Government Mulls LNG Buffer Stock Mandate for Import Terminals, Eyes Higher Regasification Charges

The Centre is considering a proposal to create emergency liquefied natural gas (LNG) reserves by requiring import terminal operators to expand storage capacity, as per The Economic Times news report.  

The discussions were revived after recent tensions in West Asia disrupted LNG trade through the Strait of Hormuz, a route that handles a large share of global LNG shipments. Officials said the proposal is still under examination and no final decision has been taken. 

LNG Storage at Existing Facilities 

Instead of developing strategic gas reserves in depleted gas fields, the government is studying whether existing LNG import terminals can accommodate additional storage. The earlier underground storage plan was set aside because of the large investment required.  

By using existing import infrastructure, policymakers expect storage capacity could be added without creating a separate network of strategic gas facilities. 

Funding Model Under Discussion 

The government is not planning to finance the project through budgetary allocation. Instead, terminal operators may be allowed to recover their investment through regasification charges.  

LNG imported into India is converted into natural gas at these terminals before it enters the pipeline system. Regasification charges currently range between ₹65 and ₹80 per mmBtu.  

If revised, the additional cost would move through the supply chain and could eventually be reflected in the price paid by gas consumers. 

Existing Capacity Remains Underutilised 

The proposal is being discussed at a time when several LNG import terminals are operating below their installed capacity. While additional storage may improve preparedness during supply disruptions, it would also require fresh investment by terminal operators.  

Higher processing charges could increase the cost of imported LNG for industries that depend on natural gas as a fuel or feedstock. These issues remain part of the ongoing discussions. 

Linked to Broader Energy Policy 

The proposal is consistent with the government's recent approach towards strategic energy infrastructure. Private participation has already been encouraged in the development and operation of strategic crude oil reserves to reduce the burden on public finances.  

A similar structure is now being considered for LNG storage, with private operators expected to build and maintain the additional capacity. 

Read More: India Cuts Windfall Tax on Diesel, ATF Exports, Raises Petrol Export Duty From Today! 

Conclusion 

The LNG storage proposal remains under consideration, with discussions continuing on implementation and financing. No official timeline for a decision has been announced. 

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