Note4Students
From UPSC perspective, the following things are important :
Prelims level: Data related to LNG import
Mains level: Trade dynamics related to LNG
Why in the news?
In 2023, the US surpassed the UAE to become India’s second-largest supplier of liquefied natural gas (LNG), providing 3.09 million tonnes (MT).
World LNG Report 2024 by International Gas Union (IGU)
- US as a Major Supplier: The report highlights that the United States has displaced the UAE to become India’s second-largest supplier of liquefied natural gas (LNG) in 2023, with shipments reaching 3.09 million tonnes (MT).
- Trade Growth: The US supplied India with 1.8 MT of LNG in 2019, which increased to 3.86 MT in 2021, indicating a significant rise in trade volume despite a decrease in 2022 due to rising prices.
- Qatar’s Dominance: Qatar remained India’s largest LNG supplier from 2019 to 2023, with shipments peaking at 10.92 MT in 2023, reflecting its consistent role in India’s energy supply.
- The decline of African Suppliers: The report notes a significant decline in LNG shipments from African nations, particularly Nigeria and Angola, which saw their exports to India drop from pre-pandemic levels of around 2.7 MT and 2.9 MT, respectively, to just 0.73 MT each in 2023.
Present trade dynamics
- Price Sensitivity: Indian companies remain price-sensitive, with LNG imports being contingent on competitive pricing. Analysts suggest that if LNG prices stay below $12 per mBtu, there could be significant growth in imports.
- Geographical Advantage: The proximity of US LNG cargoes to India via the Cape of Good Hope makes it more cost-effective for sellers to export to India compared to North Asia.
- Long-term Contracts: Ongoing long-term contracts signed by Indian entities with US suppliers continue to underpin LNG consumption, despite fluctuations in global prices.
Use of LNG in India:
|
What can be done?
- Strengthening Domestic Policies: India could benefit from reforms in domestic gas policies, including greater transparency over LNG inventory levels and improvements in gas pipeline capacity, to enhance the efficiency of LNG imports and distribution.
- Creating Price Stability: The need to establish a stronger index link between LNG import prices and domestic gas prices could mitigate price risks for LNG importers, ensuring that long-term contracts remain aligned with market conditions.
- Enhancing Infrastructure: Govt. should invest in LNG infrastructure, including regasification terminals and transportation networks, which can facilitate increased imports and improve supply chain efficiency.
- Diversifying Supply Sources: To reduce dependency on specific regions, India should explore diversifying its LNG supply sources, including potential agreements with emerging suppliers in different regions.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
