Gail (India) Ltd., the country’s largest state-owned natural gas processing and distribution company, is looking to buy seven liquefied natural gas (LNG) cargoes for delivery from Oct. 2015 until Dec. 2016, the company disclosed at the end of March.

According to the tender agreement, deliveries are to be split between India’s Dabhol, Dahej and Hazira import terminals. The delivery windows are Oct.-Nov. 15, Jan.-Feb 16, March-April 16, May-June 16, July-August 16, Oct. 16 and Nov.-Dec 16. Cargo prices will be based on a percentage, or slope, set at 10 percent of the three-month average of Brent crude oil benchmark settlements prior to the month of delivery, plus a certain premium added by bidders.

This disclosure underscores India’s recent pledge to increase its LNG purchases amid the plunge in both global oil and oil-linked LNG prices in Asia. Since mid-June, global oil prices have plunged around 60%, while LNG prices with Asia-Pacific destinations are off by around two-thirds since the beginning of last year.

India’s increased gas demand should be good news for Australia’s new LNG projects that are coming on stream soon, as well as new project proposals that need to secure long-term supply agreements with off takers before reaching the all-important final investment decision (FID). However, the recent LNG price plunge creates diametrically opposing trajectories for both countries’ gas ambitions.

India, for its part, whose domestic production has not kept pace with demand in recent years, and must rely on increased LNG imports needed for electrical power generation, is set to benefit so much from lower oil and gas prices that its GDP is forecasted to increase from around 5.6 percent to  6.3 percent.

Australia, in geographical proximity to Asia-Pacific, the largest natural gas market in the world, has been building mega-LNG projects at break-neck speed. In the next three years, seven Australian gas export facilities are to come on-stream – mostly to feed rising demand from Asia, where imports account for approximately 70 percent of global LNG supply. When plants under construction are added to current capacity, Australia’s total of 85.8 million tonnes will bypass current top exporter Qatar (at 77.7 million tons) to be the world’s top LNG exporter.

However, what will benefit India will be a quandary for Australia. The country, which has spent around $200 billion in recent years on LNG projects, was already suffering from budget blow outs amid spiraling construction costs at nearly all of its LNG projects. Now, since LNG prices have yet to find a floor the pain is increasing, especially for newly constructed projects.

Last month, Fereidun Fesharaki, founder and chairman of consultancy FACTS Global Energy, said that the knock-on effect of falling oil prices on LNG would be most keenly felt on Australian projects currently being brought into production. “The LNG business will be heavily impacted, particularly for Australia where all these expensive projects have come on. They will not be seeing a return on investment for many years to come,” Fesharaki said. He added that cash flow will come in this year and next year for Australia’s new projects but the real economics of these projects are negative for many years to come.

Despite plunging prices, the two countries have already started signing energy agreements. In January, Woodside Petroleum, Australia’s largest oil and gas exploration and production company, and Adani Enterprises, an Indian multinational conglomerate with energy interests, signed a non-binding memorandum of understanding (MOU) for cooperation in exploring opportunities in India’s oil and gas sector. According to an Adani press release at the time, the two companies will “jointly explore opportunities in sourcing LNG supply and purchase arrangements for India, and LNG marketing,” as well as other areas of interest.

However, this increased alliance in Australian-Indian LNG development will not be balanced. Australia will have to sell gas both on the sport market and by long-term contracts at repressed prices that will pressure project economics for years, just as Fesharaki alluded to, while India will be delighted to buy spot cargoes and even more thrilled to lock in 20 and even 30 year long-term contracts at multi-year price lows.

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