India’s top gas importer Petronet LNG Ltd wants Qatar Gas to lower prices for it to renew a long-term liquefied natural gas (LNG) import deal beyond 2028, its CEO Akshay Kumar Singh said on Thursday. The company in the immediate term is looking to tie up 0.75 to 1 million tonnes of LNG to meet the burgeoning energy demand in the country, particularly of the city gas sector.
In a call with journalists, Singh said Qatar sells 7.5 million tonnes a year of LNG to India at an indexation of 12.67% of the prevailing Brent price plus $0.52 per million British thermal units. (At $100 per barrel oil price, the LNG price comes for $13.19 per mmBtu).
Petronet also buys an additional 1 million tonnes of LNG at a slight variation to this price.
The 8.5 million tonnes a year contract ends in 2028.
“They (Qatar Gas) have contracted to our neighbouring countries including Bangladesh, China and Pakistan at a lower slope (than 12.67%). Our expectation is to have the long-term deal renewed at those levels,” he said. “We are very seriously engaged with them and are negotiating for a better price.”
Qatar’s recent contracts with China, Bangladesh and Pakistan are linked to a slope of about 10.2% of the Brent Crude price on a delivered ex-ship basis.
He indicated that Petronet may seek higher volume than the current 8.5 million tonnes.
“Our first priority is to secure the extension of 8.5 million tonnes a year deal. Beyond that, additional volumes can be sought based on a demand assessment. We have not frozen additional requirements,” he said.
Petronet LNG Ltd’s 7.5 million tonnes a year liquefied natural gas (LNG) import deal with Qatar Gas is ending in 2028. Renewal, if any, has to be confirmed five years ahead of that (i.e. end of 2023).
However, the company wants 0.75 to 1 million tonnes of LNG supplies in the next one year to meet the rising gas demand in the country, he said.
Gas demand in India is surging as the government pushes for raising the share of the clean fuel in the energy basket to 15% by 2030 from the current 6.7%. A massive expansion of city gas, that entails the supply of CNG to automobiles and piped natural gas to households, is creating additional demand.
Also, Petronet is seeking a supply of undelivered gas volumes of past years.
India in 2015 had not taken delivery of some 46 cargoes or shiploads of LNG as it renegotiated the pricing of the long-term supply contract after prices hit double-digit. Qatar had then agreed to revise the pricing formula, subject to India buying an additional 1 million tonnes per annum of LNG.
As regards the cargoes that were not taken, it was decided that India can see the cargoes anytime during the remainder of the contract that ends in 2028. In case, Qatar is unable to meet the request, the deferred cargoes can be delivered in 2029.
Petronet made the request for the supply of undelivered cargoes last year, but Qatar hasn’t responded favourably.
“As per the contract, it is not binding on them to do so immediately. We have been pursing whatever additional cargoes they can give us,” he said, adding Qatar has indicated that they will deliver as and when possible.
Western sanctions against Russia to punish it for its invasion of Ukraine have led to huge volatility in the energy markets globally. Europe is looking to cut its reliance on Russia for its gas needs, and Qatar offers a viable alternative.
Singh said current spot LNG prices of about $18-19 per mmBtu are reasonable, and demand will return is the prices remain in that range.
