New Delhi: The price of liquefied natural gas (LNG) encourages buyers to see secure long-term contracts possible with the choice for the price of floors and ceilings to hedge to extreme volatility, the CEO of a top gas importer on Friday.
“Such volatility has never been seen in the history of the LNG market.
We have seen the lowest and highest prices in the past year,” Ak Singh, Chief Executive Petronet LNG, told the Indian Energy Forum by Ceraweek, an industry event.
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Asian Spot LNG prices fell to the lowest record of under $ 2 per million British thermal units (MMBTU) in May last year when Coronavirus induced by Coronavirus suppressed gas demand.
Earlier this month, they skyrocketed to a record high above $ 56 per mmbtu.
Prices have pulled back to around $ 30 per mmbtu since, but it remains almost 500% up from last year.
“Every dark cloud has a silver layer and the situation (high price) encourages people to have a long-term contract rather than usual and it can be the best thing for the gas economy throughout the world,” he said.
The lower spot price has injured investment in gas production assets, which causes constraints to supply when a rebound demand as a global economy recovered after a pandemic.
Low prices also encourage buyers to take advantage of spot prices.
Short-term global spots and LNGs are now more than 40% of the overall volume, doubled in the past decade, also some of the Asian buyers are hesitant to commit long-term commitment amid energy transition uncertainty and increased liquidity, according to Valery Chow, according to Valery Chow, Head of Asia and LNG research at Wood Mackenzie.
Petronet says the long-term LNG is currently charged $ 11- $ 12 / million English thermal units compared to the spot price of around $ 40 / mmbtu.
Singh said recent volatility in gas prices encouraged buyers to see connecting long-term gas contracts with a mixture of raw and gas indices.
Floor and ceiling arrangements in prices in a long-term contract will protect buyers and sellers to volatility, Singh said.
Gas demand in India will increase because Prime Minister Narendra Modi has set a target to increase the gas share in the Indian energy mixture to 15% by 2030 from 6.2% now.
Meeting that goal requires a new LNG terminal building 70-75 million tons per year (MTPA) capacity in this country, Singh said, because super-cooled gas imports can rise to 120 mtpa from 26 mtpa at this time.
The current Indian LNG import capacity is 42 mtpa.
The new terminal of 19 MTPA capacity is being built while the plant total capacity of 9-10 mtpa is at the design stage, he said.