CNG and cooking gas prices likely to rise:Gas production halted in Qatar, India’s supply down by 40%

Due to the ongoing conflict in the Middle East, the prices of CNG (compressed natural gas) and PNG (piped natural gas) in India may rise. Following drone attacks in Iran, Qatar—the largest supplier of gas to India—has halted production at its liquefied natural gas (LNG) plants. This has disrupted the movement of LNG shipments to India, resulting in a sharp 40% cut in domestic gas supply. India imports about 40% of its LNG requirement—around 27 million tonnes annually—from Qatar. LNG imported from abroad is converted into gas to supply CNG and PNG. With this supply disrupted, city gas distribution (CGD) companies have warned that if the situation does not improve soon, CNG and PNG prices could increase. Route for oil and gas supply almost blocked India’s biggest challenge is the near closure of the Strait of Hormuz, a narrow sea passage through which countries like Qatar and the UAE export their oil and gas. Due to the conflict between Iran and Israel, this route is no longer secure. Fewer ships passing: On 28 February, 91 ships passed through this route, but now the number has dropped to just 26. India’s dependence: India imports 50% of its crude oil and 54% of its LNG through this route. Three major Petronet ships—Disha, Rahi, and Aseem—are currently unable to reach Qatar’s Ras Laffan port. Drone attack on plant halts LNG production According to Qatar Energy, Iran carried out a drone attack on Qatar’s plants located in Ras Laffan and Mesaieed Industrial City. For security reasons, the company has temporarily halted LNG production. Last week, the US and Israel had struck Iranian targets, following which Iran targeted US bases and ports in countries like the UAE, Qatar, Kuwait, and Saudi Arabia. Threat to fertiliser and power production In India, imported LNG is not only used for household consumption and vehicles but also for power generation and urea (fertiliser) production. Electricity costs may rise: If the gas shortage continues, electricity produced from gas-based power plants will become more expensive. Fertiliser shortage: Gas is a key raw material for the fertiliser sector, and reduced supply could affect urea production. CNG companies warn government of crisis Considering the gas shortage, the Association of CNG Entities (ACE) has written to the state-owned company GAIL seeking clarity. Companies have warned that if cheaper gas from Qatar is not received, they will have to buy expensive gas from the spot market. Price difference: Gas on the spot market is currently priced at $25 per unit, more than double the contracted gas price. Shift to EVs: Companies fear that if CNG prices rise sharply, people may permanently switch to electric vehicles (EVs), causing significant losses to the gas sector. Petronet LNG issues ‘force majeure’ notice India’s largest gas importer, Petronet LNG, has sent a ‘force majeure’ notice to QatarEnergy, meaning the company cannot supply gas as per the agreed contracts due to a major reason such as war or crisis. The company has also issued force majeure notices to GAIL, Indian Oil (IOC), and Bharat Petroleum (BPCL), informing them of reduced gas supply. It clarified that business losses arising from the war are not covered by insurance.