GAIL, India’s largest natural gas marketing and trading firm is reported to seek government support for renegotiating expensive LNG deal from two U.S suppliers. GAIL holds purchase contracts of around 5.8 million tonnes a year of LNG that were signed between 2011 and 2014 when the LNG market was soaring to incredible heights across the globe.
In year 2020, a reversal in spot prices of LNG due to weak fundamentals of fuel after the outbreak of Coronavirus Pandemic has struggled GAIL to market expensive LNG without contracting its own profit margins. To safeguard revenues In times where the spot prices of the product have dived to record low, GAIL has asked the government to exchange dialogues with U.S to realign the contract prices of LNG in line with the present spot prices of the product in international market.
The company also wished that the tenure of the contract should be extended by 5 years and annual purchase volumes must be reduced. The current rate for LNG purchased by U.S is about thrice of the actual price at which the product is being brought in spot markets. The company has tried to rework the purchase contracts in previous years too but was always stuck due to unyielding U.S suppliers. Hence, it has presently tied all hopes to bring clearance to the matter by urging the government to enforce their diplomatic ties.