Indian Oil Corporation Ltd’s (IOC’s) recently signed long-term liquefied natural gas (LNG) purchase deal with Abu Dhabi’s ADNOC Gas is valued at $7-9 billion, the United Arab Emirates (UAE)-based gas major said on Wednesday.
The agreement, which was inked during Prime Minister Narendra Modi’s recent visit to France and the UAE, is for supply of up to 1.2 million tonnes per annum (mtpa) of LNG to IOC for 14 years, starting 2026. During Modi’s visit, IOC inked another agreement with France’s TotalEnergies for purchase of 0.8 mtpa of LNG for 10 years, starting 2026. IOC and the government, however, have not disclosed the value of the deals.
These are the first-ever LNG term deals that an Indian company has signed with ADNOC Gas and TotalEnergies. India’s oil and gas companies, public sector players in particular, are scouting for long-term LNG purchase agreements with global suppliers to secure reliable supplies of super-cooled gas.
“The landmark deal marks another significant milestone for ADNOC Gas as it expands its global reach, reinforcing its position as a global LNG export partner of choice, and reaffirming IOCL as its key strategic partner in the LNG market,” ADNOC Gas said.
LNG, as the name suggests, is natural gas that is liquefied by cooling it at ultra-low temperatures for shipping it globally using specialised vessels.
India depends on imports to meet about half of its natural gas requirement. India, like many other countries, views natural gas as a key transition fuel as it makes efforts to accelerate its move to green energy. The Narendra Modi government has set an aim to increase the share of natural gas in India’s primary energy mix to 15 per cent by 2030, from over 6 per cent at present. This means that India’s natural gas demand is likely to grow considerably over the next few years, which in turn means that the requirement of imported LNG is also slated to rise.
Although LNG can be bought through spot contracts as well, long-term deals are considered better in terms of reliability and affordability of supply in a global market that can be susceptible to high volatility.
As one of the major importers of LNG globally, India was adversely impacted by the tightening global supply and surging spot LNG prices last year in the aftermath of Russia’s invasion of Ukraine.
IOC has an LNG regasification terminal of its own in Tamil Nadu’s Ennore. The company is also one of the promoters of India’s largest LNG importer and regasifier Petronet LNG Ltd.
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