ShreeMetalPrices: India waits for lower Oil & LNG prices


State-run oil & gas businesses have chosen a wait-and-watch strategy in prediction of more price easing amid a turbulent energy market and supply concerns. These companies are currently in negotiations with gas producers worldwide for long-term liquefied natural gases (LNG) contracts.

A person with knowledge of the proceedings stated that although the negotiations had been ongoing for more than a year. A significant agreement wasn’t going to be reached until prices dropped further.

It might not be the best time to sign long-term commitments right now. Although prices have decreased from multi-year highs. A lessening of demand could cause them to drop even further, the source said.
Spot LNG prices have decreased from an average of around $45 per metric million British thermal units (mmBtu) in the Jul to Sept quarter of the current fiscal to around $14–15 per mmBtu.

As Russia’s Gazprom defaulted on its deal to supply GAIL beginning in May 2022. Major international gas manufacturers have been seeking long-term contracts for the purchase of LNG from Indian government sector oil and gas giants such Indian Oil Company Ltd (IOCL) and GAIL.

This led to a global search for supplies and a shift toward pricey spot buying. Till the time of publication, the petroleum ministry, IOCL. And GAIL had not responded to inquiries, 22 million tonnes of LNG are cover by long term contracts with Indian companies. Gazprom ceased supplying because spot gas prices were far higher than those set by long-term contracts.

In addition to GAIL, major state-run petroleum and natural gas corporations have stepped up theirefforts to obtain additional long-term LNG contracts.

According to one official, Gazprom has not yet started supplying as per contract. And negotiations to rectify the situation are still ongoing between the two nations.

With GAIL, GMTS has signed a contract for the supply of 2.5 million tonnes of LNG annually for 20 years, beginning in 2018–19. Although the long-term LNG shipments from Russia began to reach India from June 2018. They have been halt since May 2022 as a result of the conflict in Ukraine.

India 2023 LNG Imports

The UAE’s Abu Dhabi National Oil Corporation (ADNOC) and IOCL and GAIL are negotiating a long term supply agreement. The talks are in an advanced phase, as reported in January.

Long-term contracts are necessary since spot prices have been absurdly high and unstable, as was the case in 2022. And because India will continue to be heavily dependent on LNG imports due to its growing natural gas consumption from the fertiliser and city gas supply industries.

Yet recently, prices with in spot markets have started to decline. According to a recent analysis by S&P Global Commodity Insights, South Asia’s demand for the fuel is expect to increase in the coming months as a result of lowering spot LNG prices; several nations have already entered the market through tenders.

Prices have decreased due to weaker demand in northeast Asia. It claimed, as well as forecasts for mild weather, sufficient supplies. And the impending restarting of Freeport LNG in the United States.

In an effort to guarantee energy security, India has been considering diversifying its energy import sources. Up to 85% of India’s oil demands & 55% of all its natural gas needs are met by imports.

India have imported LNG for $14.88 billion thus far in FY23 from Apr to Jan, 36.46% more than during the same period FY22 “$10.90 billion”. Thus far, the UAE, the US, and Qatar have been India’s top three suppliers.

India is also developing a strategic gas reserves. Which could be created as a joint venture by public sector businesses or via a public-private partnership, keeping in mind the country’s increasing gas demand as well as its need for energy security (PPP).