India’s GSPC closes two-cargo spot LNG tender

India’s state-operated oil and gas company Gujarat State Petroleum (GSPC) is in the process of selecting the winner for its tender for two spot cargoes, traders active in India said.

GSPC was seeking one cargo for October and one for November through the tender, which closed on 16 September. The validity period for the bids is until 21 September.

Both cargoes are expected to be delivered to the 10mtpa Dahej LNG terminal, which is operated by Petronet, although GSPC also has a slot at the 5mtpa Hazira LNG terminal.

Its pricing expectations were initially in the low-$7.00s/MMBtu, but have declined since the fall of spot prices over the course of last week, traders said.

As a result, GSPC could secure a cargo at the $6.90-6.95/MMBtu range, according to one portfolio seller active in India.

GSPC has indicated in its tender that it requires both cargoes to be offered on a fixed-price basis and that potential sellers have a master sales agreement (MSA) in place with the company.

Sellers are, however, required to demonstrate an equity worth of at least $25m for the MSA. No history of previous cargo discharge is required.

GSPC has direct supply contracts for gas with the downstream buyers as part of its gas transmission and distribution business. As such, the falling pricing of crude oil and associated opportunities in the competitive fuel market are seen as largely irrelevant in this case, as the company is working on a back-to-back basis with downstream gas buyers that do not have fuel-switching capacity.

Besides GSPC, the list of India’s LNG buyers active in the short-term market now includes gas-network operator GAIL and Indian Oil Corp (IOC), traders said.

Two buyers are, however, entirely out of the prompt market due to the low cost of competitive fuels, namely fuel oil. Indian oil company Bharat Petroleum Corp and Mumbai-based conglomerate Reliance Industries primarily purchase LNG as a feedstock for their refinery operations, rather than the downstream gas network. Both companies are out of the market because the alternative sources of feedstock are cheaper. roman.kazmin@icis.com and xieli.lee@icis.com