An LNG ship loads gas to a cruise ship in Barcelona, Spain, January 29, 2024.
Credit: Reuters File Photo
Betul (Goa): India on Tuesday signed a $78 billion deal to extend LNG imports from Qatar by another 20 years till 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 tonne a year of gas for producing electricity, making fertilizers and converting it into CNG.
The deal was signed on the sidelines of India Energy Week (IEW) here.
Sources said the renewal is at a "significantly" lower price than the current deal. At current prices, India will save about $0.8 per million British thermal unit at the renewed terms. This translates into savings of $6 billion over the contract period.
Petronet imports 8.5 million tonne per annum (MTPA) of LNG from Qatar under two contracts. The first 25-year deal is to expire in 2028 and has now been extended for 20 additional years. The second deal for 1 MTPA entered into in 2015, will be negotiated separately, sources said.
As per the 1999 deal for 7.5 MTPA, the renewal was to be agreed upon five years prior to 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. There were heightened tensions when a Qatar court sentenced eight former Indian Navy officials to death in October for allegedly spying for Israel. At December-end, their sentence was reduced.
Qatar's energy minister and top officials of QatarEnergy are attending the IEW here.
India, the world's third biggest energy consumer, sees natural gas as a transition fuel for migrating to 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 to 15 per cent by 2030 from 6.3 per cent now.
Sources said the current deal is priced at 12.67 per cent of prevailing Brent crude oil price plus a fixed component of $0.52 per million British thermal unit.
Under the new contract, the slope would remain more or less the same but the fixed charge of $0.52 would be scrapped, they said.
Also, India will save an additional $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 of shipping.
At USD 80 per barrel Brent crude oil price, the 7.5 MTPA import will cost USD 3.9 billion annually and over a 20-year period it would total to USD 78 billion.
"Petronet LNG Limited (PLL) has successfully concluded and executed a LNG sales and purchase agreement (LNG SPA) for purchase of around 7.5 million tonne per annum of LNG with QatarEnergy on long-term basis today," the company said in a statement.
This, it said, was pursuant to extension of an existing LNG SPA for LNG supply of around 7.5 million tonne on FOB or free on board basis (where the buyer arranges for shipping of the cargo), signed on July 31, 1999. Supplies started in 2023 and were to last till 2028.
"Under the new agreement, LNG supplies will be made on delivered (DES) basis commencing from 2028 till 2048," Petronet said.
Similar to earlier agreement of 1999, the LNG volumes under the new SPA shall also be offtaken by company promoters GAIL (India) (60 per cent), Indian Oil Corporation (30 per cent) and Bharat Petroleum Corporation Limited (10 per cent) after regasification primarily from Dahej terminal of PLL on substantially back-to-back basis.
"This LNG SPA between PLL and QatarEnergy will ensure energy security of India and assure continued supplies of regasified LNG to major consuming sectors like fertilisers, CGD, refineries, petrochemical, power and other industries," the statement said.
Akshay Kumar Singh, CEO, Petronet said, the existing long-term agreement between Petronet and QatarEnergy today accounts for around 35 per cent of India's LNG imports and is of national importance.
"Renewal of this agreement is a step towards achieving the vision of Prime Minister of India to make India a gas-based economy and increase share of natural gas in India's primary energy basket to 15 per cent by year 2030. This agreement will provide energy security and ensure 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.
Sources said the new deal will allow the Indian buyers to decide which terminal in India will receive cargoes. Under existing deals, Qatar delivers LNG at Dahej in Gujarat.
Sources said the freedom to decide on the arrival terminal will result in additional savings in cost for transporting the fuel through pipelines within the Indian grid.