India and Japan, two major importers of liquefied natural gas (LNG), have teamed up to ensure competitive pricing of long-term gas import deals and more LNG affordable for consumers.
The union cabinet on Wednesday approved the signing of a memorandum of cooperation (MoC) with Japan on establishing a liquid, flexible and global LNG market.
The MoC will promote bilateral relationship between India and Japan in the energy sector while also contributing to the diversification of gas supplies for India, leading to competitive prices for consumers and strengthening the country's energy security.
The arrangement will help Indian companies swap LNG booked with firms overseas with that of Japan's contracted volumes elsewhere.
The MoC provides for a framework to cooperate in facilitating flexibility in LNG contracts, abolition of destination restriction clause and also for exploring possibilities of cooperation in establishing reliable LNG spot price indices reflecting true LNG demand and supply, a cabinet releas4 stated.
The MoC also provides for trading in surplus arising from long-term supplies contracted with major exporters such as Qatar, Australia and Malaysia.
Such an arrangement will help India's state-run GAIL India Ltd swap a part of its 5.8 million tonnes of LNG booked with firms from the United States with that of Japan's contracted volumes in Asia and elsewhere, a Reuters report citing Sunjay Sudhir, joint secretary for international cooperation in the petroleum ministry as saying.
"The agreement will have a swap clause as well, like we can swap our Australian LNG from Gorgon project with LNG booked by Japan with Qatar," India's oil minister Dharmendra Pradhan told reporters.
India last month agreed to buy more LNG from the Gorgon project after Exxon Mobil agreed to cut prices under a long-term deal.
India and Japan will also look at establishing LNG spot price indices that reflect true supply and demand.
Pradhan earlier this week said that India wanted to set up a gas trading exchange for transparent market-driven prices that would encourage investment into the sector.
India wants to increase its share of gas in its energy mix from about 6.5 per cent now to about 15 per cent in the next few years.
Meanwhile a Reuters report quoting the president of Japan's JERA Co, the world's biggest LNG importer, said on Wednesday that that his firm was set to sign a new LNG contract that would be free of destination restrictions.