PSUs will be worst hurt by weak demand
India’s power demand has declined on average 30% year-on-year (yoy) and 25% week-on-week basis on 28 March following the 3-week 25 March lockdown.
“Demand from the industrial and commercial sectors are already falling,” noted Wood Mackenzie Principal analyst Pralabh Bhargava on 30 Mar 2020.
Load shape is moving to residential from industrial due to teleworking and home-schooling.
“We expect an average overall power demand decline of 35% until 14 April and a progressive recovery thereafter,” said Bhargava.
Coal stocks at power plants and mines reached record highs of 40 Mt and 60 Mt by 25 March. Coal India shipments are being rejected by many customers.
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,” said Bhargava.
Impact on gas and LNG
The transport and industrial sectors have been impacted. The average daily gas consumption across sectors stood at around 151 mmcm/d in 2019.
“We expect about 18-20% reduction in daily gas demand post lockdown,” added senior analyst Vidur Singhal.
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 oil products demand and refining
Research analyst Qiaoling Chen estimates that second quarter gasoline, jet fuel, and diesel demand will be down by 25%, 33%, and 13% yoy, respectively. The fuel oil, refinery gas demand will decline by 8% and 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,” said Chen.
Research analyst Kendrick Ng sees refiners reducing runs in response to lower demand for oil products and weakness in refining margins.
Ng estimates 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 petroleum storage level and lesser access to export markets, especially inland refineries, according to Ng. fiinews.com
