India's Increased Purchase of US Energy
India plans to boost its purchase of US energy by two-thirds, aiming to reach $25 billion, as discussed during a meeting between Indian Prime Minister Narendra Modi and US President Donald Trump.
US-India Trade Imbalance and Energy Agreements
- President Trump highlighted the potential to address the trade imbalance by increasing US oil and gas sales to India.
- Both leaders agreed on the importance of the US becoming a leading supplier of oil and gas to India.
Current US Position in India's Energy Imports
- The US is currently the fifth-largest crude exporter to India, following Russia, Iraq, Saudi Arabia, and the UAE, and accounts for about 5% of India's imports.
- The US makes up approximately 30% of India’s long-term contracted LNG imports.
Future Purchase Goals and Challenges
Foreign Secretary Vikram Misri mentioned that previous US energy purchases were around $15 billion, with expectations to reach $25 billion.
- Indian state-run companies face pressure to increase US energy purchases despite higher freight costs.
- Challenges include US oil needing to be commercially competitive to offset higher transportation costs, which are nearly three times that of West Asian imports.
Focus on Natural Gas
India prioritizes sourcing more natural gas over oil due to its multiple suppliers worldwide.
- The US is the largest LNG exporter, with Indian state-run companies like GAIL having long-term LNG deals.
- Indian companies, however, prefer crude-linked LNG contracts for their global stability, as opposed to Henry Hub-linked US contracts.
Long-term LNG Contracts
- LNG term agreements are typically for ten or more years, featuring a "take or pay" clause that obligates payment even if the energy isn't utilized.