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LNG: India LNG Spot Demand To Fall As Longer-Term Contracts Signed

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Indian demand for spot LNG cargoes expected to slow as procurement shifts to medium-term and long-term contracts, carrying risks were spot prices to persist below term prices, Platts reports.  

  • A mix of new long-term contracts representing nearly 6 million mt/y of LNG have commencement dates over the next two years, eating into India’s spot market demand.
  • Two are starting in April – GAIL and QatarEnergy for one cargo per month, and BPCL and ADNOC for six cargoes per year, both for 5 years. Both contracts are priced similar; around 120% of Henry Hub prices with a constant of $5.6-$5.8/MMbtu, Platts reports.
  • These contracts are cheaper than current spot LNG prices of around $13/MMBtu and the forward curve for LNG in 2025 and 2026, but they will become more expensive for buyers when spot prices fall from 2027 onward, according to Platts.
  • The approach is dangerous for India, Platts sources said, as customers can default if spot LNG prices become consistently lower than the contracted term prices. 
IndiaLNGPurchases

Source: Platts

 

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Indian demand for spot LNG cargoes expected to slow as procurement shifts to medium-term and long-term contracts, carrying risks were spot prices to persist below term prices, Platts reports.  

  • A mix of new long-term contracts representing nearly 6 million mt/y of LNG have commencement dates over the next two years, eating into India’s spot market demand.
  • Two are starting in April – GAIL and QatarEnergy for one cargo per month, and BPCL and ADNOC for six cargoes per year, both for 5 years. Both contracts are priced similar; around 120% of Henry Hub prices with a constant of $5.6-$5.8/MMbtu, Platts reports.
  • These contracts are cheaper than current spot LNG prices of around $13/MMBtu and the forward curve for LNG in 2025 and 2026, but they will become more expensive for buyers when spot prices fall from 2027 onward, according to Platts.
  • The approach is dangerous for India, Platts sources said, as customers can default if spot LNG prices become consistently lower than the contracted term prices. 
IndiaLNGPurchases

Source: Platts