India Considers Funding LNG Stockpiles Via Higher Import Terminal Tolls
Quick Look
- India is exploring a plan to finance emergency liquefied natural gas (LNG) stockpiles by increasing regasification tolls at import terminals.
- This move aims to bolster energy security following supply disruptions caused by the Iran war, reviving previous plans shelved due to high costs.
- The government is considering mandating terminal operators to expand storage capacity, with investment recovery through higher tolls passed on to customers.
AI-generated summary
Why It Matters
India is considering a plan to fund emergency liquefied natural gas (LNG) stockpiles by raising regasification tolls at import terminals, prompted by supply disruptions from the Iran war.
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 disruptions
Rather 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.
Open Questions
- What is the final amount of additional storage capacity required?
- How will increased tolls affect domestic gas demand?
- What is the timeline for a final decision?
