India is under a three-week lockdown from 25 March, to contain the spread of the coronavirus outbreak. Wood Mackenzie analysts discuss what this means for the coal, gas and LNG, and oil products sectors.

Impact on coal demand:

Principal analyst Pralabh Bhargava said: “Coal stocks at power plants and mines reached record highs of 40 million tonnes (Mt) and 60 Mt by 25 March, and many are already rejecting shipments from Coal India.  This situation is due to lower thermal coal demand over the last 15 days and robust production in recent months.

“Movement of imported coal will be restricted due to constraints at ports and infrastructure. We expect the Force Majeure announced by port operators to have a limited impact on coal imports, as it is considered an ‘essential’ service.”

Impact on gas and LNG:

Senior analyst Vidur Singhal said: “The transport and industrial sectors have been impacted. The average daily gas consumption across sectors stood at around 151 mmcm/d (million cubic metres per day) in 2019. We expect about 18-20% reduction in daily gas demand post lockdown. Also, demand from refineries and fertiliser plants, and anchor gas customers, have reduced in line with their utilisation rates with significant downside risk if the lockdown is extended.

“Gas aggregators are in a tight spot. LNG buyers declared Force Majeure once port operations stopped. Regas terminals were oversupplied heading into the lockdown as all major buyers procured low-priced spot volumes in advance.  Even long-term LNG volumes are at risk as demand shrinks.”

Impact on oil products demand and refining:

Research analyst Qiaoling Chen said: “We estimate that gasoline, jet fuel, and diesel demand will be down by 25%, 33%, and 13% yoy respectively in the second quarter while fuel oil, refinery gas demand will decline by 8%, 20% respectively at the same time.

“Overall, total demand is expected to decline by 871,000 barrels per day (b/d) (-17%) yoy in April. The negative impact is likely to last through Q2 2020 with most oil products returning to normal growth in the third quarter of this year except for jet fuel demand, which is expected to return to normal growth only in the first quarter of next year.”

On refining, research analyst Kendrick Ng said: “Refiners are reducing runs in response to lower oil products demand and weakness in refining margins. We estimate that the country will process about 800,000 b/d less crude in April, month-on-month basis, resulting in about 17% decline in the utilisation rate.

“Indian PSUs (public sector undertaking) are expected to be hurt the most amid tepid domestic demand, high storage level and lesser access to export markets, especially inland refineries.”