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India to sign deal extending LNG imports from Qatar till 2048, lowering costs

The first 25-year deal is to expire in 2028 and is now being extended for 20 additional years. The second deal for 1 million tonne a year entered into in 2015, will be negotiated separately.

India is likely to sign on Tuesday a multi-billion dollar deal to extend LNG imports from Qatar till 2048 at rates that are lower than current prices, sources said. Petronet LNG Ltd will sign the deal with QatarEnergy to extend import of 7.5 million tonnes a year on the sidelines of India Energy Week here.

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Sources said the price will be “significantly” lower than the current price. Petronet currently imports 8.5 million tonnes a year of LNG from Qatar under two contracts.

The first 25-year deal is to expire in 2028 and is now being extended for 20 additional years. The second deal for 1 million tonne a year entered into in 2015, will be negotiated separately, sources said.

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% by 2030 from 6.3% now.

Sources said the current deal is priced at 12.67% of prevailing Brent crude oil prices plus $0.5 per million British thermal units. Under the new contract, while the slope would remain more or less the same, the fixed charge of $0.5 would be scrapped, they said.

Also, India will save $0.30 per mmBtu more than it incurs on shipping as Qatar has agreed to convert the deal to Delivered Ex Ship (DES) from Free on Board (FOB), thereby undertaking responsibility for shipping.

While 7.5 million tonnes a year of LNG is bought by Petronet, the firm’s promoters Indian Oil Corp (IOC), Bharat Petroleum and GAIL (India) buy a combined 1 million tonnes a year of LNG.

Sources said the new deal will allow the Indian buyers to decide which terminal in India will receive cargo. Under existing deals, Qatar delivers LNG at Dahej in Gujarat.

They said the freedom to decide on the arrival terminal will save on pipeline transportation costs within the Indian grid.
Source: PTI

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