KOLKATA (miningweekly.com) – India is keen to ship in higher volumes of  liquefied natural gas (LNG) from Australia, but at the same time, the country has indicated that higher imports will be dependent on renegotiating existing long-term contracts to better reflect the fall in spot LNG prices.

At a recent government-to-government dialogue, it was stated that with India moving to a gas-based economy, there existed significant scope to enlarge India-Australia energy cooperation. However, to achieve this, long-term contracts with Australian suppliers would need to be renegotiated as Indian consumers were "price sensitive" and long-term imports of LNG needed to be aligned with realities of softening spot international prices.

It was pointed out, in the course of talks, that while most Indian long-term LNG import contracts were about $8 or $9 for a million metric British thermal unit, prevailing spot prices were almost half of that level.

About 1.44-million tons a year of inward LNG shipments were locked up in long-term contracts with Australian suppliers. This compared with 8.5-million tons a year imported under long-term contracts with Qatar, 5.8-million tons a year from the US and 2.5-million tons a year from Russia.

Though not specifically related to imports from Australia, Indian Petroleum and Natural Gas Minister Dharmendra Pradhan said in a statement last month that “India will re-look at pricing of long-term LNG import contracts at the appropriate time”.

He was quick to add that all long-term import contracts would be honoured, but that at the same time the price sensitivity of Indian consumers would also need to be protected if the country was to move towards a gas-based economy and achieve the target of LNG constituting at least 15% of the country’s total energy mix by 2030, up from 6% at present.

A section of industry in India expressed reservations over the possible success of renegotiation of long-term contracts with Australian LNG suppliers considering the rapid rise in Chinese demand for LNG shipments from Australia.

The industry sources pointed out that China was inching close to the levels consumed by Japan, currently the highest importer of Australian LNG. While Japan accounted for 39% of Australian LNG exports last financial year, China’s rising energy demand saw shipments increase to 36% of Australian exports.

Given such a rising demand for Australian LNG from key Asian markets, questions remained as to whether Indian demands for renegotiating long-term supply contracts would find any takers among Australian LNG suppliers, industry sources in India added.