Indian deepwater gas at risk from spot LNG Report

Insight 14 July 2020

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Report summary

Deepwater projects are going to drive India's gas production starting 2021. Gas from these projects, operated by Reliance and ONGC, will have to compete for market share against cheap spot LNG. While gas demand is recovering post coronavirus, spot LNG prices should stay low till 2022. We believe that these deepwater volumes are at risk of being replaced by spot LNG. However, not all deepwater gas is equal. Upstream economics, market location and buyer preferences will all dictate the amount of domestic gas which is at a higher risk of being replaced.

Executive summary
- Deepwater gas from Krishna-Godavari basin set to provide incremental domestic gas supply
- Only 15% of new deepwater gas has been contracted
- Key outcomes of the RIL/BP gas auction in November 2019
- Post-pandemic global LNG market still offers upside for spot LNG imports
- Not all deepwater gas is at equal risk
- Andhra Pradesh and Telangana – small demand centres but with clear advantage for domestic gas
- Upstream economics - Reliance can go lower, ONGC struggling to compete
- Just how low will companies have to go?
- Buyer preferences – can tilt towards spot LNG but a balanced approach is more likely
- In conclusion
- Appendix