India looking at lowering LNG imports from Qatar

In an interesting development, India is weighing the option of cutting natural gas import volumes from Qatar under its long-term contract.

Multiple sources said that with gas prices in the spot market being lower by almost $6 a unit (gas is measured in million British thermal units) than the prevailing long-term price it has with Qatar’s RasGas, India is looking at cutting the contracted volumes by about 10 per cent.

Petronet LNG imports 7.5 million tonnes annually from the global energy supplier, RasGas, under the long-term agreement.

The two had signed the first sales and purchase agreement (SPA) in 1999. Sources said the contract provides for flexibility of reducing the volumes on acceptable terms.

At present, this gas is priced at $13 a unit, while the spot delivers at India’s shores are at around $7 a unit. To this landed cost are added re-gasification costs, transmission tariffs, marketing margins, and local taxes/levies, before the end-user receives it.

High level talks are on between India and Qatar, though New Delhi allows companies to procure liquefied natural gas (LNG) under open general licence.

Under the open general licence, the marketer is free to purchase and sell based on commercial consideration. “The ties, which the two countries have had, make it a sensitive issue. Since this will not be a commercial decision, lot will depend on the political powers,” another official said.

“With new gas markets opening up for India, including the US, the country will have to re-align its gas import strategy and look at best deals in pure commercial terms,” the official said adding that even Qatar would like to maintain its strong position.

In December 2014, Petronet had received its 1000th cargo under this contract at its Dahej LNG Terminal. Petronet’s second terminal is at Kochi. Petronet is meeting approximately 30 per cent of the country’s gas demand.

COMMENT NOW