India considers LNG reserve to cut supply shortages

India is reportedly considering the creation of a strategic reserve of liquefied natural gas (LNG) to protect against potential supply shortages or price spikes in the future, following the country’s energy crisis last year, according to a senior executive at India’s leading LNG importer.

The government has “proposed we should have more storage space for LNG so that when prices are lower we should store, and supply when there is a crisis.

More governments are looking to set up emergency stockpiles of LNG, similar to the oil industry’s strategic reserves, as the super-chilled fuel becomes a more important element of the global energy mix.

Japan — one of the world’s top buyers — said last year that it is considering a similar plan.

While no storage targets have yet been discussed, Petronet is adding more tanks at its LNG import terminals to store the imported fuel and is working on a floating import plant in the eastern state of Odisha.  

Last year’s crunch is also prompting Indian buyers to hunt for long-term supply deals, which ensures deliveries to customers at more stable prices. Some of these deals are likely to be sealed in 2023.

Petronet is in talks with Qatar to renegotiate its 7.5 million tons-a-year contract that expires in 2028. The New Delhi-based company is looking to expand the contract by as much as 1 million tons.

The recent drop in spot prices has led to increased demand for prompt deliveries.

Spot prices have fallen by around 80% since August, which has revived interest in the market. However, prices will need to decrease even further, to about $6 to $7 per million British thermal units, in order to accelerate purchases.

Despite the recent drop in spot prices, the Asian spot benchmark closed above $12 per million British thermal units recently.