Exxon and Petronet-LNG آ“freezeآ” commercials

Vol 10, PW 5 (29 Jun 06) Midstream & Downstream

Environmental concerns about the Gorgon LNG project are not affecting ongoing commercial talks between Petronet-LNG and Exxon Mobil over a SPA for LNG supplies to Kochi.

PETROWATCH learns, for example, that Petronet-LNG believes commercial negotiations with Exxon to import LNG into the proposed Kochi terminal in Kerala from the Gorgon LNG project are completed. Talk to sources close to the LNG importer and it would appear that critical commercial negotiations concluded on (Monday) 19th June when a Petronet-LNG team was in Singapore for three days of intense talks with a team from Exxon Mobil.

All the critical commercial parameters have been frozen and will remain so unless either side wants to re-open them, we hear. Various documents will now have to be exchanged with Exxon.

These relate to pricing, payment security, the right to divert cargoes, take or pay and so on. The payment security mechanism itself has six contracts relating to payments for services at various parts of the LNG chain.

Price details remain, as expected, a closely guarded secret. Still, we hear the finer points of the deal will be resolved when an Exxon team arrives in Delhi for talks in late July.

Petronet-LNG wants to sign the SPA before 30th September; despite the fact that issues over turtle nesting will now force Gorgon partners Chevron, Shell and Exxon to delay the Final Investment Decision until March next year. Chevron is operator at Gorgon with 50% and 5m t/y LNG.

Exxon and Shell each have 25% and 2.5m t/y LNG. Gorgon partners must sign the SPA with the purchaser before the FID, we are told.

Petronet-LNG as the buyer must also fulfil several Conditions Precedent. These include award of the EPC and shipping contracts.

Petronet-LNG believes it is on schedule to meet the CP deadlines and wants to sign a SPA for 2.5m t/y LNG for Kochi even though the terminal will initially be built to receive double: 5m t/y.