Virendra Pandit
New Delhi: In a significant and long-term development, India on Tuesday signed a USD 78 billion deal to extend LNG imports from Qatar by another 20 years until 2048, at rates lower than current prices.
Petronet LNG Ltd, India’s biggest liquefied natural gas (LNG) importer, in a statement, said it has signed a pact with QatarEnergy to extend the deal to buy 7.5 million tonnes a year of gas for producing electricity, making fertilizers and converting it into CNG.
The deal was signed on the sidelines of the ongoing India Energy Week (IEW) 2024, inaugurated by Prime Minister Narendra Modi in Goa on Tuesday, the media reported.
The deal renewal has come at a “significantly” lower price than the current deal.
At current prices, India will save about USD 0.8 per million British thermal units at the renewed terms, translating into savings of USD 6 billion over the contract period.
Petronet imports 8.5 million tonnes per annum (MTPA) of LNG from Qatar under two contracts. The first 25-year deal, which is to expire in 2028, has now been extended for 20 more years. The second deal is for 1 MTPA. entered into in 2015, will be negotiated separately.
As per the 1999 deal for 7.5 MTPA, the renewal was to be agreed upon five years before the end of the supply term. That deadline was in December 2023. The two sides were engaged in intense negotiations over the last few months.
The India-Qatar LNG business witnessed some tension when a Qatar court sentenced eight former Indian Navy officials to death in October 2023 for allegedly spying for Israel. In early December 2023, Prime Minister Narendra Modi met Qatar’s Emit Sheikh Tamim bin Hamad Al-Thani on the sidelines of the COPS Summit in Dubai. At December-end, the Navy officials’ sentence was reduced.
Qatar’s energy minister and top officials of QatarEnergy are currently attending the four-day IEW in Goa.
India, the world’s third-biggest energy consumer, sees natural gas as a transition fuel for migrating to its aim of net zero carbon emissions by 2070. As part of this, the government is targeting to raise the share of natural gas in the country’s energy mix from 6.3 percent now to 15 percent by 2030.
According to reports, the current deal is priced at 12.67 percent of the prevailing Brent crude oil price plus a fixed component of USD 0.52 per million British thermal units (mmBtu). India will save an additional USD 0.30 per mmBtu on shipping charges as Qatar has agreed to convert the deal to Delivered Ex Ship (DES) from Free on Board (FOB), thereby undertaking responsibility for shipping.
At USD 80 per barrel Brent crude oil price, the 7.5 MTPA import will cost USD 3.9 billion annually, and over 20 years it would total USD 78 billion.
“Petronet LNG Limited (PLL) has successfully concluded and executed an LNG sales and purchase agreement (LNG SPA) for purchase of around 7.5 million tonnes per annum of LNG with QatarEnergy on a long-term basis today,” the company said.
“Under the new agreement, LNG supplies will be made on delivered (DES) basis commencing from 2028 till 2048,” Petronet said.
“This LNG SPA between PLL and QatarEnergy will ensure the energy security of India and assure continued supplies of regasified LNG to major consuming sectors like fertilizers, CGD, refineries, petrochemical, power, and other industries,” the statement said.
Akshay Kumar Singh, CEO of Petronet, said the existing long-term agreement between Petronet and QatarEnergy accounts for around 35 percent of India’s LNG imports and is of national importance.
“Renewal of this agreement is a step towards achieving the vision of the Prime Minister of India to make India a gas-based economy and increase the share of natural gas in India’s primary energy basket to 15 percent by the year 2030. This agreement will provide energy security and ensure a stable and reliable supply of clean energy and help India in its stride towards greater economic development.”
While 7.5 MTPA of LNG is bought by Petronet, IOC, BPCL and GAIL buy a combined 1 MTPA of LNG.
The new deal will allow the Indian buyers to decide which terminal in India will receive cargo. Under existing deals, Qatar delivers LNG at Dahej in Gujarat.
The freedom to decide on the arrival terminal will result in additional savings in the cost of transporting the fuel through pipelines within the Indian grid.