Forbes: Indian-Qatari LNG Pricing Negotiations: Yet Another Sign That LNG Markets Are Shifting
On Friday, Bloomberg, citing industry sources, said that India’s largest natural gas importer, Petronet LNG Ltd., was in negotiations with Qatar’s RasGas Co., to work out a new pricing formula for an existing 25-year liquefied natural gas (LNG) contract.
The revised price will be based on a three-month average price of oil, replacing a five-year average, and will also be pegged to Brent crude rather than a basket of crudes imported by Japan (known as the Japanese Crude Cocktail or JCC) that has been traditionally used in LNG contracts in the Asia-Pacific region for years. This could immediately cut the contract price of LNG paid by Petronet by about 50% starting next month.
At first blush it’s easy to skim this news and miss it’s significance. However, upon further reflection the disclosure is profound and typifies the radical shift that LNG markets are going through after the period of limited LNG supply and exorbitantly high prices (2011-2014) post the March 2011 Fukushima nuclear disaster and the subsequent shutdown of all of Japan’s nuclear reactors and that country’s over-reliance on LNG to make up for electricity generation capacity no longer being fueled by nuclear power. MORE