India's top gas importer Petronet LNG is set to cancel its offer to buy an annual 1 million tonnes of liquefied natural gas (LNG) for 10 years, two sources said, as signing long-term contracts are not attractive in the current scenario.

India is scouting for cheap gas for price-sensitive consumers as Prime Minister Narendra Modi wants to raise the share of natural gas in the national energy mix to 15 per cent by 2030 from the current 6.2 per cent to reduce pollution.

Earlier this year, Petronet invited bids to buy LNG with pricing linked to Henry Hub natural gas futures in the US and Dutch TTF gas futures and shipped on a delivered ex-ship basis.

“This month in an internal committee it was decided to cancel the tender. Soon the proposal will be placed for approval by the board,” said one of two sources familiar with the matter who both confirmed the plan to end the tender.

“Long-term deals don’t make sense in current scenario. Doesn’t make sense to lose precious foreign exchange,” the source added. GAIL (India) is struggling to sell its costly LNG sourced under long-term deals with US companies.

Asian spot LNG prices have been languishing near record low levels, which were first reached in May, due to new supply entering the market from the US and the coronavirus pandemic slamming gas demand globally.

Petronet’s chief executive Prabhat Singh last month said his firm was close to finalising the deal with prices near to spot markets. It is renegotiating pricing under long-term deals with Qatargas after spot prices declined.

Petronet has deals to annually buy 7.5 million tonnes of LNG from Qatar. Petronet did not respond to an emailed request for comment on plans to cancel the tender.

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