ExxonMobil has agreed “a big price cut” on a 20-year LNG supply deal with India, in yet another victory to buyers in an oversupplied market.
Reuters reports that India secured the discount after renegotiating its supply contract with the energy giant. The news comes two years after India renegotiated a major supply contract with Qatar – a landmark in an industry hitherto dominated by long-term supply deals.
India’s contract victory highlights how the market has shifted in the last decade from supplier’s to buyer’s market. It strengthens the hands of other major buyers to renegotiate their own trade terms, particularly Japan, which is renegotiating a slew of long-term supply deals.
Japan-based JERA, the world’s largest importer of LNG, has 10 million tonnes a year (mta) of supply contracts due to expire in 2018-2020 and has pledged to sign no new long-term deals.
In February, Japanese utility companies secured more flexible trading terms, winning the right to resell surplus LNG cargoes.
New supply from Australia and the US has swung the market from under to oversupply and cargoes from the latter come with more flexible terms. And more supply is coming.
Chevron’s Wheatstone LNG is due to start production this month. Paris-based KPLER expects the 160,000 m³ Chevron-owned newbuilding Asia Venture to reach the 8.9 mta plant on 25 September.
The energy major delayed Wheatstone’s original late 2016 start date, amid growing oversupply.