India's hunt for gas involves search for shorter deals
The South Asian giant consumes almost 22 million metric tonnes a year of liquefied natural gas
The good news for global natural gas exporters is that India’s largest utility is hunting for new supplies to import. The bad: It’s seeking shorter deals than have been traditional in the past.
India now consumes almost 22 million metric tonnes a year of liquefied natural gas, but that demand could double within just four to five years, according to BC Tripathi, the chairman of Gail India. As a result, his company wants to import more LNG, especially around 2023 and 2024. But he wants deals to last for just 10 years, rather than the more traditional 20.
“It’s becoming difficult for one to think long-term,” Mr Tripathi said in an interview Thursday at the World Gas Conference in Washington. “The amount of uncertainties has increased.”
While shorter deals allow buyers more flexibility, US developers have talked about the need for longer-term contracts to justify spending millions of dollars on new export terminals in the US. Cheniere Energy, for instance, recently announced an agreement to negotiate a 25-year deal with a Taiwan utility.
Those concerns may push India to look elsewhere for its deals. “We would like to remain engaged with our old suppliers,” Mr Tripathi said. “But we are also looking at new opportunities,” from Qatar’s expansion project to potential new supplies from East Africa, namely Mozambique.
This year, the utility giant had 7 million tonnes per annum of new supply kick in, of which 3.8 was primarily from the start-up of Cheniere Energy’s new Louisiana LNG production plant and the rest from Dominion Energy launching exports from Maryland. About half a million tonnes came from Australia and the rest were from Russia, he said.
Right now, 60 per cent of Gail’s LNG supply is tied to crude and he doesn’t see Brent losing its dominance as the benchmark anytime soon. The rest is from the US Henry Hub benchmark, he said.
A sign of the market upheaval, Gail has already renegotiated contract terms with Qatar, Exxon Mobil and Russia’s Gazprom, he said. The company abandoned attempts to do the same with Cheniere Energy, which had made public comments that a contract is a contract.
“I appreciate the contract sanctity is paramount and I expect the same, but sometimes when the market goes beyond the fairly manageable limits of either side, the spirit of the contract is that we sit down and readjust,” Mr Tripathi said. “It’s not that somebody’s pain is somebody’s gain. If there is a spirit it’s win-win spirit.”
Updated: June 29, 2018 06:35 PM