Key Moments
- Spot LNG prices jumped to $19 per MMBtu from an average of $11-12 MMBtu seen during April-February of the current fiscal year in GAIL’s latest procurement.
- The government has earmarked over Rs 600 crore to secure additional spot LNG for fertilizer plants amid supply concerns linked to the virtual blockade of the Strait of Hormuz.
- Authorities have committed to maintaining natural gas supplies to fertilizer plants at 70% of their past six-month average consumption under the Essential Commodities Act.
Spot LNG Prices Spike Amid Supply Jitters
The spot market price of liquefied natural gas (LNG), a critical input for urea manufacturing, has risen sharply to $19 per metric million British thermal units (MMBtu) in the latest tender by state-owned GAIL, according to sources. This compares with an average level of $11-12 MMBtu recorded over April-February of the current fiscal year.
Sources indicated that GAIL initiated a spot LNG purchase on Tuesday after a virtual blockade of the Strait of Hormuz – a key route for imports from Gulf producers – raised fresh concerns over the continuity of gas supplies.
Government Support and 70% Supply Commitment
To shore up availability for the fertilizer sector, sources said the government has set aside more than Rs 600 crore to procure LNG from the spot market for fertiliser plants on an interim basis.
For the March 18-31 period, fertilizer units had sought more than 8 million metric standard cubic meters per day (MMSCMD) of LNG through the Empowered Pool Management Committee (EPMC). “Around 7 MMSCMD have been awarded to bidders for supply”, source said. Spot LNG is expected to reach the country soon.
With incremental gas sourced from the spot market, utilization rates at fertilizer plants could improve to a range of 74% to 78%, according to sources.
Current Allocation and Utilization Snapshot
| Metric | Detail |
|---|---|
| Recent spot LNG price | $19 per MMBtu |
| Average LNG price (April-February, this fiscal) | $11-12 MMBtu |
| Government provision for spot LNG for fertilizers | Over Rs 600 crore |
| Requested LNG under EPMC (March 18-31) | Over 8 MMSCMD |
| Awarded LNG supply | Around 7 MMSCMD |
| Expected fertilizer capacity utilization with spot LNG | 74% to 78% |
| Mandated gas supply level to fertilizer plants | 70% of past six-month average consumption |
Strategic Diversification of LNG Sourcing
In a move to strengthen LNG availability, the government recently authorized increased spot purchases from markets including Australia, Russia and the United States.
At present, sources indicated that approximately 10% to 15% of LNG is obtained via the spot market, with the balance secured under long-term contracts with Qatar and the United Arab Emirates. Officials noted that ongoing supply constraints may push the share of spot procurement higher, which would add to the government’s expenditure.
Impact on Urea Units and Maintenance Schedules
The tightening LNG situation has already prompted some gas-based urea plants to bring forward their planned shutdowns for annual maintenance. Currently, about 50% of the LNG used in domestic urea manufacturing is imported from Qatar under a long-term arrangement, and this flow has been disrupted due to conflict in west Asia.
In response to the emerging risk to fertilizer production, the government recently invoked the Essential Commodities Act for the first time to secure natural gas for fertilizer plants. At that time, authorities assured that natural gas would be supplied to fertilizer units at 70% of their average consumption over the previous six months, subject to the operational status of the plants.
Sector Structure and Role of LNG in Urea Production
Approximately 80% of the country’s urea output relies on LNG as feedstock, with the remaining share dependent on domestic gas. Out of 32 operational urea plants, 30 currently use natural gas as their primary feedstock.
The Fertiliser Association of India (FAI) highlighted that the ongoing disruption has affected the supply of gas feedstock and stated that it is coordinating closely with the government to prioritize gas allocation for urea production.
This article was first uploaded on March eighteen, twenty twenty-six, at twenty-five minutes past eight in the night.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
