Exxon sets July 14 to December 15 deadline for SPA

Vol 12, PW 8 (04 Sep 08) Midstream & Downstream
     

Dealing with ExxonMobil is like dealing with a state-owned Indian oil company, if you believe negotiators representing Petronet-LNG working on the finer points of a proposed LNG supply contract from the Gorgon field offshore Australia.

“Exxon spends a lot of time and money on lawyers poring over each and every word of each and every piece of paper,â€‌ we hear. “They have a very cumbersome and detailed procedure.

â€‌ With such assiduous care for detail, is it any surprise Exxon has given a generous five-month time frame for negotiations and the signing of any Supply Purchase Agreement “Exxon has given a timeframe of between July 14 and December 15 this year,â€‌ we hear. “They say the SPA could be signed anytime between then.

â€‌ Crucial to note here is the word “could be signedâ€‌, conditional tense. Why Because Exxon, it seems, is talking to other buyers simultaneously, alongside its Indian suitors.

“Exxon has a separate group for each country,â€‌ we hear. “One for India, one for Japan, one for (South) Korea and one for Taiwan.

Each group is like a watertight compartment. There is no disclosure of discussions from one group to the other.

They are very strict about this. Whichever group comes up with the best price wins the contract.

â€‌ Still, Indian negotiators live in hope. In the first week of last month (August) theymoved a step closer to winning Exxon’s 3.75m t/y share of Gorgon LNG (equivalent to 20% of 15m t/y proposed capacity) after submitting the price they are ready to pay.

Rarely do the boards of Petronet-LNG promoters Bharat Petroleum, GAIL and Indian Oil agree to meet on one issue but on this occasion they did to approve the price, so important is this deal to India. Little is known about their offer to Exxon except that it will be linked to the JCC (Japanese Crude Cocktail) and run for “10, 15 or 25 yearsâ€‌ with first deliveries slated for 2014-15.