Gas-based power generation, LNG demand surges amid heat wave

India’s natural gas-based power generation has surged in May on the back of heat wave conditions, driving up demand for more LNG cargoes for prompt deliveries in June from state-owned energy companies.

Indian gas-based power generation was 4,646.53 million kWhr as of May 29 for the month of May, compared to 2,631 million kWhr a year earlier, according to data by Central Electricity Authority. India’s gas-based power generation was strong in August 2023 and September 2023, but did not rise above 4,000 million kWhr in that period, the data showed.

Generating 5 million units of electricity requires around 1 MMcm of natural gas, according to market participants in the power sector. This implies consumption of around 891.36 MMcm of gas during May or 29.71 MMcm/d, which is roughly an equivalent of over 10 LNG cargoes for the month.

The CEA does not provide separate data for power generation based on regasified LNG and domestically-produced natural gas.

However, in the first quarter of 2024, total gas consumption in the power sector grew 1.4% year on year, to 14.8 MMcm/d, according to S&P Global Commodity Insights data. Imported gas or RLNG consumption by power plants increased by 45.5% year on year in the first quarter to about 2.7 MMcm/d, while domestic gas consumption increased only marginally from 11.9 MMcm/d to 12.1 MMscm/d in the same period.

Around 74% of India’s electricity mix is coal-based, around 13% is from renewables like wind and solar, around 8% is from hydro, around 3% from nuclear and only around 2% from natural gas.

Market sources said that NTPC has been consuming 9-10 MMcm/d of RLNG on average and Torrent Power has been consuming 5-7 MMcm/d on average.

In previous years, a significant portion of gas-based power generation has been through domestically produced gas, but an increasing amount of this premium fuels has been allotted to the fertilizer and city gas distribution sectors, leading to gas power plants operating below capacity.

The current heatwave, lower global spot LNG prices and a government push to avoid power supply disruptions in the election season have helped boost overall gas-fired power generation and open up room for more LNG to be channeled into power plants.

Indian companies have had to step up spot market purchases as inventories have dropped due higher gas demand from the power sector. Indian gas importers have already purchased at least nine cargoes from the spot market for deliveries in June, Commodity Insights trade data showed.

Market sources said that GAIL conducted an auction to purchase RLNG from the domestic market twice for a total of around 80 MMcm for the second half of May, part of which is expected for power sector usage.

Several towns and cities recorded maximum daily temperatures of over 49-50 C this week, disrupting daily life and driving up power demand for air conditioning, coolers and ceiling fans.

One region in the Indian capital of New Delhi logged a maximum temperature of 52.3 C mid-week, which would be the highest ever temperature recorded in the city if correct; prompting officials to investigate the accuracy of the weather station, according to local media reports.