GAIL (India) Limited is looking to buy more liquified natural gas (LNG) from the spot market, and is likely to shell out more than double the price of contracted gas available under long-term contracts.
Reportedly, GAIL recently purchased LNG shipments at over $40 per metric million British thermal units (mmBtu). It is expected that GAIL may buy more at such inflated prices. The move to look for spot purchases of LNG is on account of default in supplies by Russia’s Gazprom since May under a pact signed in 2012. The current spot prices are much higher than the contract prices of $15-17 per mmBtu.
The company may resort to minor supply cuts for some of its customers, and is likely to supply the expensive gas to city gas distribution and compressed natural gas (CNG) companies as retail prices in these sectors are already moving in tandem with international oil and gas prices. The supply crunch comes at a time when India’s natural gas consumption is on the rise, as the government plans to focus on a gas-based economy.