LIQUIFIED NATURAL GAS (LNG)

•  LNG can be used to generate electricity. It is often used in natural gas power plants to produce electricity, especially in regions with limited access to other energy sources.
•  LNG can be regasified and used for heating purposes in homes, businesses, and industrial facilities
• LNG is used as a fuel source in various industrial and commercial applications, including in the manufacturing, chemical, and transportation sectors.
• Some ships and vessels, especially in the maritime industry, use LNG as a cleaner and more environmentally friendly alternative to traditional marine fuels
• LNG is considered a relatively cleaner fuel source compared to coal and oil because it produces fewer emissions of greenhouse gases, sulfur dioxide, and other pollutants when burned. This has made it a popular choice for reducing emissions in power generation and transportation
•  LNG is traded globally, with significant producers including countries like Qatar, the United States, Australia, and Russia. It is transported across oceans to meet the energy needs of various regions and countries

• India’s total imports from Qatar in FY2022-23 were valued at $16.81 billion, of which LNG imports alone were worth $8.32 billion, or 49.5%, an analysis of official trade data shows
• India’s other major imports from Qatar are also fossil fuel-linked commodities and products, such as liquefied petroleum gas (LPG), plastics, and other petrochemicals.
•  India’s exports to Qatar were valued at just $1.97 billion in FY2022-23. The major exports include cereals, copper articles, iron and steel articles, vegetables, fruits, spices, and processed food products
• India imported a total 19.85 million tonnes of LNG in FY23, of which 10.74 million tonnes, or 54%, came from Qatar, the trade data show.
• This means that apart from the 8.5 million tonnes of LNG that Qatar supplied as part of the Petronet LNG term contract, nearly 2.25 million tonnes of additional gas was purchased from Qatar on spot basis last year.
• While Indian LNG importers — predominantly the public sector oil and gas companies — continue to make efforts to diversify sourcing, it could be years before the high reliance on Qatar can be reduced to a meaningful extent

• The global LNG market is a seller’s market after Russia’s invasion of Ukraine and the sanctions that have disrupted Russian natural gas supplies to Europe. After the war broke out, prices, particularly of LNG spot cargoes, surged globally
• Compared with term contracts (such as the one Petronet has with Qatar), the spot LNG market is prone to higher price volatility.
• In a supply glut, spot prices tend to fall more steeply than term contracts, as pricing in the latter is based on an agreed formula between the buyer and the seller. And when supplies are tight, spot prices tend to rise much more than term contract rates
• The war has put Qatar, the world’s largest exporter of LNG, in a unique position of strength. According to industry experts, the extreme price volatility of the past couple of years in global LNG markets has established that term contracts, and not spot purchases, are the more viable option to secure supplies at a reasonable and stable price
• This has pushed LNG importers all over the world, including India, to scout for long-term contracts with major suppliers, of whom Qatar is the foremost. Over the past few weeks, Doha has announced 27-year LNG supply deals with French, Dutch, and Italian energy majors. In the preceding months, it had signed long-term contracts to supply LNG to China and Germany