of 12 per cent before the Russia-Ukraine conflict.
This prolonged surge in prices poses a challenge for Indian gas firms that rely on spot market purchases to meet their supply needs.
Global oil and gas companies foresee the risk of sustained high spot LNG prices continuing into 2025. The tight market conditions have been exacerbated by supply disruptions and rising demand from key markets.
Despite a 19 per cent year-on-year decline in Europe's LNG demand to 93 million metric tons (mmt) in 2024, recent months have witnessed a resurgence in European imports.
The report noted that the drop in annual demand was primarily due to sluggish industrial growth, reduced gas-fired power generation, and increased competition for LNG volumes from other regions.
However, cold winter conditions, the complete halt in Russian gas supplies, and depleting inventories have pushed European LNG imports higher in recent months.
Looking ahead, global LNG supply needs to increase by 230 mmt per annum over the next decade to meet the growing demand. One potential factor that could help balance the market would be the restoration of Russian gas supplies to Europe, which could ease price pressures and improve availability.
With high spot LNG prices persisting, Indian gas companies will have to navigate potential cost pressures and demand fluctuations, particularly for CGD firms that rely on imported LNG to maintain supply levels.
The industry will closely watch global developments and potential supply expansions to mitigate risks associated with price volatility.
