Commercial users rush to LPG as LNG prices pinch

Commercial users consumed nearly a fifth more LPG in the first nine months of this financial year as they switched from expensive natural gas.

Total LPG consumption in India amounted to 21,256 thousand metric tonnes from April-December 2022, up 1.8% from a year earlier, according to the oil ministry. The consumption by households, which comprise about 89% of total consumption, was up barely 0.3% year-on-year but sales to commercial users saw a surge. Packed LPG sold to commercial customers increased 18.4% while bulk LPG went up 12% year-on-year.

Factories, restaurants and shops, which routinely consume natural gas, sought alternatives after gas prices jumped to record highs in 2022. “LPG came in handy for many factories and shops. LPG prices have been declining and it’s easy to procure and use,” said an industry executive, who did not wish to be identified.

Prices of packed LPG cylinders for commercial use have been falling since May 2022, dropping by a quarter in India in the seven months to December. Liquefied natural gas (LNG) prices in the Asian spot market too are sharply down from their August peak but are still quite high, trading at around $18 per mmBtu. LNG obtained under long-term contracts, where prices are linked to crude, are available at about $12 per mmBtu, much higher than the average in past few years.

Import of LPG has shot up in the past few months. Average imports in the three months to January were 15% higher than in the preceding three months, as per energy cargo tracker Vortexa. The jump in imports was mainly due to seasonality as more energy is needed for the same job in winter, said an industry executive. The switch from natural gas to LPG by many customers was also a contributor, he said.

LPG imports have mainly increased at the Western ports, primarily because they are located close to several gas-consuming factories, said the executive.