Page 4 - AsianOil Week 23

AsianOil SOUTH ASIA AsianOil

India seeks to capitalise

on depressed LNG prices

State-run Petronet LNG not only wants better prices for term
supplies but is also pushing for indexation to spot prices

COMMENTARY INDIA is reviewing its approach to long-term dampening growth rates and increasing
liquefied natural gas (LNG) supply contracts uncertainties.”
following a pricing downturn over the past year For India, which is already seeing its gas
WHAT: and half owing to both oversupply and shrinking demand nearing pre-lockdown levels, a
Petronet LNG has demand. depressed wider market offers opportunities for
suggested that prices in Before the onslaught of the coronavirus better LNG supply deals.
long-term contracts could (COVID-19) pandemic on fossil fuel demand,
be fixed at a discount to LNG prices were already being pinched by Spot vision
West India Marker. unseasonably warm winter temperatures and State-run Petronet outlined its plans this week to
the steady commissioning of new export pro- adopt a new pricing mechanism for long-term
WHY: jects. After prices fell to a record low in 2019, the supply contracts that was based on spot markers.
The West India Marker next few years look far from certain. India’s rising demand for the fuel – driven
fell to a historic low The International Energy Agency (IEA) by the central government’s vision of a gas-
of $1.925 per mmBtu warned this week that global natural gas demand based economy – should give the country
($53.25 per 1,000 cubic was expected to shrink by 4% year on year in suitable leverage in negotiations, Petronet
metres) last week. 2020. The drop, the largest ever recorded, would CEO Prabhat Singh told S&P Global Platts in
equate to 150bn cubic metres of demand being a recent interview.
WHAT NEXT: wiped out. He said India’s LNG imports were predicted
Contract renegotiations “Natural gas has so far experienced a less to climb from 22-23mn tonnes per year at
appear to be a likely next severe impact than oil and coal, but it is far from present to 50mn tpy by 2030. He added that if
step for Indian buyers on immune from the current crisis. The record final investment decisions (FID) were reached
the hunt for a bargain. decline this year represents a dramatic change of on 200-250mn tonnes of LNG export capacity
circumstances for an industry that had become within the next five or seven years, then there
used to strong increases in demand,” IEA execu- would be even more fuel floating around on the
tive director Fatih Birol said. spot market.
Birol added: “Global gas demand is expected “I am saying we are willing to commit large
to gradually recover in the next two years, but volumes for 5-10 years. But let’s agree to those
this does not mean it will quickly go back to busi- volumes based on spot price markers. This
ness as usual. The COVID-19 crisis will have a means that since I am giving you the volume
lasting impact on future market developments, commitment, let’s agree to those volumes on a

P4 www. NEWSBASE .com Week 23 11•June•2020