Prabhat Singh faces Gorgon LNG challenge
One of Prabhat Singh's biggest challenges as Petronet-LNG’s new managing director is how to deal with the company's 20-year gas supply contract with ExxonMobil.
Under the Exxon deal first deliveries are officially contracted to start in December 2015. But these have been pushed back to mid-2016 because of delays at the Gorgon LNG liquefaction facility in Australia.
Cheap spot LNG is flooding the Indian market leaving many analysts to predict Singh will have no option but to re-negotiate the Exxon deal, signed in August 2009 at a hefty 14.5% to JCC. Many remember how when he was GAIL director marketing three years ago Singh wrote a damning letter to his predecessor AK Balyan condemning the Exxon agreement as “one of the costliest LNG deals in history” and demanded it be “reviewed and renegotiated.
” At the time Singh accurately predicted LNG prices would drop in 2015. “Singh is Petronet-LNG chief now," we hear, "He can renegotiate the deal himself!" Under the Exxon contract Petronet-LNG must offtake 480,000 t/y LNG at Kochi for the first two years increasing to 1.44m t/y.
“You'll find it is not unusual to renegotiate prices,” adds a source. “Gazprom has renegotiated prices with European buyers after the price dropped.
" Singh also faces the daunting challenge of trying to re-negotiate Petronet-LNG’s onerous 25-year SPA with an unwilling RasGas and Qatari government under which it has drastically reduced offtake, despite stringent penalties.
