Torrent wants $6/mmbtu fixed for five years

Vol 20, PW 4 (03 Nov 16) Midstream & Downstream

Torrent Power is winning praise from LNG suppliers for its decision to split into three periods or time slots an invitation to offer 38 cargoes over five years beginning April 2017.

"Torrent is very clever for splitting up the offer," one supplier tells us. "It gives them the chance to get the best deal.

They will most likely get a fixed price for Period One (April 2017 to December 2019) and will probably award Period One. And if offers for Periods Two (January 2020 to December 2020) and Three (January 2021 to December 2021) don't meet expectations they can re-issue the tender or buy spot LNG on a rolling basis like Reliance." Well-placed sources indicate Torrent is confident it can receive DES offers of $6/mmbtu or less locked-in for five years.

"That's what Torrent wants," we hear. "Torrent believes genuine suppliers with production want to lock-in supplies for five years at a fixed price.

For traders, it might be difficult. Traders will probably go for (the Brent-linked) Option Two." Yet any suggestion Torrent can convince suppliers - with production or otherwise - to lock-in a $6/mmbtu fixed price for five years is met with derision.

"Vitol told a conference in Mumbai two months ago it couldn't do a fixed price for more than two years," we hear. "Vitol said it would expect the customer to pay for the 'hedge' or derivative on the other side." Unclear is if Torrent would be ready to pay for such a 'hedge'.