Page 6 - GLNG Week 04

GLNG COMMENTARY GLNG
India fails to win over Qatar on LNG pricing
The South Asian country had lobbied Qatar to delink its LNG contracts from the oil index, to no avail
POLICY
WHAT:
India wants to scrap oil indexing in long-term LNG contracts.
WHY:
India’s long-term imports from Qatar are more than double the cost of spot market supplies.
WHAT NEXT:
Qatar will resist moving away from oil-linked pricing, but may offer other attractive terms.
INDIA’S efforts to renegotiate its long-term LNG supply deal with Qatar have fallen flat, with Doha rebuffing New Delhi’s calls for a move away from oil-linked prices.
Indian Minister of Petroleum and Natural Gas Dharmendra Pradhan said last week that his government intended to discuss all aspects of the country’s energy relationship with Qatar in response to reporters’ questions about whether LNG contract terms were up for discussion.
Asian buyers of LNG have been reviewing contract terms in the wake of plummeting spot prices. Reuters reported on January 26 that while the average LNG price for March delivery into East Asia was estimated at $4.00 per million British thermal units ($110.64 per 1,000 cubic metres), several deals had been done below this level, marking a 10-year low
India reportedly pays $8.5-9 per mmBtu ($235.11-248.94 per 1,000 cubic metres) for 8.5mntonnesperyear(tpy)ofQatariLNG.
But during Qatari Energy Minister Saad Sherida al-Kaabi’s visit to India this week the Qatari official doused New Delhi’s hopes of a discount on supplies, saying that the contract would stand.
Diverging opinions
India has already renegotiated its contract with Qatar once before. New Delhi managed to convince Doha in 2015 to roughly halve the cost
of the gas it agreed to supply under a long-term contract signed in 1999. In exchange, Indian agreed to increase its purchases from 7.5mn tpy to 8.5mn tpy. Following this deal, India then renegotiated long-term supply contracts with both Australian and Russian exporters.
This time around, however, the Middle East- ern state is unwilling to budge. Al-Kaabi said on January 27: “We are not renegotiating contracts, we stick with contracts – both sides – and we look for additional new contacts and volumes to comply with requirements from India.”
Pradhan was clearly not pleased with the sit- uation, crticising the contract’s pricing mecha- nism in the wake of his meeting with al-Kaabi.
“The current formula of benchmarking gas prices with crude oil is not correct,” the minis- ter told journalists, adding: “India believes that there should be independent pricing formula for gas ... We have to find a formula between the currentpracticesandotherinternationalprices.”
India does not seem ready to let the mat- ter lie either, given that its imports of LNG are predicted to rise and it already leans heavily on Qatar to help meet its demand. Following the meeting between the two countries’ energy min- isters, Reuters quoted unnamed Indian officials as saying that negotiations had only just started.
“There is a plenty of gas supplies in the mar- ket and India is a big market, where demand for gas will continue to rise,” one unnamed Indian
65 60 55 50 45 40 35 30 25 20
2010 2011
2012 2013
Production
2014 2015 Consumption
2016 2017
Source: BP
India's gas supply shortfall
P6
w w w. N E W S B A S E . c o m Week 04 30•January•2020
bcm per year