Two sources familiar with the matter said that India’s gas importer Petronet LNG is planning to cancel a tender for a long-term liquefied natural gas (LNG) supply as the option is deemed unattractive in the current market condition.
The tender to be canceled is an annual purchase of 1 mt of LNG for 10 years, which was a part to realize PM Narendra Modi’s program to increase the stake of natural gas in the national energy mix to 15% by 2030 from 6.2% at the moment to reduce pollution.
Earlier this year, Petronet opened bids to buy LNG with pricing linked to Henry Hub natural gas futures in the US and Dutch TTF gas futures and shipped on a delivered ex-ship basis.
The source stated that an internal committee has agreed to cancel the tender this month and in the near term the proposal will be placed for approval by the board.
“Long-term deals don’t make sense in the current scenario. Doesn’t make sense to lose precious foreign exchange,” the source said. However, they added that GAIL (India) and Italy’s ENI were the only two companies qualified for Petronet’s long term LNG tender, among 13 companies who had submitted bid.
Last month, CEO Prabhat Singh said that Petronet was close to finalizing the deal with prices near to spot markets and is renegotiating pricing under long-term deals with Qatargas after spot prices declined. The company has deals to buy 7.5 mt of LNG from Qatar each year.
As the coronavirus pandemic battered the global gas demand, along with the new supply from the US, Asian spot LNG prices have been pressured to near-record-low levels.
