From the AFR:
Woodside Petroleum has stepped up its LNG marketing efforts in India, personally led by chief executive Peter Coleman, but price looms as a major hurdle in securing long-term contracts for the company’s high-cost projects.
Mr Coleman, who is among several resources sector chief executives taking part in a government-led trade mission to India, said he expected India to play “an important part” in the expected diversification of Woodside’s global LNG customer base, while remaining cautious on timing.
“Whether that’s going to be five years or 10 years from now, I can’t predict,” Mr Coleman said, according to the West Australian.
He is thought to have met with Indian LNG importer Petronet, port operator Adani, which is building an LNG import terminal, and Adani’s partner in the terminal Gujarat State Petroleum Corporation during the visit.
…It is set to receive its first LNG supplies from Australia in 2015-16 through a 20-year contract signed in 2009 between Petronet LNG and ExxonMobil for LNG from the $54 billion Gorgon venture.
However that contract is said to be among India’s most expensive LNG deals, and reports in India say Petronet has been under pressure from gas buyer GAIL (India) to renegotiate it to a lower price.
…However Mr Coleman said this week he was “sure” Woodside would export to India.
No, it won’t. Not unless it slashes prices. The Australian trade mission is too late. Last week Japan and India ramped up their efforts to group buy LNG with agreement at the very highest level. Asian LNG customers know there is a glut coming right around the corner.
In fact, as the article intimates, prices for existing supply are going to have to fall. Petronet has no local pricing power at all. From the Times of India:
To increase LNG offtake from its Puthuvype terminal, Petronet LNG has decided to provide the gas to all other customers at the same low rate being offered to Fertilizers and Chemicals Travancore Ltd (FACT).
The company had recently offered to supply LNG to FACT at12 dollars per MMBTU (million metric British thermal unit). The price was $16 to $19.5 when the terminal was commissioned late last year.
“We are ready to pass on the benefits of the fall in prices of LNG in the global market to all customers. What is important for us now is to increase the throughput from the terminal,” said Petronet managing director and CEO Ashok K Balyan after the director board meeting here on Thursday.
Balyan, however, conceded that the company had not heard from FACT on resuming gas offtake from the Puthuvype terminal. FACT, which had initially bought LNG from Puthuvype, stopped later saying that the gas price was higher. “They are waiting for some clearances to revive supply,” he said.
He said there was no response from the state government either on the earlier proposal to set up a gas-based thermal power station at Puthuvype.
With customers hard to come by, Petronet officials are caught in a bind and unable to enhance the throughput from the LNG terminal set up at cost of Rs 4,200 crore.
The days of Australian executives swanning around Asia signing up inflated contracts on bloated demand forecasts are gone. They’re gone in iron ore. They’re gone in coal. They’re gone in LNG.
The sooner we realise it as a nation, the sooner we can get down to working out how to lower the costs of all of our largest exports products so we don’t lose on the new battlefront of global resources: market share.
