Several urea plants in the country have cut production by half because the West Asia crisis has disrupted liquefied natural gas (LNG) supplies flowing through the Strait of Hormuz, industry sources said.
Currently, LNG supplies, a key feedstock in urea manufacturing, is in the range of 65-70% of the normal level, while a few units are operating at 50% of their capacities based on the gas allocation formula, industry sources said.
While invoking the essential commodities act for the first time for ensuring supply of natural gas to the fertilizer plants on March 10, the government has stated that it would ensure supply of natural gas to the fertilizer plants on 70% of their past six-month average gas consumption, subject to operational availability.
Long-Term Supply Crunch
Meanwhile, Petronet LNG, which operates the largest liquefied natural gas receiving terminal, declared force majeure after upstream suppliers expressed their inability to deliver contracted volumes amid disruptions to cargoes transiting through the strait from Qatar and the United Arab Emirates (UAE). Iran’s recent attack on Qatar’s LNG facility is expected to hit its capacity to exports.
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Currently, 50% of LNG used in domestic urea manufacturing is imported from Qatar, under a long-term agreement, while the supply has been disrupted because of conflict in west Asia.
Strategic Pivot
To bridge the supply challenges, the government stepped up LNG from the spot market on March 17. The government has secured an additional 7.31 Million Metric Standard Cubic Meters per Day (MMSCMD), the total supply to urea plants has jumped by 23% (from 32 MMSCMD to 39.31 MMSCMD), according to an official note.
Last week to boost LNG supplies, the government approved purchase of LNG from spot markets in countries such as Australia, Russia and the United States.
According to an official statement, this technical intervention is set to yield immediate results. “Domestic Urea production is projected to climb by close to 23% from 54,500 tonne a day to 67,000 tonne a day.
“Crucially, this brings the plants’ gas requirement fulfillment to 76% of their average needs, up significantly from the previous 62%,” the note stated. Currently, around 10% to 15% of LNG is purchased from the spot market while the rest is sourced under long term contracts with Qatar and the UAE.
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Officials said that given the supply constraints, the share of spot buying of LNG may increase, which will certainly put additional expenditure on the government. This comes at a time when some gas-based urea units have advanced their dates of closure for annual maintenance due to the LNG situation.
About 80% of urea production in the country uses LNG while the rest uses domestic gas.
Thirty out of 32 urea units use natural gas as feedstock.
At present the urea stock is 6.11 million tonne (MT) against 5.52 MT reported a year ago.
TOPICSLNGUreaThis article was first uploaded on March twenty-two, twenty twenty-six, at one minutes past seven in the evening.