India's AMNS signs 500,000 mt/year LNG deal with Shell at 11.5% slope to crude oil

Arcelor Mittal Nippon Steel India has signed a deal with Shell for the supply of 500,000 mt/year of LNG starting from 2027 for 10 years, at an 11.5% slope to crude oil, sources told S&P Global Commodity Insights May 23.

This marks the first deal priced below 12% slope to crude oil since Europe switched to consuming LNG after reducing pipeline gas consumption from Russia following its invasion of Ukraine.

The deal involves certain flexibilities that the seller can exercise, such as one additional cargo per year, sources said.

"The contract is signed for 10 years for 500,000 mt/year starting in 2027 and there is no DQT (downward quantity tolerance)," one of the sources said.

Sources added that the deal was likely to include some flexibility around deliveries at the Hazira LNG terminal.

Official spokespersons for Arcelor Mittal Nippon Steel India and Shell did not respond to queries at the time of writing.

Below 12% slope

After Russia's invasion of Ukraine, the LNG market was focused on energy security. As global LNG markets adjusted to the change and spot prices eased from the record high seen in 2022, affordability has become an important component of energy security for South Asian and Southeast Asian buyers.

A Singapore-based source said the news was big because, with this deal, it seemed that the market has corrected below 12% slope to crude oil.

A Europe-based source said the price was understandable if there was some flexibility afforded in the deal for the supplier.

LNG buyers have been negotiating hard to lower oil-linked price slopes for long-term contracts as market participants expect additional volumes from the US and Qatar to be made available later this decade.

The expectation of additional supply being available from 2025 onward has put pressure on long-term pricing slopes, especially as LNG spot prices have eased from the elevated levels seen in 2022 and early 2023.

Platts assessed the West India Marker, the benchmark price for LNG cargoes delivered to west India ports and the Middle East, for July at $11.163/MMBtu on May 21, according to S&P Global Commodity Insights data.

According to the forward curve on May 21, the WIM derivative for calendar year 2027 was assessed at $9.675/MMBtu.