Updated February 6th, 2024 at 13:58 IST

Govt to sign multi-billion dollar deal with Qatar to boost LNG imports

Petronet LNG currently imports 8.5 million tonnes per year from Qatar under two existing contracts.

Reported by: Business Desk
LNG imports | Image:PTI
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LNG imports from Qatar: The government is set to seal an agreement with Qatar on Tuesday, extending liquefied natural gas (LNG) imports until 2048 at rates anticipated to be lower than current prices, according to sources familiar with the matter.

The agreement, set to be signed by Petronet LNG Ltd and QatarEnergy, will extend the import of 7.5 million tonnes per year. Negotiations will take place during the India Energy Week, with sources indicating that the new pricing structure will result in significantly reduced costs compared to the current arrangement.

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Petronet LNG currently imports 8.5 million tonnes per year from Qatar under two existing contracts. The first contract, set to expire in 2028, will be extended for an additional 20 years, while the second contract, for 1 million tonnes per year, will be subject to separate negotiations.

India, as the world's third-largest energy consumer, views natural gas as a crucial transitional fuel towards achieving net-zero carbon emissions by 2070. In alignment with this goal, the government aims to increase the share of natural gas in the country's energy mix to 15 per cent by 2030, up from the current 6.3 per cent.

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The current pricing model, based on 12.67 per cent of prevailing Brent crude oil prices plus $0.5 per million British thermal units, is set to undergo significant revisions. Under the new contract, while the pricing structure will remain relatively consistent, the fixed charge of $0.5 will be eliminated.

Furthermore, India stands to save an additional $0.30 per mmBtu on shipping costs, as Qatar has agreed to transition from Free on Board (FOB) to Delivered Ex Ship (DES) terms, thereby assuming shipping responsibilities.

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While Petronet LNG purchases 7.5 million tonnes annually, Indian Oil Corp (IOC), Bharat Petroleum, and GAIL (India) collectively acquire an additional 1 million tonnes per year of LNG. The new agreement will grant Indian buyers the flexibility to designate the receiving terminal within India, diverging from the current arrangement where LNG is delivered exclusively to Dahej in Gujarat.

This anticipated agreement marks a significant development in India's energy landscape, positioning the country to further leverage natural gas as a pivotal component of its sustainable energy transition.

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Published February 6th, 2024 at 13:58 IST