India signs $78 billion pact for 20 yrs to extend LNG imports from Qatar

India finalised a USD 78 billion agreement on Tuesday aimed at extending LNG imports from Qatar for an additional 20 years until 2048, securing rates below current prices. Petronet LNG Ltd, India’s largest importer of liquefied natural gas (LNG), announced in a statement that it has agreed with QatarEnergy to extend the contract for purchasing 7.5 million tonnes of gas annually. This gas will be utilised for electricity generation, fertilizer production and conversion into compressed natural gas (CNG). The deal was signed on the sidelines of India Energy Week (IEW) in Betul (Goa). The renewal is at a “significantly” lower price than the current deal, sources told PTI. At current prices, India will save about USD 0.8 per million British thermal units at the renewed terms. This translates into savings of USD 6 billion over the contract period. Petronet imports 8.5 million tonnes 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 before 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 the prevailing Brent crude oil price plus a fixed component of USD 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 USD 0.52 would be scrapped, they said. Also, India will save an additional USD 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 for 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 USD 78 billion.“Petronet LNG Limited (PLL) has successfully concluded and executed a LNG sales and purchase agreement (LNG SPA) for the 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. With inputs from PTI.