WoodMac has released comments on recent LNG deals signed by KOGAS and Petronet LNG.
On Korea Gas Corporation signing a 15-year contract with BP to purchase 1.58 million tpy of US LNG, Nicholas Browne said:
“KOGAS has issued tenders for long-term LNG and BP has clearly won part of this tender.
“KOGAS is looking to fill up its longer-term LNG supply requirement. It has one 4.9 million tons per annum contract with Qatar that expires in 2025.
“For BP, it looks to be following a strategy that it has done previously. BP is building market share by buying flexible LNG and then selling into markets on a long-term basis at a fixed margin. Even if the margin is relatively small, it expands BP’s portfolio and enhances its ability to unlock value through the wider portfolio.”
On the Petronet-Tellurian memorandum of understanding (MOU) to import 5 million tpy of US LNG, Nicholas Browne commented:
“The Petronet-Tellurian MOU if finalised, will be one of the largest deals completed in global LNG. It would also match the size of an existing 5 million t deal that Petronet has with Qatar.
“For India, if the deal can be realised and delivered at a close to fixed price, it could be extremely attractive for ensuring downstream sales for Petronet. Part of the challenge in marketing LNG is the difficulty in ensuring long-term downstream sales as end customers have historically proven nervous to lock in when there is a risk of price volatility.
“Another challenge is that Petronet no longer have a dominant position in LNG imports. Previously, it negotiated LNG contracts on behalf of shareholders. Now these shareholders such as GAIL and Indian Oil have their own LNG contracts. This reduces the market available to Petronet.”