India Renegotiates Pricey Long-Term Gas Deals

摘要

With spot LNG prices in Asia plunging over 60% since February 2014, term contracts look increasingly unattractive. It's not just China having problems absorbing new term supply (p8). Top Indian importers like Petronet LNG and Gail India are also under pressure (WGI Aug. 12' 15). Indian buyers are now locked in negotiations with suppliers designed to find ways of making term cargoes more affordable and allowing them to take advantage of cheaper spot imports. Analysts believe buyers' pain will be temporary: Faced with unexpectedly weak demand and competition from new sources, traditional sellers will make adjustments sooner or later, they say, helping Indian customers' balance sheets and paving the way for future deals. Petronet, India's largest LNG importer by volume, is feeling the most heat. Deliveries under what was once considered a "sweetheart" 25-year contract with Qatar's Rasgas have become far more expensive than spot imports because of a formula linked to the 60-month average Japan Crude Cocktail (JCC) price (WGI Aug.5'15). That has made them far less sensitive to lower oil prices and leaves Petronet paying over $12.50 per million Btu, versus landed spot prices in India of less than $8/MMBtu.