Qatar's RasGas likely to lower price of gas supplied to Petronet: report

Petronet LNG Ltd, India's biggest gas importer, is close to renegotiating the terms of a major deal with its Qatari supplier Rasgas, for lowering the cost of gas shipments and avoiding a $1.5 billion (Rs9,916.5 crore) penalty for lifting less gas than agreed, an online portal cites sources as saying.

A report in industry portal Petrowatch said RasGas has agreed to modify the costly long-term offtake agreement, which will help the natural gas importer to avoid penalty.

The price of LNG from Qatar comes close to $13 per million British thermal unit (mmBtu), against the $6-7 rate at which it is available in the spot or current market.

The difference has led to users preferring to buy spot LNG rather than long-term gas from RasGas of Qatar, leading to Petronet buying 32 per cent less than contracted quantity in the first nine months of 2015.

Oil minister Dharmendra Pradhan had last month said India was asking Qatar to lower prices and adjust volumes not taken this year in subsequent duration of the contract. "We are in discussions. We are hopeful that with the changing LNG market and pricing, RasGas will cooperate," Pradhan had said.

RasGas has 'in principle' agreed to postpone its collection of penalties from Petronet and its customers - GAIL, BPCL and Indian Oil - for turning back long-term liquefied natural gas cargoes, according to the report.

Petronet, which has a 25-year contract with Rasgas to annually buy 7.5 million tonne of liquefied natural gas (LNG) has reduced purchases by about a third this year due to high prices - even though it is only allowed to take 10 per cent less, making it liable for a $1.5 billion penalty.

As per terms of the long-term take-or-pay (ToP) agreement, Petronet can defer taking deliveries of only 10 per cent of the contracted volumes in a year and has to pay for the rest of it even if it does not take any supplies.

Petronet had told BSE last month any ToP obligations would be determined after the close of the calendar year.

Reports said the two firms are exploring the possibility of altering the contract's pricing formula, in which the LNG is valued based on a 60-month average of a basket of Japanese crude oil prices.

Instead, a 3-month average of Brent crude is being considered, which would lower LNG costs for Petronet and bring it in line with sharply lower crude oil prices.