This post was originally published on 31 December 2015.
Qatar has agreed to lower the price of gas it sells to India on a long-term contract by about USD 6 billion to reflect the slump in global energy rates and also waived the Rs 12,000-crore penalty for ‘short-lifting’ in 2015.
Petronet LNG Ltd (PLL), India’s biggest gas importer, on Thursday signed a revised contract with RasGas of Qatar. The price as per the revised formula will come to USD 6-7 per million British thermal units as against USD 12-13 per mmBtu currently, oil minister Dharmendra Pradhan said.
Mr. Pradhan said the reworked formula will apply to 7.5 million tonnes a year of LNG India buys from RasGas on a long-term contract ending in April 2028.
The revised formula will base the price on a three-month average figure of Brent crude oil, replacing a five-year average of a basket of crude imported by Japan, with a rider that PLL buys an additional 1 million tonnes of LNG annually.
The trailing three-month average Brent price is about USD 44 a barrel while the average of Japan Crude Cocktail for the 5-year period ended September 30 was USD 94.
Mr. Pradhan said Qatar will also not seek Rs 12,000 crore from PLL for ‘under-lifting’ LNG from RasGas by 32 per cent.
The value of the under-lifted cargoes in 2015 is Rs 12,000 crore and if the change-to-price formula was implemented, it would suggest a USD 2.5 billion buyer saving over three years.