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After getting Qatar and Australia to lower gas price, India is seeking to renegotiate rate of LNG it has contracted from the US and Russia to reflect current market realities, GAIL Chairman and MD B C Tripathi said on Wednesday. "We have successfully renegotiated, along with Petronet LNG Ltd, two long-term (LNG import) contracts.
We are now working on third and fourth contract," he said at a Ficci (Federation of Indian Chambers of Commerce and Industry) conference here. While Tripathi did not name the contracts, he was referring to last month's in-principle agreement with Exxon Mobil Corp for a cut in price of 1.44 million tonnes a year liquefied natural gas (LNG) to be imported from Australia's Gorgon project. In 2015, India renegotiated price of the long-term deal to import 7.5 million tonnes per year of LNG from Qatar, helping save Rs 8,000 crore. "This is how market structure has changed," Tripathi said. "The point which I am trying to drive is that we are moving from a supply constraint market to a supply surplus market." Tripathi said market structure has changed from a time when Indian firms struggled to get an appointment with LNG exporters to gas suppliers now running after the world's fastest-growing energy market. This has primarily happened because availability has increased and prices have slumped in global energy markets. Though he did not name the two other contracts for which GAIL, India's biggest gas distributor, is seeking price renegotiation, officials said he was referring to LNG contracted from the US and Russia. GAIL wants to renegotiate the 2011 sales and purchase agreement (SPA) with Cheniere Energy for import of 3.5 million tonnes of LNG annually, with yearly fixed fees of $548 million and a term of 20 years. The state-owned firm had agreed to pay Cheniere a price of $3 per million British thermal unit (mmBtu) plus 115 per cent prevailing Henry Hub natural gas price. Officials said GAIL wants the fixed portion to be lowered to bring down landed cost of LNG to around $7-8 per mmBtu as against the present $9.7. LNG in the spot or current market is available for less than $6 per mmBtu. The US supplies are scheduled to begin from the next year. Besides the 3.5 million tonnes per annum of LNG from Houston-based Cheniere, GAIL has booked 2.3 million tonnes a year capacity at Dominion's Cove Point liquefaction facility. Also, GAIL wants Russia's Gazprom to delay and lower the price of gas it has purchased under a 20-year deal. Shipments under the deal, initially expected to start in 2018-19, are linked to crude oil prices. GAIL had in 2012 signed a deal with Gazprom to buy 2.5 million tonnes a year of LNG for 20 years from the Shtokman LNG export plant in the Barents Sea.