India’s Petronet explores buying LNG under 10-year contract
India’s Petronet LNG , the country’s largest importer of liquefied natural gas , is looking to buy the super-chilled fuel through a long term contract starting from 2024, according to a document reviewed by Reuters.
It has issued a Request for Information indicating an interest to buy about 1 million tonnes per annum of LNG for 10 years starting from 2024, with the possibility to extend, according to the Feb. 19 document.
A request for information is a common practice to ask for written information about the capabilities of various LNG sellers to help them make more informed buying decisions.
Petronet’s request comes amid a trend among LNG buyers to move away from long-term contracts with fixed pricing to shorter contracts with lower volumes and more flexible terms. However, Indian companies have sought longer contracts as they expect domestic gas demand to increase.
The cargoes will be bought on a price formula linked to both Henry Hub natural gas futures in the United States and Dutch TTF gas futures and shipped on a delivered ex-ship basis, the document showed.
Indian companies typically price their LNG contracts on an oil-linked basis while some are tied to the Henry Hub, two sources familiar with LNG imports into India said. Contracts priced on a TTF basis are rare, the sources added.
Petronet is asking for suppliers to provide information related to the delivery and pricing of cargoes as well as flexibility that the suppliers can provide, including volumes and destination, the document stated.
Suppliers must respond by Feb. 26 and Petronet will shortlist the five most competitive suppliers.
The Indian company will analyse supply offers as well as potential LNG terminal investments if required by the suppliers. The South Asian country is expanding its pipeline network and building new LNG import terminals to encourage the use of cleaner fuel.