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Qatar’s RasGas may waive penalty on Petronet LNG for lower offtake

Our Bureau | | Updated on: Jan 22, 2018

BL24_03_GAS | Photo Credit: Cochin Port Trust

Talks on at diplomatic level or a reworked price formula

Qatar has indicated to its Indian counterparts that the Gulf country’s state-owned natural gas producer RasGas will not penalise Petronet LNG for lower offtake of the fuel.

Negotiations on a reworked price formula and the penalty for lower offtake are taking place at a diplomatic level and are close to a conclusion, sources in the know of the development told BusinessLine on Monday.

In a filing to the stock exchange, Petronet said that it is in discussion with RasGas over the ‘current issues under their agreement. However, no biding agreement has been executed’ yet.

Petronet LNG has a 25-year contract to purchase 7.5 million tonnes of liquefied natural gas (LNG) annually. According to Petronet, the long-term contracted price is around $13 per million British thermal unit (mBtu). To this landed cost are added re-gasification costs, transmission tariffs, marketing margins, and local taxes/levies, before the end-user receives it.

Last month, senior officials of Petronet said that the company in the first nine months of the calendar year has not taken 33 cargoes of LNG. Its annual commitment is to take around 120 cargoes.

“On an average, we can say we have drawn 68 per cent of the contracted capacity,” Petronet’s Director (Finance) RK Garg had said in October.

The lower offtake was due to the fall in spot prices, which led to Petronet’s domestic buyers shifting to the spot market. LNG in the spot market is available at around $7-8 mBtu.

Petronet has a ‘take-or-pay’ clause in its contract with RasGas wherein it has to pay for the entire contracted amount if it offtakes less than 90 per cent of the quantity. The company has maintained that it has similar take-or-pay agreements with its domestic buyers.

“As far as we are concerned, we have contracts with RasGas and back-to-back contracts with domestic offtakers also. Whenever you are not taking the contracted quantity, there is an issue but we are working on it,” Garg had said last month.

Published on November 23, 2015
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