Henry Hub vs Crude-Indexed LNG: PNGRB Analysis Exposes True Cost Build-Up in India

A new analysis on IndianPetroPlus.com sheds light on the fascinating story of how global LNG pricing translates into sharply higher delivered costs in India, even when benchmark gas prices appear low.

The study contrasts LNG cargoes linked to Henry Hub versus crude-indexed benchmarks, demonstrating how costs expand as gas moves from wellhead to Indian consumers. In one scenario, assuming Henry Hub at $3/MMBtu and shipping charges of $3/MMBtu, the landed LNG price balloons to $10.10/MMBtu. After customs duties, handling, regasification, taxes, and marketing margins, the ex-terminal price at Dahej works out to $11.27/MMBtu. By the time transportation tariffs and VAT are included, the final delivered cost climbs to $13.8/MMBtu-over four times the benchmark Henry Hub number.

For crude-indexed LNG, pegged at a notional $79/bbl, pricing starts at $13/MMBtu and follows a similar cost escalation, reaching around $16/MMBtu at the consumer end. The contrast shows that while Henry Hub-linked gas looks cheaper at the source, the final delivered price in India still rises dramatically because of logistics, levies, and infrastructure costs.

"India's LNG economics remain paradoxical," said analysts at IndianPetroPlus.com. "Even with Henry Hub at $3, delivered prices to Indian buyers end up closer to $14/MMBtu. This makes LNG a costlier option compared with domestic gas or competing fuels, unless pricing reforms and tax rationalization are undertaken."

The report also highlights how marketing margins, regasification charges, and state-level VAT play an outsized role in inflating consumer prices. While LNG offers cleaner combustion and flexibility, its competitive edge is eroded when global volatility and domestic taxation are factored in.

The Big Picture: India's reliance on imported LNG means global pricing structures-whether Henry Hub-linked or oil-indexed-ultimately undergo a heavy domestic cost build-up. The gap between international benchmarks and final delivered prices underscores the urgency for policy reforms, streamlined tariffs, and infrastructure optimization if LNG is to play a larger role in India's energy mix.

For detailed sector reports and analysis, visit www.indianpetroplus.com

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This release was published on openPR.