India's liquefied petroleum gas (LPG) imports are set to surge in the June quarter as a move to provide free cooking gas coincides with lower crude processing by refiners hit by collapsing local fuel demand, company officials said.
Indian refiners are processing less crude oil into fuels like LPG as industries close during a 21-day nationwide lockdown from March 25, aimed at preventing the spread of coronavirus. The outbreak has also hit overseas fuel demand.
Last week India announced it would provide free cooking gas cylinders to poorer citizens for three months, under a scheme meant to nudge them to adopt the cleaner fuel. Normally beneficiaries of the scheme get LPG at cheaper rates.
Sanjiv Singh, chairman of the country's top refiner Indian Oil Corporation Ltd, said meeting LPG demand was "a challenge".
"When demand for other products is shrinking, consumption of LPG is very high. The challenge may continue if the lockdown is not ended," he said.
India's LPG imports could rise by as much as 700,000 tonnes a month, he said, if about 70% of the 80 million beneficiaries under the scheme for poorer citizens opt for refills.
"All additional demand and a shortage of domestic production will be met through imports," Singh said.
India's Hindustan Petroleum Corp Ltd has already issued a tender to buy 245,000 tonnes of LPG for delivery in April to early May, according to a tender document seen by Reuters.
"The key oil and gas producing nations like Saudi Arabia, Qatar and Kuwait have sufficient LPG to meet India's needs," said R. Ramachandran, head of refineries at Bharat Petroleum Corporation Ltd.
"India's imports would go up as many refineries are not operating at 100% capacity."
Indian oil minister Dharmendra Pradhan, after speaking to his Saudi counterpart on Thursday, said Saudi Arabia had assured continued supply of LPG to support Indian demand.
A reduction in LPG demand from businesses like hotels and restaurants will be offset by people cooking at home instead, said Senthil Kumaran, consultant at FGE.
He said FGE expects around 1.7 million barrels per day (bpd) less crude processing in April, leading to a loss of about 50,000-60,000 bpd in LPG output.
IOC's Singh said demand for fuel, mainly diesel, in India will get some support from the government allowing movement of goods through trucks during lockdown.
Consultancy Wood Mackenzie expects India's April fuel demand to be 871,000 bpd or 17% lower than a year ago, and forecast that the 'negative impact' on local fuel consumption would continue in June quarter.
It estimated that India's gasoline, jet fuel, and diesel demand will be down by 25%, 33%, and 13% year-on-year respectively in the second quarter.