Liquefied Natural Gas (LNG) prices are currently at $5 per million metric British thermal unit (mmbtu), down from a peak of $10 per mmbtu as recently as November 2018, credit rating agency CRISIL Research said in its latest report.
The decline has been due to increasing supply in global markets from newly commissioned projects in Australia and the US. Moreover, a few of the liquefaction capacities in US and Australia became operational in the last quarter of fiscal 2019, putting downward pressure on spot LNG prices, the agency said.
CRISIL expects spot LNG prices to trend lower in 2019, averaging $5-6 per mmbtu. Beyond this year, prices could increase slightly to $6-7 per mmbtu, as seasonal demand (winter season) improves.
Additionally, the government plans to waive off customs duty (2.57%) as well as bring natural gas under the Goods and Services Tax or GST regime (lower rate at 5% vs 15-20% VAT at present). This will reduce the delivered cost of LNG further, reducing the cost of generation for power plants.
Over the next 4-5 years, the US and Australia are expected to commission 60 MTPA of LNG terminals. This is expected to shore up LNG supply, keeping prices under pressure at $5-7 per mmbtu over the medium term, the report said.
Falling spot prices of liquefied natural gas (LNG) makes this an opportune time for revival of stressed gas-based power assets in the country, the report said.