IOC wants flexible prices in LNG contracts

11 October 2015, News Wires – Indian Oil Company (IOC) had ruled out signing long-term price contracts with liquefied natural gas suppliers.

LNG vessel

The Economic Times quoted IOC finance director AK Sharma as saying the company would only enter long-term agreements for the quantity of gas, without locking in a price.

“This would be to ensure that there is no shock to consumers,” Sharma was quoted as saying.

The business newspaper claimed IOC was looking to avoid being left in a similar situation as compatriot Petronet LNG which is struggling to sell on gas bought under a long-term contract with Qatar’s RasGas.

Under that deal, Petronet agreed to take 7.5 million tonnes per annum of LNG from Qatar under a 25-year deal indexed to a five-year crude price average.

With oil prices collapsing around 50% since June last year spot LNG prices have fallen to roughly $6.80 per million British thermal units, which the Economic Times claims is nearly 50% cheaper than the price Petronet is charging from consumers.

Upstream reported earlier this month the Indian government wants the prices under the long-term deal with Qatar reduced to meet market conditions, however industry experts have suggested Petronet’s contractual obligations will make it a challenge, with no scope in the contract for reducing LNG prices.

  • Upstream
About the Author