Qatar halves gas price, waives India's Rs12,000-cr liability

In a major relief to energy-starved India, Qatar has nearly halved the price of gas it contracted to sell Petronet LNG under a 25-year contract and also waived a Rs12,000 crore payment liability arising from Petronet's refusal to import the committed quantity of gas in 2015 under the 'take-or-pay' clause.

Petronet LNG, India's largest importer of gas, and Qatar's RasGas on Thursday agreed to a new pricing formula that would see gas price dropping to $6-7 per unit from the original $12-13.

The new formula is linked to the price of European benchmark Brent crude, and would entail a saving of Rs4,700 crore annually for the fertiliser industry alone, the biggest consumer of liquid gas.

A lower fuel cost would also reduce the government's fertiliser subsidy bill.

The two companies also signed a separate contract for one million tonnes of additional gas for the remaining tenure of the deal, which has given a benefit of $15 billion by way of lower prices when they were going up in the 11 years since supplies began in 2003.

India is the second largest buyer of liquefied gas after China to have successfully renegotiated a long-term contract in tune with the changed prices and supply glut in the global energy market.

''RasGas Company Limited, Qatar and Petronet LNG Limited, India are pleased to announce that they have entered into a binding sale and purchase agreement (SPA) for supply of an additional 1 MTA of LNG to India starting in 2016 for onward sale to four Indian entities, i.e. Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd, GAIL (India) Ltd and Gujarat State Petroleum Corporation,'' a joint release stated.

Further, RasGas and Petronet LNG Limited have entered into a binding agreement to adjust some aspects of their existing long term LNG SPA of 7.5 MTA, signed by the parties in 1999, which laid the foundation for the LNG business in India.

Such adjustments will protect and preserve the overall value of the contract. As per such agreement, LNG volumes not taken by Petronet from RasGas during 2015 will be taken and paid for by Petronet during the remaining term of the SPA and will maintain its current level of oil indexation with the oil index more closely reflecting the prevailing oil prices.

''These positive developments, including the new SPA, demonstrate the strength of our long term relationship with Petronet and commitment to growing sales into India to meet its expanding clean energy needs,'' RasGas CEO Hamad Mubarak Al-Muhannadi stated.

''These developments highlight both parties confidence in the Indian market and our commitment to LNG as a cleaner, more efficient source of energy,'' Petronet CEO Prabhat Singh added.

RasGas is one of the main suppliers of LNG to India and has been supplying Petronet since 2004. Petronet is the largest importer of LNG in India and is the owner and operator of the country's largest receiving terminal at Dahej and also the Kochi LNG terminal.

The reduced price of Qatari gas would not have much impact on power tariffs, since gas-fired stations account for only 7-8 per cent of total capacity. Most of the gas-fired stations are running under special government subsidy scheme.

Gas utility GAIL would benefit since the lower price would prompt gas demand, raising utilisation of the utility's pipelines.

Petronet LNG reduced offtake of gas from Qatar in the aftermath of the oil and gas price crash, when liquid gas prices in the spot market fell to $7-8 per unit, making Qatari gas contracted at $13 prohibitive for industrial consumers.