Indian state-controlled gas distributor Gail will issue more LNG tenders to swap US term cargoes with supplies closer to India for the next few months, as long as tensions in the Red Sea persist.
India's US LNG imports have reduced as cargoes have faced difficulty in transiting via the Suez canal.
Gail has sold LNG cargoes sourced from Cheniere Energy's terminal in the Gulf of Mexico to an unnamed highest bidder in Europe, Gail's director of marketing Sanjay Kumar told Argus on the sidelines of the India Energy Week in Goa on 9 February. Gail used the proceeds from the sale to source spot cargoes from Gulf countries — shipments which do not have to transit through the Suez Canal to reach India.
Conflict in the Red Sea since December 2023 has disrupted shipping operations as tankers heading to India have been taking the longer route around the Cape of Good Hope. More recently, Houthi rebels in Yemen launched attacks on cargo carriers, worsening the situation.
Cargo delays
An inability to take the shorter Suez Canal route adds up to seven days in delays for Gail's US LNG shipments to reach the 17.5mn t/yr Dahej LNG import terminal on the west coast of India, Kumar said.
Gail expects the conflict to last at least another few months.
The newest vessel that arrived at Indian ports, named Gail Urja, is also set to face a delay of another week as it will head back to the US via the Cape of Good Hope.
But Gail has also not faced any issues with cargoes supplied by former Gazprom subsidiary Securing Energy for Europe (SEFE), under a 2.5mn t/yr supply agreement, because these cargoes were contracted on a des basis, Kumar added.
The firm has a combined 5.8mn t/yr in fuel supply contracts with Cheniere Energy's 33mn t/yr Sabine Pass export terminal in Louisiana and Dominion Energy's 5.75mn t/yr Cove Point project over 20 years.
Gail was forced to consider selling LNG cargoes sourced from the US to other buyers, particularly Europe, after three vessels that delivered cargoes to Gail from the US in January returned via the longer route instead of using the Suez Canal.
The Bilbao Knutsen, carrying a cargo from Trinidad's Atlantic LNG sailed via the Cape of Good Hope instead of the traditional Suez Canal route last month. The route avoided the shorter but conflict-ridden Bab al-Mandeb passageway linked to the Suez Canal.
But barring this lone cargo, India's LNG imports have been relatively unaffected by the Red Sea conflict. Over 80pc of India's LNG supplies in January came from the Middle East, according to data from oil analytics firm Vortexa.
