India Seeks New Qatar LNG Price Terms in Hunt for Cheaper Supply
India Seeks New Qatar LNG Price Terms in Hunt for Cheaper Supply
(Bloomberg) -- Indian gas importers have started discussions with Qatar on moving away from linking LNG prices to oil, according to India’s petroleum minister, as the South Asian nation seeks cheaper prices from its biggest supplier of the fuel.
As new pricing formulas and producers emerge, Qatar, one of the world’s top sellers of liquefied natural gas, needs to move away from the traditional practice of oil-linked prices, India’s Dharmendra Pradhan said after meeting Monday with his Qatari counterpart in New Delhi. The two sides “explored ways to make LNG more affordable for a price sensitive market like India,” especially in the long-term contract, he said later in a tweet.
“We have got all the consumers of Qatar LNG together at the meeting,” Pradhan said. “Company level discussions have already started,” he said, including with India’s main LNG buyers Petronet LNG Ltd., GAIL India Ltd. and Indian Oil Corp.
India’s pressure on Qatar is emblematic of frequent tension in the global LNG market when prices for long-term, steady supplies -- usually priced off oil -- diverge from spot prices. That situation is expected to be exacerbated this year as new export projects start up globally, stirring speculation that more buyers will be pushing for revisions to their long-term contracts.
The price difference is particularly clear for India at the moment. Qatar supplies to India, which are priced at 12.67% of Brent crude prices over the preceding three months, result in a delivered cost of about $9 to $10 per million British thermal units, an Indian government official told reporters Monday after the meeting. Supply at less that $5 per million Btu can make gas competitive with coal in power generation, said the official, who asked not to be identified discussing commercial terms. Benchmark Japan/Korea Marker spot prices were $4 per million Btu on Friday, according to S&P Global Platts
Qatar’s Energy Minister Sada Sherida Al-Kaabi said after the meetings with Pradhan and the companies that the Middle East supplier is only looking at additional contracts and volumes, not renegotiating existing deals.
“The contracts we have, we will abide by the contracts,” he said.
India has successfully pressured Qatar on prices before. In 2015, Petronet LNG reworked its 25-year contract with Qatar’s RasGas that reworked the pricing formulate to replace a five-year average for oil with a three-month average. Given the short-term trend in oil prices at the time, the change resulted in Indian buyers seeing prices fall by half.
GAIL Chairman Ashutosh Karnatak said the company highlighted to Al-Kaabi of India’s rising gas potential if prices are affordable. Petronet sent a similar message, according its managing director, Prabhat Singh.
“We told the minister about the price sensitivity of the Indian market,” Singh said after the meeting. “If LNG is affordable, India can have a huge appetite for gas.”
India has two long-term LNG deals with Qatar for a total of 8.5 million tons a year, while India’s total LNG imports during 2018-19 fiscal year were 21.7 million tons.
--With assistance from Saket Sundria.
To contact the reporter on this story: Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net
To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Alpana Sarma
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