Low gas prices to stoke boom in Indian consumption : CRISIL

Energy-hungry India is set to ratchet up its natural gas consumption over the next five years, helped by an abundance of supplies that has seen prices crashing to 3-year lows, CRISIL Infrastructure said.

That should help the share of natural gas in the country’s energy mix to rise to !5% from around 6% today.

“We expect Liquefied Natural Gas (LNG) prices to remain subdued over the medium term,” said Vivek Sharma, senior director at CRISIL infrastructure Advisory, adding that large gas supplies are expected particularly from the US and Australia.

International Spot LNG prices have ranged between $5-$6/Million Metric British Thermal Unit (MMBTU) on Freight On Board basis, while domestic gas is priced around $4/MMBTU.

“We expect the spot LNG prices to remain range-bound between $6-$8 per MMBtu in the near to medium term considering the global demand supply scenario,” said Pranav Master, director at CRISIL Infrastructure Advisory.
LNG prices are expected to remain low as unlike in the past gas prices will increasingly get decoupled from crude oil and get benchmarked to natural gas trading at key international hubs, according to CRISIL.

There will also be increased competition between gas sold at various hubs. “This will benefit India as prices become more attractive and price volatility reduces,” said Vivek Sharma, senior director at CRISIL Infrastructure Advisory.

Apart from subdued prices, part of the appeal for greater natural gas consumption will likely stem from the lower greenhouse emissions to fight climate change, says CRISIL Infrastructure Advisory.

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