India to Qatar: Cut LNG price for more airline seats

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SummaryQatar offered to reinvest $3 billion each year from its crude oil and LNG sales as FDI and as portfolio investment.

After allowing a near four-fold increase in bilateral entitlements of airline seats to Abu Dhabi, India is likely to raise the entitlement for Qatar too.

The government, however, is looking to extract concessions in the form of a discount on LNG supplies from the Gulf nation in exchange for raising the cap on the number of flights between the countries.

National Security Adviser Shiv Shankar Menon, it is learnt, has proposed that India seek a discount on LNG supplies from Qatar as a pre-condition to allow its national airline increase weekly seat entitlements, a move that could potentially help Qatar Airways earn close to $200 million over 10 years.

At a meeting on October 29, Menon suggested that India’s Petronet LNG Ltd (PLL) negotiate a long-term price for an extra 3 million tonnes of LNG from Qatar’s Ras Laffan Liquefied Natural Gas Co (RasGas) to “match the concessions” from the increase in seats for Qatar Airways.

It is also learnt that the PMO called a meeting of concerned ministries and instructed the civil aviation ministry to work out details of the number of seats that can be increased for Qatar, said a senior ministry official who was present at the meeting.

Officials from the petroleum and natural gas and the external affairs ministries and from the department of industrial policy and promotion also attended the meeting.

The Qatar government has been asking for a steep expansion in flight entitlements to its hub in Doha, to 72,600 seats a week from 24,800 seats, with the aim of creating a hub for outbound Indian travelers which can compete with Dubai and Abu Dhabi.

While Qatar has exhausted a large part of its existing entitlements, Indian carriers have been able to use less than 10,000 weekly seats.

In the wake of Menon’s proposal, PLL officials said they estimate a discount of 10-12 cents per million BTUs on the extra 3 million tonnes per annum — spread over 10 years — that could offset the revenue loss to Indian carriers on account of increased seats to Qatar Airways.

The proposed contract would be over and above the 7.5 million tonnes per annum of LNG that PLL signed with RasGas in 1999, said PLL officials.

Sources said Finance Minister P Chidambaram had favoured the “enhanced bilateral rights for Qatar Airways and Indian carriers” in the next meeting with Doha, which is willing to invest up to $3 billion each

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