New Delhi: India’s liquefied natural gas buyers are on the lookout for decades-long supply deals to secure them from price surges, a move that will take the government’s plan upward to boost the fuel’s use.
As per traders and executives, importers are enhancing efforts to lock in fuel. Buyers comprising Petronet LNG Ltd., GAIL India Ltd. and Indian Oil Corp are in terms with suppliers in the US, Qatar and the UAE for deals that will last up to 20 years. The trend is a reversal for the country, which hasn’t signed any long-term deal since 2021, as per contract data from BloombergNEF.
This measure will help reduce their exposure to the fluctuating spot market- where prices hiked to a record last year, resulting in making fuel costly for many buyers. With this, it also increases the hope of imports rebounding in a push for Prime Minister Narendra Modi’s strategy to more than double the shares of gas in the country’s energy mix at the end of the decade to help minimise pollution.
“The lesson learned by the consumers is that they can’t run the business based on spot,” Akshay Kumar Singh, chief executive officer of Petronet LNG, said earlier this month. “Going forward, we will be finding a lot of long-term contracts signed by different stakeholders.”
How will it impact the country?
Consumers of India from power plants to petrochemical facilities are heavily price sensitive as gas gives tough competition to cheap and dirtier alternatives, but had become too reliant on the spot market, which indeed is way more expensive than long-term contracts a year back.
India’s LNG imports crashed to nearly 20% after Russia’s invasion of Ukraine turned the markets upside-down.
With LNG prices falling and now India is again purchasing spot shipments, which may not last. Prices are expected to take a hike in the second half of 2023, hampering demand growth, as per Ayush Agarwal, LNG analyst at S&P Global Commodity Insights.
“Business can’t be managed with spot,” Petronet’s Singh said. This year’s import level “all depends on how the prices are hovering in international market. We are keeping fingers crossed.”
