LNG players should expect softer prices, more short-term trades: Pradhan

The global natural gas market is undergoing a major transformation driven by new supplies according to Minister for Petroleum and Natural Gas, Dharmendra Pradhan.

Addressing the seventh Asian Ministerial Energy Roundtable in Bangkok, Pradhan said that United States, Australia and Qatar are also ramping up their natural gas production.

In an official statement, he said: “New suppliers such as Mozambique, Tanzania, Egypt, Israel, Canada and Cyprus are expected to enter the LNG market in the coming years. It is expected that more than 100 MMTPA of new liquefaction capacity is expected to come on-stream in the period 2017-2020, mainly from Australia and the US.”

“With this, all industry players will need to adjust their operating models. They should expect softer prices, more short-term trades, and demands for contractual flexibility,” he added.

He said that destination-restricted, oil-indexed long-term contracts are gradually disappearing. “Many buyers have also started insisting the sellers to provide for destination flexibility so that the LNG may be delivered to different terminals,” he added.

Pradhan said that Indian companies have signed long-term contracts for around 22 million tonne per annum from different supply sources across world such as Qatar, Australia, Russia and USA among others.

“They have signed contracts linked to different indices such as Henry Hub, crude oil index etc. In order to reduce the delivered cost of LNG to Indian market, Indian importers have adopted innovative approaches like time swap of volumes, destination swaps and contract on Free on Board basis,” he added.

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