India and China to Restore LNG Intake as Middle East Supply Normalizes
GAIL and PetroChina executives indicate that the current drop in Asian LNG consumption is a temporary reaction to price spikes rather than a structural shift, expecting demand to rebound once global supply stabilizes.
Executives from India’s GAIL and China’s PetroChina assert that the recent decline in liquefied natural gas consumption across Asia is a direct, temporary response to elevated spot prices, not a permanent loss of demand. Speaking at the Gastech conference in Bangkok, leaders from both major distributors emphasized that industrial and power sector buyers are currently substituting gas with cheaper fuels due to the price surge, but these shifts are expected to reverse once the supply crunch eases.
The pressure on the market stems from the disruption of roughly one-fifth of global LNG flows through the Strait of Hormuz, which has cut off significant volumes from Qatar and the United Arab Emirates. This bottleneck has driven Asian spot prices from approximately $10 per million British thermal units to nearly $30. In response, GAIL has restricted gas allocations to manage costs but has since restored supply to 90-95% of previous levels by sourcing cargoes from alternative markets, while PetroChina has deployed trading teams to secure replacement volumes.
Price sensitivity drives fuel switching
India has experienced a sharper impact on demand than its neighbors because a larger portion of its industrial base is price-sensitive and capable of switching fuels. GAIL Chairman Deepak Gupta noted that when gas prices become economically unviable, sectors such as manufacturing and power generation pivot to alternative energy sources. This dynamic has forced the company to actively manage consumption, though the underlying infrastructure and intent to use gas remain intact, waiting for price signals to align again.
China demand suppressed by costs
In China, the reduction in LNG imports is similarly tied to cost prohibitions in the power generation sector. PetroChina International CEO Luo Yizhou stated that demand has been temporarily suppressed by high prices rather than structurally destroyed. He indicated that gas-fired power plants are likely to resume normal operations once spot prices fall back to the $7-9 per MMBtu range, noting that overall electricity consumption in the country continues to grow despite the current dip in natural gas imports.
New capacity expected to lower prices
Industry leaders anticipate that the current market squeeze will ease as new production facilities come online globally. Shell’s President for Integrated Gas, Cederic Cremers, reported that the world has lost about 36 million tonnes of Middle Eastern LNG so far this year, intensifying competition between Asian and European buyers. However, GAIL projects that 150 million to 200 million tonnes of additional capacity could enter the market within four to five years, a volume that should help normalize prices and support a recovery in demand across major Asian economies.
