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Late on Saturday, Minister for Petroleum and Natural Gas Dharmendra Pradhan tweeted: “Happy to share good news that India has, yet again, been able to address the long term price issue of LNG from Gorgon to suit Indian market.”
Officials associated with the negotiations, however, were cautious. “Yes, we have been able to reach some conclusion on price with the Australian suppliers. Nuances are still being worked out. We can say an understanding has been reached,” an official told BusinessLine .
Petronet LNG Ltd’s (PLL’s) contract with Mobil Australia Resource Company for assured LNG supply of 1.4 million tonnes annually for 20 years was signed in 2009. The buzz for renegotiation gained momentum when the contracted fuel became the most expensive gas the country had imported. The gas will now be available at the prevailing market rates.
“Supplies from this project started early this year and the renegotiated price will be applicable for future supplies,” the official added. PLL has received roughly 10 cargoes, or 900 mmscm of gas, from the project.
Spot pricesSpot gas price is currently around $6-7/mmBtu (gas is measured in million British thermal units), the long-term contract prices are around $7.5-8.25/mmBtu, and domestic gas at $2.48/ mmBtu.
At present, gas demand in India is 136 mmscmd. Of this, 74 mmscmd is met through domestic production and 62 mmscmd through imports or regassified LNG. The demand for gas is directly linked to supplies.
However, industry trackers see this as something that was bound to happen as the market dynamics has changed. The Australian contract was signed in 2009 when LNG sources were limited, resulting in higher prices, they said, adding that contracts are open to negotiations and India had renegotiate.
Besides, after successfully renegotiating the gas price with Qatar last year, PLL felt that the rates for gas under its contract with Exxon’s Gorgon project in Australia needed to be revisited.
As per the initial contract, the delivered price to end-consumers of power and fertiliser as well as small and medium gas-based units was at least a dollar more than the prevailing rates.
Gorgon is the second long-term contract signed by India. The first was with RasGas of Qatar for 25 years starting 2004. After these two contracts, it was only in 2012 that any other Indian company was able to sign another long-term contract — for supplies from Sabine Pass, US.
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