Qatar ready to sell gas to India at higher than KG basin price

The world's largest LNG exporter, which currently sells 7.5 million tonnes of LNG every year, is seeking a price linked to crude oil that at prevailing rates comes to over USD 10 per million British thermal unit.

"The proposal is for supply of 0.3 million tonnes of LNG this year, 0.5 million tonnes in 2011, 2.5 million tonnes in 2012 and 4 million tonnes from 2013," Petroleum Secretary S Sundareshan told reporters here. "This is, of course, subject to price negotiations which we will enter now."

Qatar wants to divert cargoes it had committed to the US and Europe to Asia at a better price. Qatar's agreement with the US provides for a clause where it can divert LNG to other markets if it realises a better price. Henry Hub price of gas, the pricing point for natural gas futures contracts in the US, is currently between USD 4 and 4.2 per mmBtu.

"RasGas (of Qatar) and Petronet LNG/GAIL India will engage in discussions on pricing and I hope in the next few weeks they can finalise agreements," Qatar Deputy Premier and Minister of Energy and Industry Abdullah Bin Hamad al-Attiyah, who had last night discussed the issue with Petroleum Minister Murli Deora, said.The additional supplies would be "long-term, typically 15-20 years," he said.

Sundareshan said the supplies are being discussed for import at Petronet's Dahej terminal in Gujarat and the yet-to-be commissioned Dabhol import facility in Maharasthra.
India is, however, sceptic of the offer as the asking price is too high. Qatar is seeking a price of 13.5-15.5 per cent of Japanese Crude Cocktail--the average price of customs-cleared crude oil imports into Japan-- while New Delhi was looking for a fixed price, like the current sweetheart deal.

The price is finding some resistance in India from certain quarters that consider it "too high". The rates quoted are almost the same as Petronet's Gorgon LNG deal but they say these rates are for supplies beginning immediately while the Australian LNG would arrive in 2014.

"Any LNG arriving at Dabhol will have to compete with Reliance Industries' (eastern offshore KG-D6 field) gas that is priced at USD 4.2 per mmBtu (delivered rate of USD 6.67 per mmBtu)," an official in the Petroleum Ministry said. Compared to this, the imported cost of Qatar LNG would be USD 10.4 per mmBtu (at USD 80 a barrel oil price). After including import duty of 5 per cent, shipping cost, regassification, local levies and transportation charge, the delivered price would be USD USD 13 per mmBtu.
Qatar, which has the world's third largest reserves of gas, in the five years to December 2008 sold LNG to Petronet at USD 2.53 per mmBtu. From January 2009, this price was linked to moving average of international oil rates and is currently priced at USD 7 per mmBtu ex-terminal.

Attiyah cited Chinese to influence India into buying his LNG. He said Qatar had signed with China for 12 million tonnes of LNG, mostly diverted from the US and the UK.