India asks Qatar to cut prices of LNG imports
Asian major urges Qatar to cut gas prices in line with global slump, waive contractual penalty
India has urged its largest liquefied natural gas (LNG) supplier Qatar to cut prices to match the current slump in global rates.
The Economic Times newspaper said India has also requested Qatar to waive penalty for not buying all of the contracted fuel.
India has a long-term contract to buy 7.5mn tonnes of LNG a year. Qatar sells LNG to India at around $13 per million British thermal unit, as compared to the $6-7 rate at which it is available in the spot market.
The difference has led to buyers preferring to purchase spot LNG rather than long-term gas from Qatar’s RasGas.
India’s Petronet LNG has reportedly bought 32% less than contracted quantity in the first nine months of 2015.
India’s Oil Minister Dharmendra Pradhan has said authorities were talking to Qatar to lower prices and adjust volumes not taken this year in subsequent duration of the contract.
As per the contractual take-or-pay agreement, Petronet can defer taking deliveries of only 10% of the contracted volumes in a year and has to pay for the rest of it even if it does not take any supplies.
"We are in discussions with Qatar. We are hopeful that with the changing LNG market and LNG pricing, RasGas will cooperate," Pradhan said.
"Our Prime Minister (Narendra Modi) has put this issue to the leadership of Qatar. I have talked to my counterpart in Qatar and our companies are actively negotiating," he said.
The high price of LNG under the long-term contract has led to users in India’s fertiliser and power industry finding it cheaper to use alternate fuels like naphtha and fuel oil.
India is the fourth largest importer of LNG in the world.