India Set to Renegotiate LNG Rates with Russia

With global energy market moving from a supply-constraint market to a supply-surplus market effecting a slump in prices, India is preparing to renegotiate with Russia’s Gazprom the price of LNG, supply of which is to begin next year.

New Delhi (Sputnik) – India’s state-owned natural gas processing and distribution company GAIL has said that India is seeking to renegotiate the rate of LNG it has contracted from different countries including Russia to reflect current market realities. The decision comes after India successfully negotiated a lower gas price with Qatar and Australia.

“We have successfully renegotiated, along with Petronet LNG Ltd, two long-term (LNG import) contracts. We are now working on third and fourth contract,” GAIL chairman and managing director B.C. Tripathi said at the Federation of Indian Chambers of Commerce and Industry conference in New Delhi on Wednesday.

Explaining the raison d’etre behind renegotiation, the GAIL chief said that the market realities have changed with India being seen as the world’s fastest-growing energy market at a time when gas availability has increased and prices have slumped in global energy markets.

“The market structure has changed and we have moved from a supply constraint market to a supply surplus market,” Tripathi said.

GAIL had last month cut a deal with Exxon Mobil Corp. for a revised price for 1.44 million tonnes of LNG per year to be imported from Australia’s Gorgon project. Earlier in 2015, India had renegotiated the price for a long-term deal to import 7.5 million tonnes per year of LNG from Qatar.

While Tripathi did not name the contracts, in particular, industry analysts suggested that GAIL is seeking price renegotiation vis-à-vis LNG contracts from the US and Russia.

“It is a buyers’ market now as there has been oversupply and that too from various sources. India wants to delay shipments as the demand remains muted. Russia may push for short-term contracts as it may suit it should the prices of the natural gas rise in future,” S. Raghuram, a commodities analyst, at the Indian Agribusiness Pvt Ltd told Sputnik.

Gazprom’s subsidiary Gazprom Marketing and Trading — Singapore and India’s GAIL had signed a 20-year supply contract in 2012.

The initial commitment was to supply 2.5 million tonnes of LNG annually to India. The supplies were to begin in 2018.