Market participants widely expect India’s key gas companies to lock in several major long-term LNG deals, which have been in the final stages of negotiations, during India Energy Week to be held in the week starting Feb 5.

The main deal that is anticipated is an extension of long-term LNG contracts between India’s largest LNG importer Petronet LNG and QatarEnergy totaling around 8.5 million mt/year that are set to expire in 2028.

The specifics around the renewal of the Petronet-Qatar LNG agreement have been a closely guarded secret and it is unclear whether the deal will be renewed with the same pricing, duration and volume as the original agreement, and last-minute changes are frequent.

However, the 8.5 million mt/year volume would represent one of the largest signed by Qatar with a single state-owned Asian gas importer, and markets are keenly eyeing the terms of the deal as they would set an industry benchmark for oil-linked long-term contracts and negotiations for the rest of this year.

For India, an extension of LNG supply contracts with Qatar will highlight its long-term LNG procurement strategy as the industry has changed significantly since the initial deals were signed, new suppliers like the US and Australia have gained significant market share and India’s own economic profile and outlook has evolved. Recent events like the pandemic and the Russia-Ukraine war also delayed deal talks.

Qatar Energy has three existing contracts with Petronet LNG expiring in 2028 — a 5 million mt/year deal over 24 years, a 2.5 million mt/year deal over around 18.5 years and a 1 million mt/year deal for over 12 years, according to S&P Global Commodity Insights data.

The 1 million mt contract was for downstream supply to GAIL, Indian Oil Corp., ONGC and Bharat Petroleum Corp. Ltd., with Petronet LNG only providing storage, receiving and regasification services and not buying the LNG, according to exchange filings.

LNG markets are closely watching whether India will buy additional volume beyond the 8.5 million mt/year due for renewal, how the deals will be structured, and whether the deal will extend beyond 2050, as recent Qatari deals with Chinese and European buyers have been as long as 27 years.

India and Qatar have also explored mutual energy investments, such as Indian equity investments in Qatar’s LNG projects as well as Qatar’s investment in Indian LNG terminals for captive demand. No deals were reached and the two countries have had a brief geopolitical tussle, but the government could now seek to expand partnership beyond LNG.

Flurry of contracts
Market participants expect imminent deals because India has moved on several pending agreements in recent weeks.

On Jan. 5, state-owned GAIL announced an LNG supply deal with Vitol for 1 million mt/year starting in 2026 for 10 years, with market sources indicating a price of 12.4-12.45% oil slope. GAIL also announced a deal with ADNOC LNG for 0.5 million mt/year starting 2026 for 10 years.

There is a strong likelihood that the UAE and India could expand their trade ties and use the conference as a platform to expand the 0.5 million mt/year agreement, given the free trade agreement between the countries, market sources said.

In 2023, ADNOC LNG and IOCL signed a heads of agreement for 1.2 million mt/year for 14 years starting in 2026.

ADNOC LNG has been developing its low-carbon Ruwais LNG project with a capacity of 9.6 million mt/year in the Al Ruwais Industrial City, Abu Dhabi, and deliveries are expected to start in 2028. Any new LNG deals announced between India and UAE would be related to this expansion, market sources said.

IOC had also signed with TotalEnergies for 10 years for 800,000 mt/year. Any new long-term deals expected at India Energy Week will be in addition to IOC two deals in 2023, according to market sources.

Petronet, GAIL, QatarEnergy and ADNOC did not immediately respond to queries on expected LNG deals at the conference.

“India should continue signing long-term deals, even though the renewal of Petronet’s 8.5 million mt/year contract with Qatar is imminent,” Ayush Agarwal, LNG analyst with S&P Global Commodity Insights, said. “Even after the renewal of this contract, approximately 40% of the forecast demand will remain uncontracted by the end of the decade. This could pose a risk given the volatility in the market and geopolitical uncertainties.”

“Indian buyers prefer Middle East suppliers anyway due to the close proximity to the market,” he said. “Furthermore, Indian buyers don’t have any contracts with projects that are at risk, and they haven’t signed any agreements with the US exporters since 2019. Even the deal between Petronet and Driftwood in 2019 didn’t materialize.”

India plans raise the share of gas in the country’s energy mix to 15% by 2030, from about 6%. In 2023, India implemented unified gas pipeline tariffs for transportation of natural gas which simplified gas pricing and incentivized downstream demand.

Source: Platts