The recently announced Indian Oil Corp's (IOC) deal with ADNOC for the supply of 1 mill tonnes per annum for 15 years was probably priced at around 12.4% slope to crude oil, sources told S&P Global Commodity Insights.
The gas will be supplied from the Ruwais LNG project. Deliveries are expected to start in 2028 when the project is due to come online.
Discussions had taken place since earlier this year, and was officially announced as part of Abu Dhabi Crown Prince, Sheikh Khaled bin Mohamed bin Zayed Al Nahyan's visit to India on 9th September.
This represents the third long-term contract signed by IOC in just over a year.
In July, 2023, IOC signed a 14-year deal for 1.2 mill tonnes per annum with ADNOC and another 0.8 mill tonnes with TotalEnergies. These supplies are expected to begin in 2026 with the price around 12.6% slope to crude oil.
The latest deal indicates that the pricing expected for DES India is expected to be lower for 2028 onwards versus 2026 and it also seemed to be at a lower price than other deals signed by ADNOC for Ruwais LNG.
Most of the previous deals were signed near a slope of around 12.6%, while others were in the range of 12.7%-12.8% with buyers’ operational flexibilities, adding a premium for the purchaser.
Exempt customs duty
As per a free trade agreement between India and UAE, buyers of ADNOC cargoes do not have to pay a 2.75% customs duty, which indicates a saving of nearly 27 cents on a $10 per MMBtu cargo.
Other countries exporting LNG to India also have a free trade agreement, including Australia and Malaysia but currently not Qatar, US or Oman.
Indian market sources said that a deal priced around 12.4% slope to crude oil was high given that there were portfolio companies and trading houses willing to offer lower prices, although there could be other considerations.
A fixed formula of 12.4% to the Dated Brent price of $73.995 per MMBtu would imply a price of $9.175 per MMBtu, Platts, part of Commodity Insights said.
This compared with the Platts WIM calendar year 2027 derivative assessment of $9.325 per MMBtu at the Singapore close on 13th September.
Meanwhile, Shell's deal with Arcelor Mittal Nippon Steel was priced at 11.5% slope to crude oil, partly due to flexibilities that the UK energy major can exercise. This deal calls for 500,000 tonnes to be supplied per annum beginning in 2027.
Torrent Power is also seeking 500,000 tonnes per annum from 2027 and has received offers around 12% slope to crude oil, market sources told S&P Global. The company had sought price offers linked to crude oil and Henry Hub.
Market participants said that the prices linked to Henry Hub offered to Indian buyers were near 120% slope to Henry Hub, plus a constant of around $4.2 per MMBtu.
Indian refineries are expected to ramp up their natural gas demand by the end of this decade.
