LNG Price Slump Sends Biggest Indian Refiner on Buying Binge

Indian Oil Goes on a Buying Binge
  • IOC to boost spot LNG purchase after Indian terminal expanded
  • Country to more than double import capacity within 5 years

Indian Oil Corp., the nation’s biggest refiner that’s also boosting its liquefied natural gas business, is lifting purchases of the fuel to take advantage of a price plunge amid a glut.

The state-run company plans to buy two LNG shipments per month in the spot market for six months from October, according to Debasis Sen, director of planning and business development. That compares with a total of nine spot cargoes for the previous year, when it started importing the commodity directly.

India is among buyers seeking more cargoes of the cleaner fuel as spot prices have fallen about 60 percent since October 2014 amid a supply glut. While demand growth prospects are limited in more mature markets like Japan and South Korea, consumption in India, China and emerging Asian nations will increase, the U.S. Energy Information Administration forecasts. India’s consumption may rise 11 percent a year over the next decade, BMI Research predicts.

“Low prices have made LNG more affordable,” Sen said in a telephone interview on Aug. 25. “We are witnessing strong demand from customers such as fertilizer, power plants and glass industries.”

Spot Deals

Indian Oil sold 1.93 million metric tons of natural gas during the year through March 31, up 6.9 percent from a year ago, according to a statement. The refiner holds rights to market 30 percent of the fuel imported by Petronet LNG Ltd., the country’s top purchaser. While IOC gets supplies sourced from Petronet, it is seeking to increase direct procurement through spot deals.

Shares of Indian Oil rose as much as 1.2 percent to 580.60 rupees, the highest intraday level since Aug. 9, and traded at 577.80 rupees by 11:47 a.m. in Mumbai. The local benchmark S&P BSE Sensex index was little changed.

Higher imports will help New Delhi-based Indian Oil diversify further into natural gas. Prime Minister Narendra Modi’s administration is seeking greater use of the cleaner fuel in the country’s energy mix to curtail carbon emissions by the world’s second-most populous nation.

The nation has more than doubled its imports in the past seven years as domestic supplies dried up. Purchases rose 15 percent from a year earlier to 16.08 million tons during financial year ended March 31, 2016, according to provisional data from the oil ministry’s Petroleum Planning & Analysis Cell.

Terminal Expansion

The country plans to increase its LNG import capacity to 55 million tons per year within five years, from about 21 million now, Oil Minister Dharmendra Pradhan said in New Delhi on Aug. 1.

Petronet has expanded the capacity of the Dahej terminal in western India, the nation’s largest LNG import and re-gasification terminal, by 50 percent to 15 million tons per year. Indian Oil, which owns 12.5 percent of the importer, has booked a portion of the increased capacity to bring in more shipments directly.

“We were facing capacity constraints at Dahej in importing LNG on our own and could purchase only one shipment so far since April,” Sen said. “But now with the expansion, we can accommodate two cargoes a month.”

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