New Delhi: India has extended its 1999 contract for importing gas from Qatar for another 20 years, under more favorable terms that promise significant savings of $6 billion over the extended period, based on the current Brent crude price of $80 per barrel.
Petronet-LNG, India’s largest gas importer, and QatarEnergy finalized the agreement on Tuesday during India Energy Week, extending the contract, which was set to expire in 2028, for importing 7.5 million tonnes of LNG annually, amounting to an estimated $78 billion.
With India meeting 40% of its gas needs through imports, the QatarEnergy contract alone contributes to 35% of total gas imports. Under the existing deal, Qatar has been supplying LNG since 2003-2004, priced at a slope of 12.67% of the current Brent crude futures rates, along with a fixed charge of 52 cents per unit (million British thermal units or mmBtu) of gas.
Sources reveal that the revised contract eliminates the fixed charge while largely retaining the slope from the previous agreement. Additionally, QatarEnergy will now bear the shipping costs, delivering gas to the port designated by Petronet under a delivered basis arrangement, as opposed to the previous free on board arrangement. In total, these adjustments are expected to result in savings of $0.8 per unit of gas, including reduced shipping costs.
The favorable terms secured in the renewed contract underscore India’s growing influence as a key player in global energy demand. Leveraging its position, Indian negotiators drove a hard bargain throughout the protracted negotiations.
The negotiation period coincided with strained bilateral relations after a Qatari court sentenced eight former Indian Navy officials to death on charges of spying for Israel. This move was perceived as an attempt by Doha to sway the negotiations.
However, India stood firm during the talks, capitalizing on Qatar’s efforts to secure buyers amid increased LNG supplies from the United States to Europe, which limited Qatar’s marketing options for its expanded liquefaction capacity. Qatar’s liquefaction capacity is projected to increase from 77 million tonnes per annum to 126 million tonnes by 2027.
