Indian consumers of liquefied natural gas are looking for long-term supply agreements to shield them from price increases, which will aid the government's ambition to increase the usage of the fuel. Importers are working harder than ever to lock in fuel prices. Buyers including Petronet LNG Ltd., GAIL India Ltd., and Indian Oil Corp. are negotiating 20-year contracts with suppliers in the US, Qatar, and the UAE. The country, which hasn't inked a long-term agreement since 2021, is experiencing a reverse in the trend.
That ought to lessen their exposure to the erratic spot market, where prices last year rose to a record high and made fuel prohibitively expensive for many buyers. In support of Prime Minister Narendra Modi's plan to more than quadruple the amount of petrol in the nation's energy mix by the end of the decade to help cut pollution, it also raises the possibility of imports recovering.
Akshay Kumar Singh, chief executive officer of Petronet LNG, stated earlier this month that "the lesson learned by the consumers is that they can't run the business based on spot." "As time goes on,
we'll discover many long-term contracts signed by various stakeholders." As petrol competes head-to-head with less expensive and dirtier alternatives, India's consumers, including power plants and petrochemical facilities, are extremely price-sensitive. However, they had grown too reliant on the spot market, which was significantly more expensive than long-term contracts last year. Following the market disruption caused by Russia's invasion of Ukraine, the country's LNG imports fell by almost 20%.
Despite the fact that LNG prices have since decreased and India is once more buying spot imports, this may not continue. Ayush Agarwal, an LNG analyst at S&P Global Commodity Insights, predicts that prices will rise in the second half of 2023, slowing the expansion of demand.
The company who declined to provide their names because the negotiations are still going on, Petronet is currently in talks with Qatar to renew an existing agreement at a cheaper price and secure additional volumes. The business is reportedly in discussions with a number of alternative suppliers.
A 1 million tonne per year deal and a stake in a US LNG export plant are both sought after by GAIL. Approximately nine suppliers have shown interest, according to a senior corporate executive. According to another official, GAIL is also in discussions with a number of other foreign suppliers.
Requests for comment on contract discussions were not immediately answered by GAIL or IOC. Long-term contracts are still a means to avoid difficulties in the spot market even though there is limited supply available before 2027 owing to a lack of new projects, Petronet's Singh said earlier this month. Singh claimed that spot management of business was impossible. The volume of imports for this year "all depends on how the prices are trending in the global market. We're crossing our fingers.
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