Surging liquefied natural gas (LNG) prices are pushing buyers to look at securing long-term contracts possibly with an option for a floor and ceiling price to hedge against extreme volatility, the CEO of India`s top gas importer said on Friday.

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"Such a volatility was never seen in the history of LNG markets. We have seen the lowest and the highest prices in the last one year," A.K. Singh, chief executive of Petronet LNG, told the India Energy Forum by CERAWeek, an industry event.

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Asia spot LNG prices dropped to a record low of below $2 per million British thermal units (mmBtu) in May last year when coronavirus-induced lockdowns depressed gas demand.

Earlier this month, they rocketed to a record high above $56 per mmBtu. Prices have pulled back to around $30 per mmBtu since, but remain nearly 500% up from last year.

"Every dark cloud has a silver lining and this (high price) situation is pushing people to have more long-term contracts than normally and that could be the best thing for the gas economy across the world," he said.

Lower spot prices had hurt investment in gas production assets, leading to supply constraints when demand rebounded as the global economy recovered after the pandemic.

Low prices also encouraged buyers to take advantage of spot prices.

Global spot and short-term LNG contracts now account for over 40% of overall volumes, doubling in the last decade, also partly a result of Asian buyers hesitating to make long-term commitments amid energy transition uncertainties and growing supply liquidity, according to Valery Chow, head of Asia gas and LNG research at Wood Mackenzie.

Petronet says long-term LNG is currently costing it $11-$12/million British thermal units compared to spot prices of around $40/mmBtu.

Singh said recent volatility in gas prices is prompting buyers to look at linking long-term gas contracts with a mix of crude and gas indices.

Setting floor and ceiling of prices in long-term contracts would protect both buyers and sellers against volatility, Singh said.

Gas demand in India is set to rise as Prime Minister Narendra Modi has set a target to raise the share of gas in India`s energy mix to 15% by 2030 from 6.2% now.

Meeting that goal requires building new LNG terminals of 70-75 million tonnes per annum (mtpa) capacity in the country, Singh said, as imports of the super cooled gas could rise to 120 mtpa from the current 26 mtpa.

India`s current LNG import capacity is 42 mtpa. New terminals of 19 mtpa capacity are under construction while plants totalling 9-10 mtpa capacity are at the design stage, he said.