GSPC and Torrent re-work LNG sourcing strategy

Vol 22, PW 11 (21 Mar 19) Midstream & Downstream

GSPC and Torrent Power have chosen to re-think their LNG sourcing strategies following a sharp drop in spot prices.

This report learns spot cargoes for the second half of April and first half of May are available for $5.50/mmbtu, less than half the $11.62/mmbtu price at which a cargo from Angola reached DAHEJ three month ago on December 22. "Prices are plunging," a senior industry source tells us.

"Don't be surprised if they go under $5/mmbtu." GSPC has reacted to the situation by canceling a 12-cargo 'strip' tender under which it wanted deliveries every month from April 2019 to March 2020.

Instead in early March (this month) GSPC awarded a four-cargo contract to Glencore, seeking deliveries at DAHEJ in July, September, November and January. GSPC is believed to have done the deal with Glencore at below 11% 'slope' to Brent.

GSPC is soon expected to award another four-cargo contract and has also issued a separate tender to buy two spot cargoes for the two halves of April. Torrent which issued a similar 12-cargo offer from April to March has also cancelled the tender.

Unlike GSPC and Torrent, Reliance seems not to be worried about locking itself into contracts when prices are falling and is understood to have awarded a 12-cargo deal last week to several suppliers with deliveries starting from April 2019 until March 2020. Some speculate these included Reliance favourites Shell and Qatargas.