India is in talks with Qatar’s RasGas Company to tweak a decade-old liquefied natural gas (LNG) procurement deal. Indian firm Petronet LNG has been forced to cut down gas volumes from Qatar after the fuel bought through this long-term contract became nearly twice as expensive than spot purchases.
“As the oil prices are coming down, we are asking them to relook at the pricing,” said a senior official at ministry of external affairs, requesting anonymity.
India’s petroleum minister Dharmendra Pradhan is scheduled to visit Doha to attend the 6th Asian Ministerial Energy Roundtable next week. Pradhan would discuss the Petronet-RasGas deal with Mohammed Saleh Al Sada, the minister of energy and industry of Qatar, the official said.
On October 19, Prabhat Singh, managing director and CEO of Petronet LNG said that the two firms are working out a solution. He, however, did not disclose whether India is re-negotiating the volumes or the price. “Let the nation win,” Singh added.
On December 26, 2014, India received the 1,000th cargo under its long-term contract with RasGas at Dahej LNG terminal in Gujarat. Nearly 16 years back, Doha-based RasGas and New Delhi-based Petronet LNG had signed the first sales and purchase agreement (SPA) to import 7.5 million metric tonne per annum (mtpa) liquefied natural gas (LNG) on take-or-pay basis and price linked to a 60-month average of crude oil.
At present, the LNG through this route costs around $12.67/mBtu at India’s west coast, excluding other charges such as re-gasificiation, transportation, marketing margin and state levies. On the other hand, spot cargoes are available at nearly half the price at $6-6.5/mBtu. Since gas procured from Qatar is expensive, GAIL is not finding buyers for it and forced to utilise it at its petrochemical plant further hurting its revenues.
In the first nine months (January-September), Petronet has procured 68% of the gas available under the deal from RasGas. “We do not take 33 out of 120 cargoes,” Singh had said.
No doubt, India’s growing economy (latest OECD forecast pegs it at 7.3%) has enough appetite for gas — but pricing is the key. In the absence of last-mile pipeline connectivity and lack of other infrastructure, imported natural gas turns out to be the most expensive fuel in the basket. Indian firms such as GAIL and IOC have sealed contracts to import more than 10 mtpa of LNG starting 2018. Now, the challenge for them is to find consumers at home to sell these volumes. In the current scenario, it seems a herculean task to convince buyers to procure LNG.