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This story is from October 18, 2017

India seeks flexible LNG deals, IEA says it’s happening

India seeks flexible LNG deals, IEA says it’s happening
NEW DELHI: Liquid gas contracts are shedding their rigidity and becoming more flexible as regional systems gradually merge into an interlinked global market in an oversupplied situation, the International Energy Agency said on Wednesday.
The IEA’s projections in its second Global Gas Security Review came on a day India’s oil minister Dharmendra Pradhan urged gas buyers and sellers to join hands for developing a “balanced and sustainable” global market at a time when entry of new suppliers is transforming the trade.

Flexible contract regime will help optimise cost of supplies and allow countries such as India to rapidly develop a gas-driven economy as part of strategy to reduce carbon footprint.
Till now liquid gas trade has been confined to regional contracts with rigid terms, often biased in favour of the seller and offering little legroom for buyers. This is changing in the wake of fall in gas prices in tune with drop in oil prices and rise of the US fracking industry.
Following the price crash, India’s largest liquid gas importer, Petronet LNG, renegotiated its long-term contracts with Qatar’s RasGas and ExxonMobil, a partner in the Chevron-led consortium operating Australia’s Gorgon project. The renegotiations have made gas more affordable for India and will result in huge savings to the economy.
Speaking at the LNG Producer-Consumer Conference in Tokyo, Pradhan said buyers and sellers need to come together to design flexible terms such as provisions for reviewing the pricing formula, flexibility in take-or-pay clause, abolition of restrictions on cargo destinations,” the oil ministry said in a statement.

The IEA report indicated such changes over the next five years. “Looking forward, the pool of legacy export contracts with fixed destination and long duration can be expected to shrink as these expire, and be replaced by more flexible contracts. The development of US exports emerges as a major source of additional contractual flexibility. Global portfolio players would play an increasing role and provide additional flexibility from their currently open selling positions,” it said.
“LNG contract flexibility appears as an important determinant of the resiliency of the global gas system. The report's updated analysis of new signed contracts shows clear evidence of contractual structures becoming less rigid, a trend evidenced by the growing share of flexible destination contracts, as well as the decrease in contracts' average duration,” the IEA report said.
“While gas markets are currently well supplied, the transformation of natural gas markets from regional systems to more globalised and interdependent markets is creating new security challenges, according to the International Energy Agency's latest assessment of global gas security.”
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