Five long-term LNG contracts in five months
Indian LNG importers seem to have woken up to the stability offered by long-term contracts, with five significant deals signed so far this year (2024).
Of these, the latest is the one signed by Hazira-based steel maker AMNS with Shell for ten years at an 11.5% slope to the Brent crude oil benchmark for 500,000 t/y. This roughly translates into eight to nine 60,000-tonne cargoes every year.
AMNS signed the deal in mid-May 2024 after closing the tender in March 2024. Shell will start supplies from 2027 from its global portfolio.
The AMNS and Shell deal is the first LNG deal priced below a 12% slope since Russia invaded Ukraine in February 2022. AMNS will also have the flexibility to bring in one additional cargo every year.
"AMNS has a huge appetite for LNG," says a gas industry source. "We expected AMNS to sign a 1m t/y contract, but they only went for 500,000 t/y."
From January 1 (2020) to April 15 (2024), AMNS averaged more than 21 cargoes a year and brought in 90 cargoes in total, including some shared with other LNG importers. Other LNG deals this year include GAIL's 10-year 1m t/y deal with LNG trader Vitol at 12.5% Brent, signed on January 5 (2024), and another 10-year 500,000 t/y deal with Adnoc at 12.65% starting 2027, signed on January 29 (2024).
On February 7 (2024), Petronet-LNG renewed its long-term deal with QatarEnergy for 7.5m t/y over 20 years. Soon after, Deepak Fertilisers signed a 15-year Henry Hub-linked 650,000 t/y deal with Norway's Equinor on February 19 (2024).
"Contractual LNG supplies will play an important role in meeting Indian gas demand," says a Dahej source. "We need to sign more term deals and cut exposure to the spot LNG market."
Another source adds the oil ministry is pushing state-owned companies to sign more term deals. "Efforts are being made to improve gas affordability," he says.
A GAIL source believes supply and price security are the driving factors behind buyers signing long-term contracts.