India's state-owned city gas distribution company Gujarat Energy (GEL) has signed a long-term LNG supply agreement with Abu Dhabi's state-owned Adnoc for around 400,000 t/yr, or up to 4mn t over 10 years, linked to the US Henry Hub benchmark, the company said today.
Deliveries under the agreement are scheduled to begin in 2028 at around 400,000 t/yr, equivalent to around 6-7 LNG cargoes/yr. The volumes account for roughly half of the 800,000 t/yr LNG sourcing programme approved by GEL's board on 5 November, with the broader programme equivalent to around 12 cargoes/yr.
Few cargoes under the deal may also start arriving even in 2027, market sources told Argus.
The contract is likely to be priced at 119pc of Henry Hub plus a constant of $4.20/mn Btu, sources familiar with the matter told Argus.
The LNG is expected to support GEL's downstream gas demand, including supplies to the Morbi ceramic cluster in the western state of Gujarat, as well as its broader industrial and CNG customer base. The contracted volumes would be sufficient to support roughly 1.3mn-1.5mn m³/d of gas demand.
The companies said the transaction marks the first purchase of LNG molecules from XRG's international gas portfolio, Adnoc's international investment company.
GEL supplied around 1mn m³/d of gas to the Morbi cluster in October after capturing most of the 8mn-8.5mn m³/d market in July, when supplies of competing fuel propane came under pressure following disruptions to trade through the strait of Hormuz.
State-run Gujarat Energy expects to maintain a minimum gas offtake of 3mn m³/d in the region, it said during an August earnings call.
The Adnoc agreement, equivalent to roughly 1.3mn-1.5mn m³/d of gas demand, will provide a foundation for meeting part of that requirement, with additional LNG supplies expected to be contracted separately.
GEL is aiming to capture a 50pc share of the Morbi market in the long term. But it faces competition from propane suppliers, including state-owned Indian Oil and Bharat Petroleum, as well as private-sector distributors Adani, Aegis Logistics and Confidence Petroleum, which have offered steep discounts to ceramic manufacturers in recent months.
GEL has also approved a regasification agreement for capacity booking at GSPC LNG's 5mn t/yr Mundra LNG terminal for the LNG deal. The terminal has direct pipeline connectivity to Morbi, reinforcing its efforts to expand pipeline gas sales to the ceramic cluster.
The Indian government earlier this year encouraged gas distributors to prioritise gas supplies to regions with pipeline connectivity, as authorities sought to reduce dependence on LPG in industrial clusters following supply disruptions during the Middle East conflict.
The Henry Hub link does not necessarily mean the LNG will originate from the US, but the agreement aligns with a broader trend among Indian gas consumers and distributors to secure term contracts linked to a variety of other indexes to hedge against a volatile spot LNG market.
