Indian importers of liquefied natural gas (LNG) have issued force majeure notices to suppliers as domestic demand for gas and port operations are hit nationwide to curb the spread of the coronavirus, say industry sources at Reuters.
Any reduction in purchases by India, the third largest economy in Asia and one of the main importers of super-cooled fuel, should further influence LNG prices, already beaten by a drop in demand in China, where the virus has emerged.
India on Wednesday imposed a total foreclosure of its 1.3 billion inhabitants for 21 days and only authorizes the supply of essential products. This decision prompted several industries to close their doors and certain ports of the country to declare a case of force majeure.
This in turn affects the LNG market, according to several sources.
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India’s largest gas importer Petronet LNG has notified Qatargas of force majeure and is seeking to delay delivery of the cargo, two sources said. “The demand for gas has dropped significantly and is expected to decline further,” said a source in the GAIL gas service (India).
“Only fertilizers, electricity and refineries are operating at full load. Other local buyers have already issued force majeure, so where should we sell LNG?” this source said, adding that his company had issued force majeure notices to certain suppliers and was in the process of sending notices to other sellers.
The Gujarat State Petroleum Corp (GSPC) has also issued force majeure notices to its LNG suppliers, two sources said.
“The performance under the contract with the sellers will be delayed due to foreclosure … most of our customers have already sent us a case of force majeure. Industries such as chemicals, textiles and ceramics which are not eligible in the essentials category are closing, “said a source at GSPC.
The daily delivery of gas to domestic customers has dropped significantly, which in turn has resulted in the filling of LNG storage tanks, with buyers no longer able to accept cargo, a second source said.
“The transport segment is already down 10% and retail gas is down to 10% of normal volumes, industrial production has been impacted,” added the source.
“We may soon see cargo destined for India diverted to China, which is the complete opposite of what happened a month ago.”
GAIL, GSPC, Petronet and Qatargas did not respond to Reuters’ requests for comment.
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Declining local demand could curb gas production from Oil and Natural Gas Corp (CGSB), India’s largest producer of oil and gas, its president Shashi Shanker told Reuters. “For now, there is no impact on oil and gas production, but in the coming days, gas production could be affected due to lower catches due to lower domestic demand, “he said.
Shanker said capital expenditure by CGSB (capex) could be affected as the foreclosure has delayed the supply of equipment abroad and restricted expatriate travel for work. The CGSB established investment plans of Rs.325 billion ($ 4.3 billion) in 2020/21.
LNG spot prices in Asia had recently trended upwards due to a slow recovery in demand from China as people returned to work, but with demand for gas in Europe and now in India , they should reverse the gains, traders said.