Thanks to Prime Minister Narendra Modi’s diplomacy, Qatar has agreed to reduce the cost of liquefied natural gas (LNG) by half.
An agreement has been signed between Petronet, India’s biggest gas importer and Qatar’s RasGas to supply LNG at $6-7 per million British thermal units (mmBtu), which is far lower than $12-13 per mmbtu, agreed earlier. India is the biggest importer while Qatar is world’s largest exporter of the LNG.
The pricing formula was reworked after several meetings and negotiations between the two companies and interventions from Prime Minister Narendra Modi, Dharmendra Pradhan and the head of the state of Qatar. Petroleum minister Dharmendra Pradhan hailed the agreement as a major diplomatic success in India’s bilateral engagements aimed at energy security.
“In addition to the waiving off of the penalty of Rs 12,000 crore as per the take-or-pay clause, the deal also means Rs 4,000 crore benefit to the downstream sectors like fertilizer and power by way of reduced gas rates,” he said. Pradhan said
“I went to Qatar in November to put across our points of view there. Qatar has been a good business friend, but we’re now moving from the relationship of a buyer and a seller to long-term partners.”
He added that it was a win-win outcome for both the countries.
Oil minister Dharmendra Pradhan
Qatar’s RasGas has also waived off Rs 12,000 crore penalty for taking a lower quantity of the gas than the agreed amount.
There was a 25-year contract between the two companies to buy 7.5 million tonnes. LNG Petronet reduced the purchase due to high supply prices.
With lower purchase cost, it is expected that this will also bring down CNG prices in India.
The fertiliser industry, which is the biggest consumer of liquid gas, will save Rs 4,700 crore annually. This will also reduce the government’s fertiliser subsidy bill. Deven Choksey, managing director of KR Choksey Investment Managers, said:
“The lower gas prices will benefit Petronet LNG in terms of lower working capital and higher volumes. More importantly, the end-consumers will benefit from lower prices as the importers are expected to pass on the lower cost.”