LNG demand set to rebound in China, India, Pakistan after US-Iran war ends

The supply disruption has sent Asian spot LNG prices to nearly $30 per million British thermal units (MMBtu), compared with around $10 per MMBtu before the war.

In Short

• LNG demand in China, India and Pakistan may recover after Middle East supply issues ease
• India's industries sensitive to high LNG prices are shifting to coal and oil
• Pakistan expects demand rise if LNG prices drop and new supplies arrive

LNG demand in China, India and Pakistan could recover from multi-year lows once the Middle East supply crunch eases and new supplies become available, according to industry executives, reported Reuters. The disruption has pushed up gas prices and encouraged some users to switch to coal and oil.

The conflict has prevented Qatar and the United Arab Emirates from sending most of their LNG through the Strait of Hormuz, a key route for global gas supplies.

The supply disruption has sent Asian spot LNG prices to nearly $30 per million British thermal units (MMBtu), compared with around $10 per MMBtu before the war.

The sharp rise in prices is affecting gas demand in India, particularly among industries that are sensitive to fuel costs. Some businesses have switched to other fuels when natural gas became less viable.

GAIL and PetroChina have also deployed trading teams to find alternative LNG cargoes to replace supplies from Qatar and the UAE.

Shell, the world's biggest LNG trader, estimates that around 36 million tonnes of LNG from the Middle East have been lost so far this year.

INDIA SEES PRICE-SENSITIVE DEMAND

High LNG prices have put pressure on demand across the country. GAIL Chairman Deepak Gupta said several sectors are sensitive to gas prices and can move to other fuels when LNG becomes too expensive.

Petronet LNG CEO Akshay Kumar Singh also highlighted affordability as a major challenge. While demand for gas remains, consumers are particularly sensitive to prices and are looking for greater stability.

GAIL said India initially had to limit gas consumption because of the supply disruption. However, supplies have since been restored to around 90% to 95% as the country increased its ability to source LNG from other markets.

Gupta expects around 150 million to 200 million tonnes of LNG to come online over the next four to five years.

PAKISTAN COULD SEE DEMAND RETURN

Pakistan is also expected to see higher LNG demand if prices become more affordable and additional supplies enter the market.

Pakistan LNG CEO Masood Nabi said demand could increase with new volumes becoming available.

Solar power has helped Pakistan deal with power shortages in recent years, but gas demand continues from households and other sectors.

CHINA DEMAND MAY RECOVER

PetroChina International CEO Luo Yizhou expects demand from gas-fired power plants in China to recover when LNG prices return to a more normal range of $7 to $9 per MMBtu.

Strong growth in electricity consumption is expected to support this recovery.

ExxonMobil also expects substantial long-term LNG demand growth in China. The company pointed to the country's extensive LNG import infrastructure along its east coast as a factor supporting this outlook.

The company remains confident about diversifying its LNG portfolio, with interests across the US, Mozambique, Qatar, Papua New Guinea and Australia. It is also continuing to assess new opportunities while focusing on supply costs.

Industry executives from GAIL, PetroChina and ExxonMobil expect LNG consumption to pick up once prices fall and supply conditions improve.

The expectation is that the current decline in demand will be temporary, with consumption in China, India and Pakistan likely to strengthen as additional LNG supplies come online and prices become more affordable.

- Ends