Qatar to waive $1bn penalty on India's Petronet
RasGas has agreed to not press for the $1bn in penalty against Petronet for breaking a 25-year LNG contract
Qatar has agreed to waive $1bn penalty on Indian firm Petronet for breaking a long-term LNG contract, reports say.
RasGas has also consented to change the pricing formula for the Indian market to reflect the slump in global crude oil prices.
After months of intense negotiations, RasGas has agreed to not press for the $1bn in penalty that Petronet LNG Ltd, India's biggest import of liquefied natural gas (LNG), has to pay for buying only 68% of the contracted 7.5mn tonnes this year.
Also, RasGas has in-principle agreed to changing the current pricing formula based on a 60-month average of a basket of Japanese crude oil prices to a 3-month average of Brent crude, a move that will lower cost of LNG to $7-8 per million British thermal unit as compared to $12-13 currently.
"There is good news for India," a top source told India’s DNA newspaper. "Price renegotiations are almost complete."
Petronet is taking only 68% of the volumes it agreed to in 25-year contracts with RasGas after a slump in global energy prices led to gas being available in spot or current market a roughly half that rate.
As per the new deal being negotiated, Petronet will take the quantities it did not take this year during the remainder of the contract period.
Sources told the daily that Petronet has a take or pay contract with RasGas where if purchases less than 90% of contracted volumes, a penalty triggers where in it has to pay for all of the contracted volumes.
State-owned GAIL India Ltd, Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) have committed to buy all of the 7.5 million tonne a year of LNG that Petronet is to import from Qatar.
But with slump in global prices, the Indian companies have opted to buy gas from spot market rather than use the long-term LNG.