State-run GAIL signs long-term LNG supply contract with Adnoc Gas

State-run GAIL (India) Ltd on Thursday signed a long-term contract for purchase of liquefied natural gas (LNG) from Adnoc Gas. Both the companies signed the 10-year Sales and Purchase Agreement (SPA) for the delivery of up to 0.52 million metric tonnes per annum (mmtpa) of liquified natural gas from Adnoc Gas, starting in 2026.

This is the first SPA Adnoc Gas has inked with an Indian buyer, a statement from GAIL said. The LNG will be delivered in six cargoes per year from Adnoc Gas’ Das Island natural gas facility, which has an LNG processing capacity of 6.0 MMTPA, a GAIL press release said.

Also read | ADNOC to supply gas to Indian Oil

The Abu Dhabi National Oil Co. (Adnoc) is the state-owned oil company of the United Arab Emirates.

Mint reported in January that talks for India's state-run firms to secure LNG from UAE to cater to India's energy security needs were at an advanced stage. Consuming nations prefer long-term deals as they provide gas at cheaper rates than spot purchases.

As a result, the UAE, India's second largest source of energy imports, is now a long-term gas trading partner. This development assumes importance as India's demand for natural gas is poised to rise steeply in the coming years.

Growing LNG demand

"India is witnessing a growing demand for LNG to meet its increasing natural gas demand in a diversified sectoral pattern. GAIL plans to significantly increase its term LNG portfolio in the coming years to meet this rising demand," said GAIL marketing director Sanjay Kumar, adding that the Adnoc Gas deal was a crucial step in this direction.

The deal is also expected to help India increase the share of natural gas in its energy mix to 15% by 2030, from about 6% today, GAIL informed in its press statement.

Adnoc Gas senior vice president of marketing Rashid Khalfan Al Mazrouei said, "This agreement strengthens Adnoc Gas’ role as a reliable and responsible global natural gas provider and reflects our ambition to capture future growth opportunities in gas demand. It also reinforces our position as a preferred partner for energy solutions in India."

Also read |  Abu Dhabi's Adnoc offers India a stake in its upcoming LNG liquefaction terminal

Globally demand for LNG is expected to rise 15% over the next decade due to the increased use of the natural gas in the south Asian region, as well as due to China's shift from industrial coal to gas, Al Mazrouei added.

Indian state-run companies have been looking at long-term agreements for LNG supply in a bid to achieve energy security and it has gained momentum since 2022 when gas prices touched multi-year highs with the start of the Russia-Ukraine war.

In May, state-run Indian Oil Corp. Ltd signed a long-term contract with French energy giant TotalEnergies in France for LNG supply. In February, Petronet LNG extended its contract with QatarEnergy LNG by signing a long-term deal for buying 7.5 million tonnes of LNG per annum.

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