Share Of Short-Term LNG Deals To Rise In Domestic Consumption: GAIL

GAIL, India's biggest gas marketing firm, expects the share of spot and short-term liquefied natural gas (LNG) contracts in the country's gas consumption to rise after a slump in spot prices has made long-term deals less attractive.

"Presently one third of the market is (made up of) spot contracts and two thirds are long term. But we expect it to go more towards spot contracts," GAIL chairman Manoj Jain said at the India Energy Forum conference held by CERAWeek.

To cut its carbon emissions, India aims to raise the share of natural gas in its energy mix to 15 per cent by 2030, and companies are investing billions of dollars to build infrastructure including doubling pipeline capacity and setting up LNG import terminals.

"Long-terms contracts are going to be lesser and short and medium term contracts are going to be the order of the day," Mr Jain said, adding that GAIL was looking at destination swaps and to convert long-term contracts to small- and medium-term contracts.

Spot gas imports by the electricity generation sector, which account for over a fifth of the country's total consumption of the fuel, doubled in the June quarter to the highest in at least 14 quarters, while purchases under long-term contracts slumped by over a third to the lowest in the same period.

Domestic gas consumption needs to rise by at least three times to account for 15 per cent of the overall energy mix, Mr Jain said, adding that the country needed to further rationalise taxation and tariffs to boost gas consumption and local output.

India's gas consumption was 64.124 billion standard cubic metres in 2019-20.

"Fifteen per cent is a huge task but (because of) the policy environment and the push that the government has provided, I think yes, that is possible," Mr Jain said.