India caps mid-term LNG pricing expectations

State-owned LNG consortium Petronet LNG would be willing to sign a mid-term deal with a supplier who can meet its buying price, the company’s CEO said at a major industry event in Japan.

“If someone offers [a fixed price of] $5.00/MMBtu [delivered ex-ship], we would do it immediately. No thought needed,” Prabhat Singh, CEO of Petronet LNG, said on the sidelines of the Gastech 2017 conference on 5 April.

However, most buyers are not looking for supply beyond a five-year commitment, because of the price uncertainty as spot prices are likely to stay at current levels or decline further, he said.

The view from LNG producers and portfolio suppliers at Gastech 2017 is that a $5.00/MMBtu price is unrealistic and unworkable, even if new export plants are developed at the lowest cost possible.

A $7.00-8.00/MMBtu range would be more feasible, two sources said.

Renegotiations in place

Petronet is currently in discussions with its long-term supplier US-based major ExxonMobil over the flexibility of its contractual offtake from the Gorgon LNG project in Western Australia, Singh confirmed.

“We are honouring the contract as of today. We are just addressing the market [conditions as] India [demand] can be volatile. We are trying to find solutions to that,” he said. Singh confirmed that Petronet will receive its second contractual cargo from Gorgon in April.

Import capacity uncertainty

In the mid-to-long term, India would be able to import more LNG once it builds infrastructure comprising receiving and regasification capacity as well as pipelines connecting to a national gas grid, he said. The issue is not a lack of financing, rather the uncertainty of utilisation rate.

“All it needs is a $20bn investment [in India] over the next four to five years, which is available in the market,” Singh said. “People are ready to spend, but they want to be told that the infrastructure capacity will be utilised.” xieli.lee@icis.com