India’s largest gas importer Petronet-LNG and QatarEnergy on Tuesday signed on the sidelines of India Energy Week here the agreement extending the contract, which expires in 2028, for importing 7.5 million tonne of LNG (liquefied natural gas) annually for an estimated $78 billion.
India meets 40% of its gas needs through imports. The contract with QatarEnergy accounts for 35% of total gas imports. Qatar began supplying LNG from 2003-2004 under the existing deal that is priced at a ‘slope’ (per cent) of 12.67% of the current Brent crude futures rates and a fixed charge of 52 cents per unit (million British thermal units or mmBtu) of gas.
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Sources said the fixed charge has been scrapped under the revised contract, while the slope largely remains the same as before. The revised terms will also save shipping cost as QatarEnergy will bear the cost of delivering gas at the port designated by Petronet under DES (delivered basis) against FOB (free on board) arrangement, where buyer arranges shipping, in the existing contract. Altogether, the saving will come to $0.8 per unit of gas.
The favourable terms in the renewed contract indicates India’s rising clout as the pivot of global energy demand growth. Indian negotiators leveraged this fact to drive a hard bargain during long-drawn negotiations.
The talks coincided with a dip in bilateral ties after a Qatari court handed death sentence to eight former Indian Navy officials on charges of spying for Israel, which was seen as Doha’s attempt to influence the negotiations.
But New Delhi played hardball as the negotiations came at a time when Qatar, the world’s largest LNG exporter, was seeking buyers amid rising US supplies to Europe limiting marketing options for its expanded liquefaction capacity. Qatar’s liquefaction is set to rise from 77 million tonne per annum to 126 million tonne by 2027.