India is a gas importer country, and as the country is growing at an unprecedented rate, the demand for gas and oil has surged like never before. Also, after the advent of PM Modi’s Ujjwala Scheme, India is importing more LNG, and the penetration of gas cylinders in rural India and Tier 2 and Tier 3 cities is increasing.
According to the head of finance at Gas Authority of India Ltd. (GAIL), the company is looking for long-term gas import contracts and intends to sign one soon to make up for interrupted supplies from a former subsidiary of Russian energy giant Gazprom.
In 2012, GAIL and Gazprom Marketing and Trading Singapore (GMTS) reached a 20-year agreement for the purchase of 2.5 million metric tonnes of LNG on average every year. The largest gas distributor in India reported a 93% fall in net profit for the December quarter as it transferred less gas locally due to a reduction in LNG supplies as a result of a partnership with GMTS.
“The Indian economy is needing more and more gas.” Even if GMTS had not occurred, we were in the market for gas. Yes, but GMTS circumstances have forced us more,” Rakesh Jain stated.
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A wake-up call for India
According to Statista, India’s imports from Qatar account for 41% of its total imports. This data tells us that Qatar alone holds nearly half of India’s LNG supplies, and we have seen the importance of energy supplies during the Russia-Ukraine crisis. So, giving control of our supplies to a hostile nation like Qatar is very dangerous.
Qatar can paralyse the Indian LNG market in a matter of weeks or even days. It just has to source a new buyer, which it can do by offering gas at a discounted rate to other nations, but such a situation will be very dire for India. Seeing this and the Gazprom disruption together, India is rapidly in search of new suppliers of LNG.
GAIL is in discussions with a number of companies, including Abu Dhabi National Oil Company (ADNOC), for gas supplies. “Probably we will get a better deal,” Rakesh Kumar Jain stated.
India is also increasing its supplies of LNG from the USA, which is the second-largest supplier of LNG to India, but it exports a significantly smaller share of India’s total supplies, which are 13%. GAIL is expected to bring in eight additional LNG cargoes from its U.S. portfolio in 2023, which were previously sold to global customer.
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What happened with Gazprom?
Germany took full ownership of key gas market player SEFE (formerly Gazprom Germania) to ensure German gas supply security, the economy ministry of Germany stated, following EU approval of a state aid package.
Gazprom Germania, a subsidiary of the Russian energy giant Gazprom, was taken over by the German government due to liquidity issues and supply chain disruptions caused by EU sanctions imposed on Russia following the Russia-Ukraine war.
GMTS, which is a subsidiary of Gazprom Germania, had a long-term deal under which it was to supply 2.5 million metric tons, or a minimum of 36 cargoes of LNG, to GAIL during the calendar year 2022.
It defaulted on the supply of eight cargoes (shiploads) of liquefied natural gas (LNG), which invoked a 20% penalty on the agreed price. This penalty was minor in today’s terms, so the company gladly paid it and continued with its supplies diverting to Europe.
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India, on the other hand, is vigilant of this scenario, as the Indian government played a masterstroke by securing oil supplies from Russia at a discounted rate when the prices of oil were skyrocketing. The same is happening in the gas scenario: the Indian government, along with securing supplies from other countries, is investing aggressively in gas projects in Russia’s Far East.
India and Russia are both developing a facility in the far eastern region that will meet India’s gas demand and also export gas to other nations. The strategic investment by India, whether in gas or any other area, shows that India is now playing on the front foot rather than being dependent on nations for its basic needs as it did in the past.
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