Govt mulls LNG buffer mandate for terminals

New Delhi: India is weighing a plan to fund emergency liquefied natural gas (LNG) stockpiles at import terminals by raising regasification tolls, according to people familiar with the matter.The Iran war and the resulting disruption to LNG supplies through the Strait of Hormuz exposed India's vulnerability to supply shocks, prompting policymakers to revive plans for strategic gas storage.

The idea has been considered before, but was shelved largely because of its high cost.Instead of creating strategic storage in depleted gas fields, a prohibitively expensive option, the government is considering mandating LNG terminal operators to expand storage capacity at their import terminals, the people said.

No final decision has been taken on this, and the amount of additional capacity that operators would be required to build is still being weighed.Also Read: India lifts emergency natural gas supply controls imposed after LNG disruptionsRather than funding the project through the budget, policymakers are weighing a proposal to allow terminal operators to recover their investment by charging higher regasification tolls.

Gas importers could then pass on the additional costs to customers further down the value chain.Imported LNG is converted into natural gas at import terminals before being fed into the pipeline network.

Terminal operators currently charge a regasification fee of about ₹65-80 per mmBtu for the service.Mandating terminal operators would help build the storage faster than having the government finance and execute the project itself, the people said.

However, some cautioned that most Indian LNG terminals are already deeply underutilised, and imposing another layer of costs on importers could further weigh on terminal utilisation and domestic gas demand.The government has also encouraged private-sector participation in building and operating strategic crude oil reserves to reduce the fiscal burden.

"You do not run a country off a few caverns, because energy locked underground earns nothing and costs a great deal to hold," oil minister Hardeep Singh Puri recently wrote while explaining India's approach to strategic petroleum reserves. ...