Petronet LNG, QatarEnergy’s impending long-term LNG deal price likely at 12% slope to crude oil

Indian gas importer Petronet LNG’s imminent deal to extend its long-term LNG contract with QatarEnergy is likely priced at a 12% slope to crude oil, according to sources familiar with the matter.

The two entities are expected to announce the agreement to extend to their exiting long-term LNG sales and purchase agreement for a volume of 7.5 million mt/year for a tenure of 20 years beyond 2028, the sources said.

The contract is likely to be on the DES basis linked to crude oil around a slope of 12% for deliveries across India, according to sources. This price level is one of the lowest for oil-linked contracts signed in recent years and is likely to set an industry benchmark for contract negotiations in the coming months.

“It is the most important contract in India because for the downstream market in India, that price will act as a benchmark considering the volume and tenure,” an LNG importer from India said.

The contract between Petronet and QatarEnergy originally signed in 1999 is considered the bedrock of India’s LNG and natural gas industry.

Another source familiar with the matter said the new deal did not have a clause for extension by another five to 25 years. This is significant because some of QatarEnergy’s recent contracts in Asia have been for as long as 27 years.

The new Petronet LNG-QatarEnergy deal extension until 2048 is expected to be announced as part of India Energy Week being held in Goa, India, this week.

The 7.5 million mt/year volume represents one of the largest contracts signed by Qatar with a single Asian gas importer.

Petronet LNG and QatarEnergy did not respond to queries about the deal prior to the conference.
Long-term contracts

India’s GAIL recently announced its sales and purchase agreement with Abu Dhabi National Oil Corporation LNG for 500,000 mt/year starting in 2026 for a tenure of 10 years.

On Jan. 5, GAIL also announced a long-term deal with portfolio company Vitol for 1 million mt/year for a tenure of 10 years starting in 2026. The pricing of this deal was reported earlier around 12.4%-12.45%.

In July 2023, Indian Oil Corporation Limited announced a long-term LNG contract with Total Energies for 800,000 mt/year and a heads of agreement for 1.2 million mt/year starting in 2026 for 14 years.

Despite the contract renewal between QatarEnergy and Petronet, 40% of India’s forecasted demand will remain uncontracted by the end of the decade, according to Ayush Agarwal, LNG Analyst with S&P Global Commodity Insights.

QatarEnergy recently announced a contract with Excelerate Energy for up to 1 million mt/year for delivery to Bangladesh starting in 2026 for a tenure of 15 years.

In 2023, QatarEnergy signed contracts with Shell, ENI and Total Energies for deliveries of LNG cargoes in Europe, with the contract including exposure to natural gas indexation, S&P Global reported earlier. The Middle East supplier also signed contracts with Sinopec in 2023 allowing deliveries to LNG receiving terminals of Sinopec across China at a price of 12.7%.

Qatar plans to increase its liquefaction capacity to 126 million mt by 2027 as against 79 million mt in 2023.

Platts assessed West India Marker — the LNG price for cargoes delivered to west India ports — at $9.375/MMBtu for March on Feb. 5, S&P Global data showed.

Platts assessed JKM — the benchmark LNG price for cargoes delivered to Northeast Asia — at $9.575/MMBtu for March on Feb. 5, the data showed.
Source: Platts