New Delhi: India pressed Monday its largest LNG supplier Qatar to lower the price of gas under the existing long-term supply contracts, a request that Doha turned down. It said that sanctity of contracts is important for the credibility of both sides.
India imports 8.5 million tonne per annum of LNG from Qatar under two long-term contracts with a rate linked to crude oil prices. Landed price of liquefied natural gas (LNG) comes to USD 9-10 per million British thermal unit while the same gas is available in the spot or current market at half the rate. The long-term contract with Qatar is the most expensive with volumes from Australia, Russia, and US on long-term contracts coming on cheaper rates.
Oil Minister Dharmendra Pradhan met Qatar Energy Minister Saad Sherida al-Kaabi to press for the ‘need for realignment of existing long-term LNG contracts with the market to suit the affordability of end consumers’.
Talking to reporters after the meeting, the minister said the pricing of gas as a percentage of prevailing oil prices tends to inflate the price of the environment-friendly fuel, and alternate independent benchmarks needs to be developed. The linkage means that the price of gas will go up every time there is a spike in crude oil prices.
“All energy producers have to revisit this old practice and come to the new methodology of pricing keeping demand and supply in mind,” the minister stated. “We need to re-examine the pricing mechanism of the long-term natural gas deal with Qatar,” he added.
Kaabi responded saying current contracts cannot be renegotiated but Qatar was willing to supply additional volumes at different rates.
“We don’t renegotiate existing contracts. Contracts are contracts for the duration we sign them for. We as businesses understand that the sanctity of contract is important for both sides. And for the credibility of both sides, both parties must respect that,” informed Kaabi.
“We are looking forward to adding more volumes in India and negotiating additional volumes. India has a huge demand for gas and Qatar is willing to meet all of that,” added the Doha minister.
Qatar sells LNG to India at a price equivalent to 12.67 per cent of the three-month average Brent crude oil price. The indexation of Russian LNG is 11.5 per cent.
PTI