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Indian Oil Corporation Limited (IOC’s) announced that it recently signed a long-term LNG supply deal with Abu Dhabi’s ADNOC Gas, worth between $7 billion and $9 billion, the UAE’s major gas company said on Wednesday.
The supply agreement, which was signed during Prime Minister Narendra Modi’s recent visit to France and the UAE, provides for the supply of up to 1.2 million tons per annum of LNG to the IOC for a period of 14 years, from 2026. Another agreement was signed with France’s TotalEnergies to buy 0.8 million tons per year of LNG for 10 years, from 2026. However, the value of the deals has not been disclosed by the International Olympic Committee and the government.
These are the first deals of their kind in the field of liquefied natural gas signed by an Indian company with ADNOC Gas and Total Energy. The Indian oil and gas company, and public sector players in particular, are looking for long-term LNG purchase agreements with global suppliers to secure reliable supplies of cryogenic gas.
ADNOC Gas said: “The historic agreement represents another important achievement for ADNOC Gas, as it expands its global reach, cementing its position as the preferred global partner for LNG export, and reaffirming IOCL as its key strategic partner in the LNG market.”
LNG, as its name suggests, is natural gas that is liquefied by cooling it at extremely low temperatures for worldwide shipment using specialized vessels.
India relies on imports for about half of its natural gas needs. India, like many other countries, considers natural gas a key transition fuel as efforts are underway to accelerate its transition to green energy. Narendra Modi’s government has set a target of increasing the share of natural gas in India’s primary energy mix to 15 percent by 2030, from more than 6 percent at present. This means that the demand for natural gas in India is likely to grow significantly over the next few years, which in turn means that the demand for imported LNG is set to rise as well.
Although LNG can be purchased through spot contracts as well, long-term deals are considered better in terms of reliability and affordability of supply in a global market that can be subject to high volatility.
As one of the major importers of LNG globally, India was negatively affected by shrinking global supplies and higher spot LNG prices last year in the wake of Russia’s invasion of Ukraine.
IOC has its own LNG regasification plant in Tamil Nadu Ennore. The company is also one of the promoters of India’s largest LNG importer and LNG registrar Petronet LNG Ltd.
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