Despite a severe, nationwide lockdown, India’s LNG demand has not disappeared though force majeure notices by Petronet and Gujarat State Petroleum Corp. likely affect the majority of Indian LNG import capacity well into 2Q with several cargoes already deferred.
Amid a difficult 1Q this year, India provided one of the main bright spots for LNG demand. In the period of January to March, the country imported 41.2% more compared to 1Q 2019, which equates to more than 2 million tonnes (mmt) of demand growth overall.
Our data indicates India imported 2.37mmt in March this year, led by 1.45mmt (61.1%) at Dahej LNG.
1Q demand growth carried by Hazira LNG
Demand growth in 1Q 2020 was primarily carried by Hazira LNG, which almost doubled offtakes by 0.43mmt (95.7%) year-on-year. Dahej LNG, meanwhile, increased offtakes by 0.40mmt (51.8%) over 2019 levels. Petronet’s LNG terminal at Cochin increased year-on-year imports five times over, taking imports from sporadic offtakes in early 2019 to at least one cargo per month in 1Q 2020.
Growth this year was also facilitated by the introduction of new capacity at Mundra LNG in Gujarat and continued ramp-up of operations at Ennore LNG in Tamil Nadu.
COVID-19 lockdown cut demand growth trajectory short
Unfortunately, this growth trajectory snapped with the introduction of a sweeping 21-day lockdown throughout the country to suppress the spread of COVID-19, which has very quickly begun to impact demand in April, LNG Journal ship-tracking data indicates.
Petronet and GSPC force majeures cause vessel diversions
Public life has since effectively come to a standstill with only fertiliser production, power plants and refineries – all classified as essential industries – allowed to run at parcel loads. Most other power-intensive industries have been ordered to close down for the duration of the lockdown. Petronet and Gujarat State Petroleum Corp. (GSPC) have declared force majeure to deal with the rapid loss in demand with the former seeking to defer deliveries instead of cancelling them outright.
For example, the Angola LNG-controlled Malanje had to turn away from Hazira after having waited off the Indian coast for around 10 days in early April. The cargo was snapped up by KPC’s Mina al Ahmadi LNG in Kuwait. The same week, RasGas-controlled LNGC Al Sahla suffered a similar fate and was diverted to Summit Power’s FSRU off Bangladesh.
April offtakes already trailing year-ago levels by 27%
Accordingly, offtakes in April to date have fallen well below their 2019 equivalents, with imports in the first 13 days of the month trailing year-ago levels by 0.21mmt (-26.6%). Notably, that figure would have been worse but for a string of imports at Dahej last week whilst Petronet capacity at Hazira suffered the most. Offtakes at the terminal were down 56% year-on-year on 13 April whilst imports at Dahej had retreated by 32% for the same period.
Lockdown extension weighs on 2Q outlook
Although the lockdown has been extended until 3 May (it had previously been planned to end on Tuesday), New Delhi advised it will likely permit economic activities to resume in COVID-19 free zones starting 20 April to aid poorer people dependent upon daily wages. However, this is unlikely to translate into a full-throttle resumption of heavy industry and consequently LNG demand, in our view, as it will take time for the labour force to return to their industrial sites often far away from home villages. As such, we do not yet see a silver lining for Indian demand in Q2 2020.