German state-owned gas trader SEFE's sales and purchase agreement with Oman LNG for the supply of 400,000 mt/year of LNG over 2026-2029 likely includes price linkage to Europe gas hub index, market sources told S&P Global Commodity Insights in the week to April 9.
The announcement of the sales and purchase agreement was made on March 21, following a binding term sheet between SEFE and Oman in August 2023. The contract is on an FOB basis, market sources said.
"The price is linked to TTF minus a discount on FOB," a trader source said.
The inclusion of European gas index in a contract by Oman LNG would mark a first for the Middle East country in a term deal which typically signs contracts based on linkage with crude oil.
Market sources have repeatedly indicated since 2023 that given the evolving dynamics of the market, with Europe becoming a major importer of LNG, Europe's preference for long-term contracts were more closely linked with gas hub index rather than crude oil.
Sources said the European gas hub price considered was the Dutch TTF in the contract, using a formula which considers a percentage to TTF minus a constant.
Another source confirmed that the price of the contract was linked to TTF but said that the reason for doing so could be because of optimization strategy.
SEFE spokesperson declined to comment when contacted and Oman LNG did not respond at the time of writing.
Typically Oman only offers a crude oil price-linked contract price and this linkage with gas hub prices came to some as a surprise, market participants said.
In 2023, Qatar Energy's contracts with Shell, ENI and Total Energies also included a linkage in the long-term contracts that were announced. At the time, sources across the Middle East had indicated that the buyers' preference for LNG delivered to Europe was for an inclusion of gas hub prices in long-term contracts.
SEFE recently also announced a Heads of Agreement deal with ADNOC LNG on a DES basis with flexibility on delivery linked to crude oil prices, sources said.
Through the contract with ADNOC, SEFE is expected to receive 1 million mt/year of LNG from the upcoming Ruwais project for a tenure of 15 years.
SEFE also supplies LNG to India's GAIL as it took over the obligation from the contract that GAIL originally signed with Gazprom. According to the contract, GAIL expects to receive 2.8 million mt/year of LNG from SEFE until 2040. According to market sources, this contract is linked to Japan Customs Cleared and priced at a slope of low-13%.
Platts assessed the May JKM, the benchmark price for LNG cargoes delivered to Northeast Asia, at $9.826/MMBtu April 9.
Platts assessed the May West India Marker, the benchmark price for LNG cargoes delivered to West India ports, at $9.325/MMBtu April 9. (April 9, 2024)
GERMANY - OMAN - LNG - SUPPLIES - IMPORTS - EXPORTS