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Wednesday, April 24, 2024

Russia ready to meet India’s oil demands at market price

India is looking for a long-term contract with Russia to secure its energy needs, as Russia is the largest liquefied natural gas (LNG) producer.

Russia’s largest liquefied natural gas (LNG) producer, Novatek, is poised to clinch a deal with India’s main gas distributor GAIL on long-term supplies.

A preliminary agreement may be signed as early as this week during a visit by Novatek Chairman Leonid Mikhelson to India for an energy conference, people familiar with the matter told the news outlet on condition of anonymity.

The news comes as GAIL struggles to recover from its 93% slump in profits in the three months to December compared to a year earlier, resulting from a supply disruption on the part of a former unit of Russian energy giant Gazprom.

GAIL had a 20-year contract with Gazprom Marketing and Trading Singapore (GMTS), a former unit of Berlin-based Gazprom Germania. Last year, German authorities took over Gazprom’s subsidiary, now called Sefe, as part of anti-Russia sanctions, without providing compensation payments.

The Indian utility company was forced to resort to gas rationing, and slashed output at its petrochemicals plants after supplies under the deal with GMTS fell through.

Novatek and GAIL are now negotiating terms, and will have to decide on the volume of supplies, which will depend on insurance and shipping.

“We are actively in discussion with a couple of long-term LNG suppliers… Hopefully, we should be able to conclude at least one contract shortly,” the executive director of GAIL, A Kaviraj, stated.

According to Reuters, Novatek is offering monthly LNG supplies to GAIL under a long-term deal on a free-on-board basis, meaning the buyer has to charter ships, and pay freight, insurance and delivery costs.

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The Indian company, however, is asking Novatek to ensure the transfer of cargo to Indian ports and cover insurance and freight expenses, as insurance companies are reluctant to provide shipping services for Russian energy cargoes due to Western sanctions.

India is keen to expand its energy cooperation with Russia as a means of boosting its energy security. New Delhi has been Russia’s top oil consumer for several months, having imported a record 1.17 million barrels a day in December.

Courtesy: Reuters