Indian liquefied natural gas (LNG) importers have issued force majeure notices to suppliers as domestic gas demand and port operations are hit by a nationwide lockdown to curb the spread of coronavirus, industry sources told Reuters.
Any reduction in purchases by India, Asia's third largest economy and a top importer of the fuel, is likely to further hit LNG prices, already cut by a drop in demand in China, where the virus emerged.
India imposed a sweeping, 21-day lockdown of its 1.3 billion residents on March 25, and is only allowing the supply of essential commodities. Several industries shut operations and some ports in the country declared force majeure.
This is spilling into the LNG market, several of the sources said.
Spot prices in Asia LNG-AS fell to a record low in February but had been rising due to India's LNG purchases and a slow recovery in China as people returned to work. But with gas use down in Europe and now India, prices have started to reverse recent gains.
India accounted for about 7% of global LNG imports in 2018, according to the International Gas Union, a global trade association. India's top gas importer Petronet LNG has served a force majeure notice on Qatargas and is seeking delayed delivery of cargoes, two sources said.
"Gas demand has reduced drastically and it is likely to go down further," a source with gas utility GAIL (India) said.
"Only fertiliser, power and refineries are running at parcel loads. Other local buyers have already issued force majeure so where should we sell LNG?" the source said, adding that his firm had served force majeure notice to some suppliers and was sending notices to the remaining sellers.
India's Gujarat State Petroleum Corp (GSPC) has also issued force majeure notices to its LNG suppliers, two sources said.
"Performance under the contract with sellers will be delayed due to lockdown ... most of our customers have already sent force majeure to us. Industries like chemical, textile and ceramics that do not qualify under category of essential commodities are closing," a source at GSPC said.
U.S. exports are expected to fall in coming months as a result, Goldman Sachs said.
GSPC has cancelled a tender to import 11 cargoes of LNG for deliveries in May 2020 to March 2021, the company source said.
India's daily gas send-out to domestic customers has dropped significantly, which has in turn caused LNG storage tanks to fill to the brim, with buyers unable to accept any more cargoes, another source said.
"We may soon see cargoes meant for India being diverted to China, which is the complete opposite of what happened a month ago," the source said.
GAIL, GSPC, Petronet and Qatargas did not respond to Reuters' requests for comments.
Falling local demand could curb the gas output of Oil and Natural Gas Corp (ONGC), India's top oil and gas producer, its Chairman Shashi Shanker told Reuters.
"As of now there is no impact on the production of oil and gas, but in the coming days gas production might get affected because of less off-take in view of the decrease in domestic demand," he said.
(Writing by Emma Yang Editing by Harry Huo)
For any questions, please contact us by firstname.lastname@example.org or +86-351-7219322.