India rushes to win LNG deal for Modi’s gas push

New Delhi: India’s liquefied natural gas buyers are seeking multi-decade supply agreements to protect them from rising prices, which will upend the government’s plan to boost fuel use.

Traders and executives say importers are stepping up efforts to lock in the fuel. Buyers Petronet LNG Ltd, GAIL India Ltd and Indian Oil Corp have signed contracts with suppliers in the US, Qatar and the UAE for up to 20 years. The trend has reversed in the country, which has not signed any long-term deals since 2021, according to BloombergNEF contract data.

The move will help reduce their exposure to the volatile spot market, where prices hit record highs last year, making fuel expensive for many customers. It also raises hopes of a recovery in imports towards Prime Minister Narendra Modi’s strategy to more than double the share of gas in the country’s energy mix by the end of the decade in order to minimize pollution.

“The lesson for consumers is that they cannot control the business on an immediate basis,” Petronet LNG CEO Akshay Kumar Singh said earlier this month. “In the future, we will find many long-term contracts signed by various stakeholders.”

How will it affect the country?

From power plants to petrochemical facilities, Indian consumers are highly price-sensitive as gas gives stiff competition to cheap and dirtier alternatives, but they have become too dependent on the spot market, which is indeed much more expensive than long-term contracts a year ago.

India’s LNG imports fell to almost 20% after Russia’s invasion of Ukraine roiled markets.

LNG prices are falling and now India is buying spot shipments again, which may not be sustainable. According to Ayush Agarwal, LNG analyst at S&P Global Commodity Insights, prices are expected to rise in the second half of 2023, hampering demand growth.

“You can’t do business with Spot,” said Petronet’s Singh. This year’s import level “all depends on how prices fluctuate on the international market. We take heart.”

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