Economic Times: India to Skip Long-Term Gas Pricing Contract with Turkmenistan

India doesn't plan to freeze a long-term price or formula for the gas it plans to buy from Turkmenistan using TAPI pipeline following a bitter experience with Qatar recently when it had to forego the benefits of commodity crash and pay double the spot rate for a long time before the 25-year contract was reworked. 

"The natural gas market is changing rapidly. No one knows how it would look like in the next few years. So, it doesn't make sense to lock-in a price or a formula for the next 20 years," an oil ministry official said. The price of liquefied natural gas (LNG) that is transported long distance using ships has collapsed two-thirds in two years. 

Global LNG supply is expected to rise by a third to about 330 million metric tonne annually by 2018, likely to further depress prices. Amid this uncertainty that makes predicting long-term gas prices extremely difficult, the government doesn't want to get into a multi-year pricing contract. "A long-term contract witnesses several cycles and ends up balancing the gains and losses. MORE