India’s New Plan to Improve LNG Terminals: What You Need to Know
India’s Petroleum and Natural Gas Regulatory Board (PNGRB) has released a draft proposal to enhance regulatory control over the country’s liquefied natural gas (LNG) terminals. This move aims to address the issue of capacity underutilization and bring greater transparency to the sector.
Why the Change?
Most of India’s LNG terminals, except for the Dahej terminal, are operating at less than 50% capacity. This chronic underutilization has led the PNGRB to propose measures to optimize the use of existing infrastructure and ensure more efficient operations.
An industry source said, “We’ve been putting up more capacity than required … so this move will tackle that aspect.” Another source added that the proposed changes would allow new suppliers to access the terminals, fostering increased competition and potentially lowering costs.
Expert Opinions
Akshay Modi, South Asia analyst for natural gas, LNG, and hydrogen at S&P Global Commodity Insights, said, “Most LNG terminals, except Dahej, are operating way below 50% capacity, leading PNGRB to consider regulating them due to underutilization.” He added that while the regulation might slow down the development of LNG regasification infrastructure, it would enhance transparency for downstream consumers and promote open access.
Impact on LNG Imports
Despite the increased regulatory oversight, India’s reliance on LNG imports is not expected to diminish. Analysts at Commodity Insights noted that India’s LNG imports in the first quarter of 2024 surged by 44% year-on-year, driven by a significant 51% decline in spot prices and robust demand across all downstream sectors.
New Requirements
The draft proposal outlines several critical requirements for new LNG terminal projects:
- Entities planning to build an LNG terminal must notify the PNGRB before making a final investment decision.
- New LNG import projects will require a certificate of registration from the Board.
- Developers must publicly disclose their tariffs for regasification and other charges.
- The regulator’s approval for new units or expansions will be based on factors like promoting competition, avoiding unnecessary investments, and ensuring an adequate national gas supply.
Moreover, the PNGRB will have the authority to impose fines on developers if project schedules or start-up dates are delayed. Companies planning new capacity must have a credible business plan for capacity utilization and will need to furnish a bank guarantee equal to 1% of the estimated project cost of the terminal or Indian Rupee 250 million (USD 3 million), whichever is less.