Cheaper, assured long-term natural gas supply for India: Petronet to soon sign unique LNG deal

In an effort to produce natural gas at cheap prices, India’s biggest LNG importer Petronet may soon sign a long-term LNG deal, benchmarked to daily or spot prices, which are often less than normal rates. However, the CEO and Managing Director of  Petronet LNG, Prabhat Singh refused to give details of the supplier, PTI reported. Prabhat Singh added that the company was initially looking to buy 1 million tonnes of LNG under such a contract and aimed to further increase the capacity depending on the customer’s response. He further said that nearly 13 suppliers have showed interest in providing LNG to Petronet.

At present, Petronet buys around 10 Mtpa of LNG through contracts with ExxonMobil and Qatar Petroleum. However, these contracts are priced at an average of benchmark crude oil rates, which the company wants to get rid of. The PSU firm GAIL India has also contracted 5.8 million tonnes of LNG from the US-benchmark rates.

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India had earlier bought liquefied natural gas (LNG) under long-term contracts from Qatar and Australia at an average price of USD 3.5-4.5 per million British thermal units in the current quarter while the spot prices of LNG are in the range of USD 2. Petronet had also sought bids for 1 million tones of LNG per year for 10 years, starting 2024, from suppliers. The Petronet CEO also underlined that the company plans to set up 50 LNG dispensing stations along five highways in FY21 and expand it to 1,000 stations across India in later years.

Meanwhile, Petroleum Minister Dharmendra Pradhan had recently said that India will gradually end central controls on gas pricing as it seeks to attract foreign investment and technology to lift local output. The minister called it an incentive for investors to come to India and take advantage of pricing and marketing freedom to produce and invest more.