India renegotiates LNG deal with Exxon - oil minister

NEW DELHI 10 September 2017: India has renegotiated the pricing of liquefied natural gas (LNG) imported from Australia’s Gorgon project to make the imported fuel affordable to price-sensitive domestic customers, Indian oil minister Dharmendra Pradhan said on Saturday.

India has been trying to leverage its position as one of the biggest energy consumers to strike better bargains for its companies. In 2015 it renegotiated the LNG pricing formula with Qatar’s Rasgas to buy the gas at half the original price.

“Indian customers will receive (Gorgon) LNG volumes at an amicable price soon. This is done in a similar way to what we did with LNG from Qatar,” Pradhan said in a tweet.

India’s top gas importer Petronet LNG signed a deal in 2009 with Exxon Mobil Corp (XOM.N) to buy 1.5 million tonnes of LNG annually from Gorgon for 20 years. At that time Petronet agreed to buy LNG at a cost equivalent to 14.5 percent of the oil price and to pay for the shipping freight as well. Supplies under the deal began from January 2017, with the landed price of gas costing about $11-$13 per million British thermal units (mmBtu), almost double that of Asian spot LNG prices. The Gorgon gas prices are now linked to about 13-13.5 percent of the global oil price on a delivered basis, two sources with knowledge of the negotiation said. Renegotiation of the deal also shows how softening oil prices and a global supply glut are forcing LNG exporters to offer better deals to retain their share in global energy markets. India wants to gradually move to a gas-based economy and aims to double the cleaner fuel’s share in its energy mix to 15 percent in the next few years. Petronet’s managing director Prabhat Singh declined comment and Pradhan did not specify changes in the pricing formula.

“Happy to share good news that India has, yet again, been able to address the long-term price issue of LNG from Gorgon to suit Indian market,” Pradhan said in a tweet.