GAIL (India) Ltd, the country’s largest gas company, has signed a long-term LNG purchase agreement with Abu Dhabi National Oil Company (ADNOC) Gas for around 0.5 million tonnes per annum (MMTPA) of liquefied natural gas (LNG), the Indian firm said in a statement on January 29, 2024.
This is the second long-term LNG deal that GAIL has signed this month, after securing a contract with global commodity trader Vitol for 1 MMTPA LNG for 10 years starting from 2026. These deals will help GAIL diversify its LNG portfolio and meet the rising demand of its customers in various sectors such as power, fertilizer, city gas distribution and industrial use.
Benefits of the deal
The LNG deliveries under the ADNOC deal will commence from 2026 onwards for a duration of 10 years, across India. GAIL expects that the deal will contribute to bridging the gap in India’s demand and supply of natural gas and will open more avenues of cooperation between GAIL and ADNOC in other areas of energy.
According to GAIL’s chairman and managing director Sandeep Kumar Gupta, “This agreement is in line with our strategy to secure long-term LNG supplies from diverse sources at competitive prices. This will also reinforce the robust cultural and economic bonds between India and the United Arab Emirates (UAE)”.
The UAE is one of India’s key strategic partners in the Gulf region, with bilateral trade reaching $60 billion in 2019-20. The two countries have also enhanced their energy cooperation in recent years, with Indian companies acquiring stakes in UAE’s oil and gas fields.
India’s LNG market outlook
India is one of the fastest-growing LNG markets in the world, with its consumption expected to reach 28.7 MMTPA by 2024-25, up from 23.9 MMTPA in 2019-20. The country aims to increase the share of natural gas in its primary energy mix from 6.2% currently to 15% by 2030, as part of its efforts to reduce carbon emissions and enhance energy security.
To achieve this goal, India is expanding its LNG import infrastructure, pipeline network and city gas distribution projects across the country. The government has also announced several reforms and incentives to promote the use of natural gas in various sectors.
GAIL is playing a pivotal role in India’s gas market development, as it operates more than 70% of the country’s natural gas pipeline network and has a dominant position in gas marketing and transmission. The company is also investing in new LNG terminals, pipelines and city gas projects to cater to the growing demand.
With the signing of the long-term LNG deals with ADNOC and Vitol, GAIL has secured a total of 3.5 MMTPA of LNG supply for the next decade, which will help the company meet its contractual obligations and capture new opportunities in the Indian gas market.