Petronet-LNG saves freight cost in Gorgon deal

Vol 20, PW 26 (21 Sep 17) Midstream & Downstream
     

Dharmendra Pradhan's unhelpful 'tweet' on sensitive negotiations between ExxonMobil and Petronet-LNG over a reduction in the price of Gorgon LNG has sent suppliers and producers scrambling for information.

As details trickle out, it's become clear Petronet-LNG has extracted huge concessions from Exxon, particularly on shipping LNG from the Barrow Island facility to Dahej or Kochi under the original 20-year SPA for 1.44m t/y signed August 10, 2009. Earlier the contract was Freight on Board (FOB) forcing Petronet-LNG to pay $0.80/mmbtu shipping costs on the tankers it hired.

But the renegotiated contract will be Delivered ex-Ship (DES) passing on the shipping costs to ExxonMobil, which must arrange the tankers. "Petronet-LNG will save almost a dollar for every mmbtu that comes in," reports a source.

Under the original deal linked to 14.5% of the Japanese Customs-cleared Crude (JCC) benchmark, the Gorgon LNG price worked out to $7.25/mmbtu assuming $50/barrel. But after the renegotiation the LNG price will be pegged at 13.9% Brent or $6.95/mmbtu.

This will save Petronet-LNG at least $83m every year as its annual contract spend drops from $603m to $520m. On September 9 Pradhan tweeted: "Happy to share the good news that India has yet again been able to address the long-term price issue of LNG from Gorgon to suit the Indian market.

This is similar to what we did with LNG from Qatar."

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