Industry Trend Analysis - Lower LNG Prices Positive For Demand - FEB 2018

BMI View : GAIL's continued push to lower the costs of imported LNG into India is positive for the domestic demand growth outlook. However, its US sellers may be less able to offer the type of concessions offered by their Australian and Qatari counterparts, given the non-integrated nature of US LNG plants.

GAIL India is renegotiating its US LNG supply and purchase agreements (SPAs) with Cheniere Energy and Dominion Cove Point. This follows the renegotiation of the SPAs the company holds with RasGas in Qatar (in 2015) and ExxonMobil in Australia (in 2017). The US contracts cover up to 5.8mn tonnes per annum (mtpa) of LNG.

In both former contract renegotiations, GAIL secured more favourable contract terms in return for increasing the contract volume. Contracts are commercially sensitive and are not made public; however, reports have suggested that the revised terms include some mix of a lower indexation to crude, a shorter reference window, improved price reopener clauses and a removal of shipping costs. In part, GAIL is profiting by current market conditions, in which large global supply additions are intensifying competition for buyers and forcing a more concessional approach on the part of sellers. In addition to this, the size of the Indian market and its prospects for growth have placed the company in a strong position to negotiate.

Booming Market For Sellers To Tap
India LNG Net Export Forecast, bcm
f = BMI forecast. Source: PPAC, BMI

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