What: Petronet LNG of India signed an agreement with RasGas of Qata
why : Import gas at a low price
When : 01st January 2016
Petronet LNG of India signed an agreement with RasGas of Qatar for the purpose to import gas at a low price. Under the guidelines of agreement, RasGas will provide LNG at 6-7 dollar per million British thermal units with effect from 01st January 2016.
Pradhan said India would also purchase an additional 1 million tonnes of LNG every year from RasGas till the purchase contract expires in 2028.
“We felt that our long-term contract running from 1999 with Qatar has to be a win-win for both sides. Prime Minister Narendra Modi had held talks with Qatar and I personally visited that country in November. Petronet LNG will be able to make a net saving of Rs.4,000 crore a year on account of the revised gas price,” said Pradhan. He added that a price band has been fixed under the revised contract to factor in fluctuations.
Petronet LNG managing director and chief executive officer Prabhat Singh said that LNG price has now been aligned in such a way as to move in tandem with the prevailing global crude oil prices.
The rate of $13 per mmBtu of LNG was attractive to Indian customers when spot prices were around $17 a few years ago.
With the fall in prices of crude oil, which forms the basis for gas pricing, the contracted price of LNG became unattractive for Indian customers. The formula followed thus far linked LNG prices to the 60-month moving average of the Japan crude cocktail. It has now been linked to the three-month average of Brent crude to make it more realistic.
Experts said that power and transport sectors hold the key to increased demand for natural gas in India and, in view of India’s commitment to the Paris climate change deal (inked in December), it is desirable to use more gas, which is less polluting than fuels like coal and furnace oil.
“Taking advantage of this renegotiated deal and the prevailing low spot LNG prices, demand for gas must be encouraged in every possible segment, including many gas-based power plants that are stranded or partially utilized,” said Debasish Mishra, partner at consultancy firm Deloitte Touche Tohmatsu India LLP.
Petronet LNG, promoted by state-owned firms GAIL (India) Ltd, Oil and Natural Gas Corp., Indian Oil Corp. (IOC) and Bharat Petroleum Corp. Ltd (BPCL), operates a 10-million-tonne-a-year LNG import terminal at Dahej in Gujarat and a 5-million-tonne-a-year terminal at Kochi in Kerala. Its customers include IOC, BPCL, GAIL (India) and GSPC Ltd.