Why India’s LNG Buying Surges Despite Costly Gas

Why It Matters

The shift shows India will prioritize grid reliability over cost, cementing LNG as a strategic import even in a tight Asian market. This behavior reshapes regional gas trade flows and signals long‑term demand for flexible, dispatchable power in a renewable‑heavy system.

Key Takeaways

• India’s LNG imports hit 2.1 Mt in May, up from 1.67 Mt.
• US LNG shipments to India rose six‑fold, now largest supplier.
• Heatwave drove power demand 11% YoY, prompting emergency gas use.
• Solar surplus by day, storage gap at night forces costly LNG.
• Qatar supply loss shifted imports to Oman, Nigeria, and US.

Pulse Analysis

India’s gas market is defying the broader Asian trend of demand contraction as LNG prices stay elevated. While South Korea and Japan have trimmed imports, India’s purchases climbed because extreme heat turned gas into a critical peaking fuel. The country’s reliance on imported LNG surged after Qatar, which previously supplied roughly 45% of its volume, halted shipments, prompting a rapid pivot to U.S., Omani and Nigerian cargoes. This realignment not only reshapes regional trade patterns but also underscores the limited elasticity of Indian power demand during climate‑driven stress events.

The immediate driver is a record‑breaking heatwave that pushed May power consumption 11% higher year‑on‑year and forced the grid to confront a 2.5 GW nighttime shortfall. Solar generation, now over 154 GW, floods the system during daylight, driving prices toward zero, yet storage capacity lags, leaving evenings exposed. In response, the Ministry of Power ordered gas‑based generators to standby for short‑duration dispatch, effectively turning LNG into an emergency reserve despite JKM prices hovering around $18 per MMBtu. This policy shift illustrates how operational flexibility can outweigh pure cost considerations when reliability is at stake.

Looking ahead, the persistence of high temperatures and a potentially weak monsoon raise the prospect of continued LNG imports through the summer. While India could double its gas‑fired capacity to roughly 20 GW, the lack of adequate battery storage and constrained hydro resources keep LNG as the most viable bridge. Investors and policymakers should watch for further diversification of supply sources, potential contracts for longer‑term LNG cargoes, and accelerated storage investments, all of which will determine whether India’s gas demand becomes a lasting feature of its energy mix.