Ramit Mehrotra, Pune
India is set to sign a deal with Qatar to extend their Liquified Natural Gas (LNG) import contract for up to 20 years at rates lower than current prices. Petronet LNG Ltd., India’s largest LNG gas importer, will sign a deal with Qatar’s QatarEnergy to extend the import of 7.5 million tonnes per year. Sources say the prices are significantly less than the deal that previously persisted.
Negotiations to extend the contract have been taking place for some time now. The deal was signed on the sidelines of India Energy Week (IEW) 2024, held in Goa. As per current prices of the renewed contract, India will save about $0.8 per million British thermal units. This leads to savings of up to USD 8 billion throughout the contract period.
LNG in the present contract is priced at the slope of 12.67% of Brent Crude Oil Futures and a fixed price of charge of 52 cents per million British Thermal Units. Slopes are the percentage of the crude oil indicator at which the NLG price is labeled. However, the fixed charges are not present in the contract, and neither is the slope to Brent, according to the sources. Both rates stay unchanged. The first 25-year deal is set to expire in 2028 and has been extended for up to 20 years till 2048. The second-year contract entered into in 2015 will be negotiated separately, sources said.
India, the world’s third-largest energy consumer, sees LNG as a method to transition to its aim of zero carbon emissions by 2070. The purchases align with the government’s aim to increase the share of natural gas in the country’s energy mix to 15% by 2030, from 6.5%. Sources also revealed that the new deal will help the oil and gas giant decide which Indian terminals will receive cargo.
The NLG importer is a joint venture of the Oil and Natural Gas Corporation, Indian Oil, GAIL and Bharat Petroleum, and functions as the country’s largest LNG gasification terminal in Dahej, Gujarat. Qatar is the world’s largest exporter of LNG and accounts for half of India’s LNG imports. According to Petronet LNG, the extension of the QatarEnergy term contract will ensure a seamless supply of regasified LNG to major consumer sectors such as fertilisers, city gas distribution and power generation.
India imported a total of 19.85 million tonnes of LNG in the financial year 2022 – 2023, of which 54% of LNG came from Qatar, according to India’s official trade data. India’s total imports were valued at USD 16.81 billion, of which LNG imports were alone worth USD 8.32 billion. Natural gas is an environmentally cleaner alternative than the use of conventional crude oil fuels and is significantly cheaper.