ExxonMobil: India renegotiates the 20-year LNG contract

If ExxonMobil had not agreed to renegotiate, Petronet might have scrapped the agreement.

liquefied natural gas ExxonMobil PetronetAccording to Fitch Ratings the renegotiation of a 20-year liquefied natural gas (LNG) contract to lower the price paid by India’s Petronet LNG to one of its suppliers, ExxonMobil, demonstrates the risks faced by LNG exporters in the oversupplied APAC market. Larger LNG importers, such as Japan, South Korea and China, have a strong bargaining position and could push for renegotiations in their own long-term deals.

ExxonMobil has agreed to accept lower prices and to absorb freight costs. It has reportedly reduced prices to less than 14% of Brent from 14.5% on already-contracted supplies, and accepted 12.5% on additional supplies.

If ExxonMobil had not agreed to renegotiate, Petronet might have scrapped the agreement, leaving the major to pursue damages and resell the volumes on a weak spot market.

India is a relatively small, if growing, importer of LNG. The larger importers that have not so far looked to renegotiate contracts could have a much more significant impact on exporters. Japan accounts for around 32% of global LNG imports, South Korea for 13% and China for 10%. India accounts for 7%, slightly more than Taiwan, at 6%.