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Petronet LNG in talks with Qatar for higher volumes at lower price

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India’s largest gas importer is also looking to import 0.75-1 MT of LNG to meet short term requirements

Petronet LNG is holding discussions with Qatar about extending its long-term contract of 8.5 million tonnes (MT) per year of liquefied natural gas (LNG), which ends in 2028, its Chief Executive Officer AK Singh said on Thursday. India’s largest LNG importer also wants the desert nation to lower the price of the commodity as it explores increasing import volumes in line with rising domestic consumption.

Speaking with reporters, Singh said the company is currently negotiating with Qatar Gas for a long-term contract beyond 2028. Besides, it is also looking to import 0.75-1 million tonnes of LNG in the short term to meet the increasing domestic consumption, particularly in the city gas distribution (CGD) segment.

Qatar sells 7.5 million tonnes a year of LNG to India at an indexation of 12.67 per cent of the prevailing Brent price plus $0.52 per mBtu (million British thermal unit). At a price of $100 a barrel of crude, the gas price comes to $13.19 per mBtu. “The firm also purchases an additional 1 MT of LNG at a slight variation to this price,” the CEO added.

The long-term contracts with Qatar Gas beyond 2028 have to be confirmed by 2023. “Our first priority is to secure the extension of the deal. Beyond that additional volumes can be sought based on a demand assessment. We have not frozen additional requirements,” Singh said.

On lower prices for future contracts, he said that Qatar has inked contracts with countries such as Bangladesh, China, and Pakistan at a lower slope (less than 12.67 per cent). “Our expectation is to have the long-term deal renewed at those levels. We are very seriously engaged with them and are negotiating for a better price,” Singh explained.

High LNG prices

Spot prices in the last couple of years have witnessed unprecedented volatility in the global markets, especially Asia and India region. It had touched a record low of $1.76 per mBtu in April 2020, and a high of $84.4 per mBtu in March 2022.

On LNG prices, Singh said rates are softening. “Today, it is in the range of $18-19 per mBtu on DES (delivered ex-ship) West India Marker. Long-term prices have also gone up, at $14 per mBtu, because of linkages with crude prices. Crude is above $100 per barrel. The gap between crude and long-term prices is narrowing down and has come in the range of $4-5 per mBtu. This is a good sign for consumers that we expect will help in maximising utilisation of natural gas in the country,” he said.

In an investor call on Thursday, Petronet LNG’s Director (Finance) VK Mishra said that prices are coming down. In March 2022, they hovered around $30-35 per mBtu. “Today it is around $18.25 per mBtu. Prices are expected to come down in the next 3-4 months. Besides, if the prices of LNG come in the range of $15-16 per mBtu, then it will become viable for power plants to use gas,” Mishra added.

Published on May 13, 2022

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