ExxonMobil gives India big discount on LNG deal

MELBOURNE: India has won a big price cut on a 20-year liquefied natural gas (LNG) deal with global giant ExxonMobil Corp in a rare contract renegotiation, a bad sign for global producers in a heavily oversupplied market.

Long-term contracts were rarely revised in the LNG market, and for a big producer to cave in showed how supply from new plants in Australia and the United States over the past two years had transformed the market, said analysts.

“This trend is overall a negative for sellers as they are forced to provide more flexibility to buyers’ needs to maintain their markets,” said Wood Mackenzie analyst Saul Kavonic.

India has been aggressive in seeking cheaper deals, also renegotiating a contract with Qatar in 2015, but the real pain for producers would come if major Asian buyers in Japan, South Korea and China followed suit.

“Happy to share good news that India has, yet again been able to address the long-term price issue of LNG from Gorgon to suit Indian market,” he said.

RBC analyst Ben Wilson estimated ExxonMobil would receive 15 per cent less revenue per unit on its sales to Petronet under the new deal. Reuters