India begins importing LNG from Russia
India has begun importing liquefied natural gas (LNG) from Russia as part of its strategy to diversify its supply sources and cater to the rapidly rising local energy needs.
"Today will be seen as the golden day for India's energy roadmap," Oil Minister Dharmendra Pradhan said after receiving the first LNG ship from Russia at Dahej import terminal on Monday. The government is committed towards transforming India into a gas-based economy, he said, adding that supply by Russia will help in achieving that.
Russia is the latest country to begin supplying long-term LNG to India after US, Australia and Qatar. Till two years ago, the country depended solely on Qatar for long-term supplies.
India is heavily investing in building LNG import terminals and pipelines to import and supply gas across the country. Local production is rising at a pace not enough to meet the rising domestic demand, India will continue to need import, he said.
India imports 45% of the total amount of natural gas it consumes. With the government's plan to raise the share of natural gas in the country's energy mix to 15% by 2030 from about 6.5% now, import of LNG is expected to rise. Natural gas consumption in the country rose 5% to 58 billion cubic meters in 2017-18. The government expects half of India to have access to piped gas for cooking and transport after the new city gas licensing round, which is currently underway.
The gas supplied by Russia will become important in this context, as will be supplies from the Middle-East, the US and other regions to India, the 3rd largest energy consumer and 4th largest LNG importer in the world. Russia is the largest crude oil and second-largest gas producer in the world.
In 2012, state-run gas marketer GAILNSE -1.85 % had signed a 20-year agreement with Russia's energy giant Gazprom for purchase of 2.5 million tonnes of natural gas a year. It also has long-term contracts with US suppliers for 5.8 million tonnes per year of LNG. Supplies from US began earlier this year.
A sharp drop in the price of LNG, following a crude collapse four years ago, made imported natural gas more affordable in India and also pushed up local demand for the commodity. As spot LNG rates dropped, it made the long-term deals struck before the price collapse by importers like GAIL and Petronet LNGNSE -0.02 % look expensive. Over the last three years, GAIL and Petronet reworked their contracts with suppliers from the Middle-East, Russia and Australia, bringing in more price and delivery flexibility.
Under the deal renegotiated with Gazprom, the duration of the contract has been extended by three years and GAIL has agreed to buy an additional two million tonnes of LNG over the life of the contract, according to sources. GAIL has the flexibility to import the full contracted volume of 2.5 million tonne (MT) a year from the fourth year of the contract while keeping the purchase lower at 0.5 MT in the first year 2018-19, 0.75 MT in 2019-20 and 1.5 MT in 2020-21.
India and Russia have strengthened their energy partnership in the last few years. A consortium led by Russia's Rosneft invested $13 billion last year to purchase a 20 million tonne refinery and a network of petrol pumps in the country. Indian state firms have so far pumped in about $10 billion for stakes in Russian upstream projects in search of energy supply security.