New Delhi: State-run oil and gas companies currently in talks with gas producers around the world for long-term liquefied natural gas (LNG) contracts fear further softening of prices amid a volatile energy market. Wait-and-see approach has been adopted. and supply concerns.
A person with knowledge of the matter said although talks have dragged on for more than a year, a larger deal will be signed once prices fall further.
“Now may not be an appropriate time to seal long-term contracts. Though prices have come down from multi-year highs, they may fall further with lack of demand,” the person said.
Spot LNG prices have fallen from an average of $45 per mmBtu to around $14-15 per metric million British thermal unit (MMBtu) in the July-September quarter of the current fiscal.
Indian public sector oil and gas majors, including Indian Oil Corporation Limited (IOCL) and GAIL, have been looking for long-term contracts for the purchase of LNG with major international gas producers for the past one year, as Russia’s Gazprom announced plans to end May 2022. has defaulted in contractual supply to GAIL. This led to a worldwide chase for supplies and a move to expensive spot buying.
Queries sent to the Petroleum Ministry, IOCL and GAIL remained unanswered till press time.
Indian companies have long-term LNG contracts for 22 million tonnes per annum. Gazprom cut off supplies because spot gas prices were much higher than those negotiated under long-term contracts. Besides GAIL, other state-owned oil and gas companies have also stepped up their efforts to bag more and more long-term contracts for LNG.
Another official said that Gazprom has not resumed its supplies under the contract and talks are still underway between the two countries to resolve the issue.
GMTS had entered into an agreement with GAIL for supply of 2.5 million tonnes of LNG per year for 20 years from 2018-19. While Russian long-term LNG cargoes started arriving in India in June 2018, supplies have been stalled since May 2022 in the wake of the Ukraine war.
On 29 September 2022, Peppermint The report said that India has approached the US, UAE, Saudi Arabia and Iraq for LNG supplies.
IOCL and GAIL are in talks with UAE’s Abu Dhabi National Oil Company (ADNOC) for a long-term supply contract. On January 27, Peppermint had informed that the talks are at a very advanced stage.
According to sector experts, due to increase in India’s natural gas consumption from fertilizer and city gas distribution sectors, India will remain heavily dependent on LNG imports despite projected growth in domestic natural gas production and long-term contracts are important as spot Prices have been extreme and volatile as seen in 2022.
However, prices have declined of late in the spot markets. A recent report from S&P Global Commodity Insights said that falling LNG prices in the coming months are set to revive demand for the fuel in South Asia, with some countries already marketing through tenders. Coming back.
“Prices declined as demand weakened in Northeast Asia amid expectations of mild weather and ample reserves, as well as resumption of Freeport LNG in the US,” it said.
India is looking at diversifying its sources of energy imports to ensure energy security. India is dependent on imports for 85% of its oil needs and 55% of natural gas demand. So far in FY23 (April-January), India has imported LNG worth $14.88 billion, up 36.46% from $10.90 billion during the same period in FY22. Qatar has so far been India’s largest supplier, followed by the United Arab Emirates and the US.
Keeping in view the growing demand of gas for the energy security requirement of the country, India is also planning a strategic gas reserve, which will come up in the form of joint ventures of public sector companies or public-private partnership (PPP). may come
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