Petronet in talks with Qatar to defer April LNG cargoes

India's state-controlled Petronet will take delivery of its scheduled LNG cargoes up to the end of this month but is in talks with its largest LNG supplier Qatar's state-owned Qatargas to defer scheduled deliveries of term LNG cargoes in April by a few weeks as a means to manage an anticipated slump in downstream demand because of a 21-day nationwide lockdown that started yesterday.

The firm has declared force majeure (FM) on its ability to receive LNG cargoes but is in talks with Qatargas regarding deferrals because the Qatari firm is under no obligation to agree to the FM, a senior Petronet official told Argus. He did not comment on whether the FM extends to its term contract with ExxonMobil.

At least 10-11 of Qatargas' cargoes scheduled for delivery to India in April will need to be offloaded in a different market or may be deferred to a later date if the firm agrees to Petronet's request. Qatargas could not be reached for comment on this.

But Petronet will take delivery of eight spot and term LNG cargoes that are scheduled to arrive by 31 March, the Petronet official said. Vessel tracking data indicate that three vessels are scheduled to call at the 17.5mn t/yr Petronet-operated Dahej terminal in Gujarat during 27-31 March — the 149,600 m³ LNG Borno on 27 March, the 145,000 m³ LNG Enugu on 29 March and the 160,000m³ Sonangol Etosha on 31 March. The 137,514m³ Ghasha tanker is already at Dahej waiting to discharge, although vessel tracking data show a delivery date of 5 April.

Petronet has a 7.5mn t/yr term supply agreement with Qatargas, which started in 2004. The volumes are sold to state-owned buyers Gail, IOC and Bharat Petroleum (BPCL) at a ratio of 60:30:10, respectively. The contracted volume is equivalent to around 10-11 cargoes a month, based on a cargo size of 60,000t. Gail, BPCL and IOC have separate agreements with Qatargas, which started in 2016, for 1mn t/yr or a little over one 60,000t cargo each month.

Petronet also has a contract with ExxonMobil to receive 1.44mn t/yr of LNG, or around two cargoes a month based on a 60,000t cargo size, from the Chevron-operated 15.6mn t/yr Gorgon plant in Western Australia. Gail and IOC each take 30pc of the contracted volume from Petronet, while the remaining 40pc goes to BPCL.

As many as eight Qatari cargoes are already on offer in the spot market to northeast Asian buyers, which have received calls seeking interest, industry participants said. And sellers have been marketing three Gorgon cargoes, with two for delivery in April and one for May in the last two days, participants said.

Downstream buyers that receive regasified LNG (RLNG) under the Qatargas contract have sent FM notices to their sellers IOC, Gail, BPCL and state-controlled Gujarat State Petroleum (GSPC), industry participants said. Demand has dropped significantly among city gas distribution, power and ceramics firms, industry participants said.

"Our demand — internally and from our customers — has gone down drastically," an official at IOC said. "Daily sendout for IOC alone from the Dahej terminal has dropped by around 30pc since the start of this week."

Both Gail and IOC have not declared FM but have alerted their LNG suppliers of the weakening domestic demand situation, officials at both firms told Argus. But it is unclear if BPCL and GSPC have done so. These firms could not be reached for comment.

"The situation is getting worse with the coronavirus outbreak and now with the lockdown — we are just keeping suppliers informed," another Gail official said. "Our buyers have declared FM and we are intimating this to our suppliers. It is an advance notice." The Gail official did not elaborate on what the advance notice means.

Gail also has contracts to offtake 3.5mn t/yr of LNG from the Sabine Pass facility in the US and the 2.3mn t/yr Cove Point facility. It has swapped some of its 2020 US offtake with traders last year, but has also not been taking the remainder of the volumes in full because of a lack of shipping. It has offered a significant proportion of this offtake on the spot market on a fob basis.

IOC may be forced to invoke FM if demand deteriorates further but it plans to monitor developments at Dahej closely over the next few days. Dahej is India's largest terminal and where the firm receives most of its LNG imports, even though its 5mn t/yr Ennore terminal in Chennai has been operating since March last year.

The firm is scheduled to receive two spot cargoes in April, with one to be delivered on 6 April to Dahej and the other between 20 March and 20 April to Ennore.

Several Indian ports on 22 March declared FM ahead of the lockdown in anticipation of constraints to the movement of people and material, which might result in cargo delays, demurrage charges and the inability to discharge at rates guaranteed earlier. The Mundra terminal, which is co-owned by GSPC and private-sector conglomerate Adani, is the only one among India's six LNG terminals to declare FM.

The ports of Gangavaram, Krishnapatnam, Karaikal, Dhamra and Gopalpur and Krishnapatnam have all declared FM. And India's shipping ministry has asked other major ports to consider doing the same.

By Camille Klass