South Asian LNG imports grew by 0.12 Mt y/y in January, though this was mostly thanks to Bangladeshi imports of 0.24 Mt off a y/y baseline of zero. India’s LNG deliveries of 1.61 Mt were down by 0.21 Mt y/y. Pakistan’s imports of 0.64 Mt were up by 0.14 Mt y/y. While maintenance to the country’s Engro regas terminal may limit growth in February, Pakistan has issued tenders for five March-April deliveries and six cargoes for May-June. Bangladesh announced it has contract terms agreed with 15 global LNG suppliers for spot deliveries, to supply around 25% of the country’s needs from the short-term market. India will need its new regas infrastructure to start-up promptly to reach our forecast for 2019 import growth of 2.5 Mtpa y/y. IndianOil’s (IOC) 5.0 Mtpa Ennore facility is scheduled to receive a commissioning cargo in late February. Meanwhile, the 5.0 Mtpa Mundra terminal has not yet begun operating, despite construction being finished, due to contract disputes. In the coming two years, the pace of LNG import growth will remain tied to resolving infrastructure constraints.
LNG imports to South Asia edged up by 0.12 Mt y/y (6%) in January. This was largely due to 0.24 Mt in Bangladeshi imports, off a y/y baseline of zero. India, the region’s largest importer, took in 0.21 Mt less y/y (12%), while Pakistani imports of 0.64 Mt were up by 0.14 Mt y/y.
Even though India saw fewer LNG deliveries y/y, part of that decline was offset by domestic production growth of 47 mmcm/d y/y. Overall, India’s total gas supplies for January only declined by 44 mmcf/d y/y thanks to the domestic output gains, which helped gas-fired power generation in the country rise by 0.11 TWh y/y (3%). Gas-fired output was the only thermal source to increase in January, with modest 1% y/y reductions seen in both lignite and coal-fired generation.
The growth in gas-fired output—despite the drop in total supply of gas—came with a decrease in nuclear generation. Output from India’s nuclear reactors fell by 1.0 TWh y/y (25%), as several plants went offline for maintenance last month. The Kaiga reactor began inspections in January after setting the world record for most consecutive days in operation in late 2018. Kudankulam I likewise went offline in January for refuelling. The recent gas gains in power are likely to be short-lived as these reactors are scheduled to return to the grid in February.
Pakistan’s imports of LNG in February are likely to have slumped m/m on strong January numbers, and its Engro regasification terminal went offline for maintenance between 14-19 February. Indications from Kpler suggest that the February numbers are down by just 0.1 Mt m/m (but up by 0.03 Mt y/y) as the terminal was rushed back into service after just six days despite being legally approved to close for up to three weeks. The push to get the terminal back online comes amid an ongoing winter gas shortage in Pakistan, which saw the prime minister sack the chiefs of both Sui Natural Gas Pipeline and Sui Southern Gas in January.
The effect of the gas shortfalls this winter, combined with falling global LNG prices, will likely see Pakistani imports rise as its infrastructure returns to full service. The country invited bids for five LNG cargoes for March-April delivery in the wake of the gas crisis. Pakistan also asked for bids for an additional six deliveries in the May-June window. Pakistan cancelled tenders last summer as delivery prices rose above $11.00/mmbtu, a move which contributed to the current shortage. With JKM summer 2019 prices currently averaging $6.80/mmbtu, we expect healthy imports to continue through this summer for Pakistan, to the tune of 0.5 Mt in y/y uplift in Q2 19-Q3 19.
Pakistan is also taking steps to both diversify and lower the cost of its sources of gas. Late January saw an official request to renegotiate the terms of its 15-year LNG import deal with Qatar, in the hope of a price cut and a one-year credit facility. In early February, Pakistani company Inter State Gas Systems signed a Memorandum of Understanding with Gazprom to build a subsea pipeline connecting the Russian company’s Gulf gas reserves to Pakistan. Construction on the 1.0 bcm/d project is not expected to be complete until 2023. Iran announced it had completed its 8 bcm/y onshore pipeline to Pakistan’s western border, but little progress has been made in Pakistan on its west-east pipeline that would allow imports to start. The current US sanctions on Iran have been cited as a reason by Pakistan for not building the connecting pipeline.
The key to the region really accelerating its LNG imports is India, which is in the process of developing considerable new LNG import infrastructure. While ship channel dredging necessary to commission the country’s first east coast terminal at Ennore is set to drag into late February, the terminal’s operator IOC has secured an initial cargo for the facility. The terminal is scheduled for its first delivery on 26 February. Ennore announced it will likely use just 1.5 Mtpa of the 5.0 Mtpa terminal’s capacity in 2019, which will feed local fertiliser plants and IOC refineries. The remaining capacity can only be utilised once the construction of pipelines south to Nagapattinam is completed, which is scheduled to occur in late 2020 at the earliest.
Another Indian regas terminal that is waiting for a commissioning cargo remains mired in a contractual dispute. The 5.0 Mtpa Mundra facility was inaugurated by the prime minister in September 2018 and had a commissioning cargo delivered in November 2018 from Sabine Pass. That cargo was then diverted to the Hazira terminal due to disagreement over land lease agreements and sub-concessions between the Gujarat provincial government and Mundra’s co-operators, the Adani Group. The spat has seen Mundra sit idle since finishing construction, with IOC also cancelling a planned investment in the project. Gujarat State Petroleum, which owns the 50% of Mundra that Adani does not, is now hoping to offload its stake onto Adani. No deal is currently in place. Initial plans to use 1.5 Mtpa of Mundra’s capacity are critical to India reaching our projection of 2.5 Mtpa in y/y import growth in 2019.
A core piece of infrastructure needed to boost Indian gas demand took a step forward in February as the first phase of the 2,650 km west-to-east Jagdishpur-Haldia-Bokaro-Dhamra Natural Gas Pipeline (JHBDPL) project was completed. The 585 km section from Phulpur-Dobhi-Barauni, with spurlines to Patna and Varanasi, has been completed. The pipeline is being further extended from Barauni to Guwahati, in the northeastern state of Assam, through a 729 km pipeline, which is expected to be completed by 2021, although that seems ambitious given construction on the first phase began in 2015.
India also inaugurated a city gas distribution (CGD) network in Patna, which is targeting residential and commercial users as well as providing compressed natural gas (CNG) to the transport sector. In an increased effort to get gas into the Indian economy, Gail has been authorised to lay CGD networks in major cities such as Patna, Varanasi, Ranchi, Jamshedpur, Bhubaneswar and Cuttack. In addition, the Indian petroleum downstream regulator PNGRB said it had received 225 bids to build out CGD networks in 50 municipalities in its latest bidding round, with successful applicants to be notified at the end of February. The bidding is for areas covering 18% of India’s geographical area and 24% of its population. While over time the new pipelines and CGD networks will provide the impetus for gas demand growth, 2019 LNG demand growth is going to be more sensitive to alleviating localised infrastructure constraints, which have been hampering new terminals coming online. The long-delayed Kochi-Mangalore pipeline, which is key to increasing utilisation at the 5.0 Mtpa Kochi regas terminal, is scheduled to be completed in March, which will allow that terminal to take more gas. The terminal only received 0.5 Mt in 2018, six years after its commissioning.
|Fig 1: LNG imports forecast by country, Mt|
|Source: Note: Q1'17 to Q4' 18 are actuals
Source: Bloomberg, Kpler, Energy Aspects