India has agreed to buy an extra one million tonne of liquefied natural gas (LNG) from Exxon Mobil’s Gorgon project in Australia in a trade-off for cheaper rates for the originally-contracted volume.
Petronet LNG, a state-controlled natural gas importer, had signed a deal with Exxon Mobil in 2009 to purchase 1.44 million tonnes of LNG annually for 20 years, and began receiving supplies in January at a rate that was much higher than the spot. An LNG supply glut and a collapse of crude prices, with which LNG prices are mostly linked, have prompted buyers’ demand for renegotiation and increased suppliers’ inclination to accommodate such demand.
Petronet and Exxon Mobil ‘have reached a broad understanding of terms’, the company informed stock exchange on Monday. The final agreement is a couple of months away, a person with direct knowledge of the matter said.
As part of the deal, Petronet will take about another million tonne of LNG at 12.5 per cent of the Brent oil price, the person said. The original supplies will come for 13.9 per cent of Brent, down from 14.5 per cent earlier, and the transportation cost would shift on to Exxon from Petronet earlier, he said.
Petronet had similarly reworked a long-term gas purchase deal with Qatar in November 2015 after spot rates crashed, leaving the company with fewer consumers willing to accept expensive gas. There again Petronet agreed to take an extra one million tonne to get the supplier, Qatar’s Rasgas, to change pricing formula that brought down prices.
State-run GAIL too is caught in an expensive gas import deal with US and trying to renegotiate the terms. GAIL has a contract to buy 3.5 million tonnes of LNG annually for 20 years from Cheniere Energy and has also booked capacity for another 2.3 million tonnes a year at Dominion Energy’s Cove Point liquefaction plant. US supplies would start early next year. Read more
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