Rise in LNG Imports

India has recently experienced a significant increase in its imports of Liquefied Natural Gas (LNG). In June 2024, India imported 2.60 million tonnes (mt) of LNG, marking the highest import volume in 44 months. This represents a notable rise from 1.77 mt in June 2023. The increased LNG imports are closely tied to a rise in gas-based power generation in the country.

Key Data and Trends

• Power Generation Increase: Power generation from gas-based units surged to 4.60 billion units in June 2024, a 52% increase from 3.03 billion units in June 2023. This spike reflects the greater use of gas for power generation due to higher summer demand.
• Capacity Utilization: India's gas-based power generation capacity stands at almost 25 gigawatts, constituting 5.6% of the country’s total installed capacity. The overall plant load factor (PLF) for gas-based plants improved to 25.8% in June 2024 from 17% in June 2023.
• Quarterly Data: For the April-June quarter (Q1), power generation from gas-based plants increased by 62.5% year-on-year, reaching 13.49 billion units.
• Import Dependency: In June 2023, over 53% of natural gas consumed by gas-based power plants was imported LNG. This figure rose to nearly 56% in April 2024, reflecting a reliance on imported LNG due to the limited domestic production.

Reasons for Increased LNG Imports

• Demand Surge: The higher LNG imports are attributed to increased power generation during peak summer months to meet high electricity demand.
• Price and Availability: Reasonable spot market prices and ample availability of LNG globally have driven higher imports. Government policies supporting increased power production have also played a role.
• Domestic Shortfall: Domestic natural gas production only meets about half of India’s total gas consumption. With local gas prioritized for city gas distribution and fertilizer sectors, the power sector relies heavily on imported LNG.

Economic and Operational Implications

• Cost Considerations: Imported LNG is generally more expensive than domestic gas. This cost disparity has historically led to lower capacity utilization for gas-based power plants.
• Capacity Utilization: Despite higher imports, economic challenges have kept gas-based plants operating below optimal capacity levels.

Future Outlook

• Expected Decline in Imports: LNG imports are anticipated to decrease from the June 2024 levels due to higher spot prices and a potential cooling of power demand during the monsoon months.
• Market Dynamics: The fluctuations in LNG prices and power demand will continue to influence India’s LNG import strategy and gas-based power generation.

Conclusion

The recent rise in LNG imports highlights the growing role of gas-based power generation in meeting India's energy demands, particularly during peak periods. While the increase in imports reflects a short-term response to high demand and favorable international prices, the high cost of imported LNG and dependence on foreign sources underscore the need for a more balanced and sustainable energy strategy. Moving forward, India will need to manage its LNG imports carefully, taking into account global market conditions and domestic energy needs.