India Ramps Up LNG Imports Amid Power Crunch

Despite exorbitant prices, India has been buying additional cargoes of liquefied natural gas to battle a power supply crunch that has caused blackouts in one of the world’s most populous countries.

At least two Indian utilities bought LNG cargoes on the spot market this week, for same-month delivery, at prices about three times higher than the normal for spot markets amid tightening global gas supply, Bloomberg reports, citing unnamed sources.

Natural gas only represents a tiny portion of India’s power generation mix; however, a persistent and substantial shortage of coal has forced utilities to switch to gas amid record-high temperatures that have pushed demand higher.

The shortage of coal, which is used to generate more than two-thirds of India’s electricity, emerged earlier this year, eventually leading to planned blackouts as the country entered peak demand season. The roots of the coal shortage, however, date further back when utilities failed to stock up sufficiently before the start of summer on the subcontinent.

Last year, analysts warning about a looming coal shortage in the country said that it could last for three to six months. The shortage was the result of the fast and sharp rebound in demand for electricity after the COVID lockdowns combined with supply chain snags that have plagued utilities around the world.

India is producing coal at a record rate amid the shortage, with some forecasters expecting total output of some 800 million tons in the financial year that started last month, the Financial Times reported this week.

The global LNG market is also getting tighter amid ever-growing demand from the European Union, which is in a rush to fill its storage space for next heating season and insulate itself as much as it can in case Russia turns the gas tap off for more European countries after Poland and Bulgaria.

By Irina Slav for Oilprice.com

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