Chemical, fertiliser and steel companies are negotiating with the three LNG marketers Gail, IndianOil and Bharat Petroleum (BPCL) to buy LNG. Take or pay agreements for 100% of the gas off-take have never been signed on such a large scale in India before now. The agreements will be signed by the user industries for a five year period and will be for the entire quantity of gas. All three companies are preparing to sign gas sales agreements within the next week, mostly with their existing naphtha customers who now want to switch to gas. The situation is very different from a few months ago when there was considerable uncertainty about the viability of LNG at the USD 3.5 to USD 4.5/mmbtu price band. However, oil companies will have to pay users the differential between the price of gas and alternate fuel if they are unable to supply gas, and similarly, users will have to pay oil companies the price of gas if they cannot consume it.
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