ExxonMobil Corp. has agreed to lower the price of its LNG sales to Indian buyer Petronet from the Gorgon-Jansz project.
Although no exact figures are available, analysts suggest the supermajor has reduced the price per unit of LNG from the Western Australian project by $1.10-1.30. The new deal has an estimated value of more than $90 million/year for Petronet at current oil and transport prices.
Petronet’s 20-year contract, signed in 2009, was for the purchase of 1.4 million tonnes/year. The company has been angling for some time to renegotiate the original terms in the light of the global glut of LNG.
ExxonMobil has a 25% interest in Gorgon-Jansz.
News of the discount is expected to place pressure on other Australian LNG producers as they enter negotiations with existing and potential LNG customers.
It seems likely, analysts say, that there will need to be a more flexible approach to LNG contracting—including a move to shorter-duration contracts—if sellers are to maintain their markets. If widespread discounts also are on the agenda it could have negative implications for sellers’ profits and the recouping of capital costs of the large projects such as the $54-billion Gorgon-Jansz development.
Australia sells most of its LNG into Asian markets: Japan, South Korea, China, and Taiwan. It remains to be seen whether major price renegotiation discounts will occur for buyers in these countries and what the implications will be for the LNG projects in Australia yet to be brought on stream.
