* Industrial users looking for alternative fuels such as LPG, fuel oil
* After blackout, warning of crisis in Pakistan
* India may see 2-3 fewer LNG cargoes in Feb-March than usual
AHMEDABAD, India / DHAKA / KARACHI, Pakistan Jan 15 (Reuters) – Pakistan and Bangladesh are rationing gas and buyers across South Asia seeking alternative fuels after spot prices for liquefied natural gas (LNG) soared to record highs, government and industry officials told Reuters .
LNG spot price LNG-AS has nearly tripled since early November as freezing temperatures across North Asia boost demand and deplete supplies. Since July, prices have risen by a dizzying 1,000%.
Natural gas and industrial power plants across the region save gas, with the scramble for other fuels driving demand for liquefied petroleum gas (LPG) and residual oil.
In Pakistan, which relies more on spot LNG imports for its winter needs, industrial gas use is restricted to certain hours and industry executives have warned the situation has become critical.
The recent power outages were partly due to a gas shortage after buyers who bought cheap LNG earlier in the year refused to pay during recent price spikes.
“The gas crisis currently facing the industry includes cutting off gas supplies to industry as well as low gas pressure,” said Saleem Uz Zaman, president of the Karachi Industry and Trade Association.
Sui Southern Gas Company, the gas distributor for Pakistan’s southern half, said in a letter to the industry association that it was facing an “emergency situation” and pegged a daily supply gap of around 200 million cubic feet.
In Bangladesh, the government has cut gas supplies to power plants due to lower electricity demand during winter, while maintaining a steady flow of gas to industry, said a senior official at state-run Petrobangla.
IMPORTED BULLETS CANCELED
Surging prices have led to the cancellation of orders from state-owned buyers Indian Oil Corp, LNG Pakistan and Rupantarita Prakriti Gas Co. from Bangladesh.
“LNG prices are going crazy … Over the last few tenders, we have had no response from suppliers,” said Rafiqul Islam, general manager at Rupantarita Prakriti.
“We are continuing our efforts to buy from the spot market … But it is very unlikely to get competitive prices in this very volatile market,” he said.
Reliance Industries, operator of west India’s largest refining complex, has almost stopped importing LNG and turned to cheaper alternatives, industry sources said. Reliance did not respond to a request for comment from Reuters.
South Asia has become a critical growth market for LNG, with imports by India, Pakistan and Bangladesh rising 8% in 2020 to a record 50.48 billion cubic meters (BCM) despite the coronavirus pandemic hitting the region’s economies, according to ship tracking data Refinitiv.
That growth rate is the second after China’s LNG import expansion by 11.5% in 2020.
Tile makers from Morbi, the center of India’s ceramics industry, have sought permission from local authorities to switch to alternative fuels such as LPG, the Morbi Ceramics Association wrote in a letter to officials on Jan. 9.
“Fuel is a significant input cost for us, accounting for 30% of the total production cost,” he said.
India’s consumption of fuel oil has also increased after the price of gas surged.
“Whatever fuel we produce is consumed here. We have not been able to build an inventory for the oil furnace, ”said an official at the Bharat Petroleum Corp refinery who declined to be named. “The situation is completely different from what happened after the COVID-19 outbreak … Nobody can afford LNG at this level.”
India could see 2 or 3 fewer cargoes in February and March than usual, said ES Ranganathan, head of marketing at India’s largest gas transmitter GAIL (India) Ltd.
However, he expects the impact of supply to customers to be minimal. GAIL will receive 32 cargoes this year under its long-term agreement with Gazprom compared to 24 years ago, he added.
Reporting by Sumit Khanna in Ahmedabad, Ruma Paul in Dhaka and Syed Raza Hassan in Karachi; Additional writing and reporting by Nidhi Verma in New Delhi; Edited by Florence Tan, Gavin Maguire and Edwina Gibbs