Qatar Set to Sign Cheaper Long-Term LNG Deal with India

(Reuters) — Qatar Energy within weeks could sign a long-term deal to provide LNG to Indian buyers on cheaper and more flexible terms than existing contracts, trade sources said, as India seeks to meet a goal to increase the fuel's use.

The Indian companies and Qatar Energy have agreed on terms and a contract could be signed by the end of this month or early in February, one of the sources said, adding the contract offering destination-flexible cargoes and lower pricing, would run until at least 2050, possibly longer.

It would extend contracts set to expire in 2028 for the supply of 8.5 million metric tons per year (tpy) LNG to Indian buyers and play a part in meeting Prime Minister Narendra Modi's aim to raise the share of natural gas in the country's energy mix to 15% by 2030 from 6.3% now.

The Indian companies and Qatar Energy did not respond to requests for comment.

Qatar, which aims to expand its liquefaction capacity to 126 million tpy by 2027 from 77 million, is keen to play a larger role in Asia and Europe as competition from U.S. supply increases.

Last year, Qatar signed long-term deals with European majors Shell, TotalEnergies and ENI.

Qatari LNG is often priced in relation to oil, using a formula based on a slope, or percentage of crude.

One of the sources said the deal is likely to be finalized at a price of around a 12% slope of Brent per million metric British thermal unit (MMBtu). A second source gave a range of 12-12.5% for supplies on a free-on-board basis for India.

The second source said a deal could be signed during an energy conference in India from Feb. 6-9.

None of the sources could be named because they were not authorized to speak publicly.

Under an existing deal, India's top gas importer Petronet LNG imports 7.5 million tpy of LNG from Qatar on a delivered basis with slope of 12.67% and a fixed charge of 52 cents.

Additionally, companies including state-run Indian Oil Corp., Bharat Petroleum and GAIL (India) - which hold stakes in Petronet - buy a combined 1 million tpy of LNG at the same price.

The new deal will allow the Indian buyers to decide which terminal in India will receive cargoes, a third source said. Under existing deals, Qatar delivers LNG to western Gujarat state.

The source added the freedom to decide on the arrival terminal could save Indian buyers pipeline transportation costs within the Indian grid.

Petronet Chief Executive A. K. Singh last year said his company could get a price lower than the 12-13% slope of Brent offered by Qatar to China and Bangladesh. 

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