'Revised LNG deal with Russia's Gazprom to kick in from May'

GAIL had in January renegotiated terms of its 20-year deal to import 2.5 MT a year of liquefied natural gas (LNG) from Gazprom.

"After detailed discussions, both parties agreed on an understanding for amendment to the LNG sale and purchase agreement (of 2012) through a Deed of Amendment primarily on volume ramp up and reduction in price, which has been signed on January 16, 2018," he said in a written reply to the Rajya Sabha.

Without giving details of price reduction, Pradhan said commencement of LNG supplies has been agreed from May 2018.

"Due to the gradual ramp-up, supplies are likely to reach full contracted LNG volume in 5-6 years," he said. "Commencement of LNG supplies agreed is from May 2018." The contracted volume has been lowered from 2.5 million tonnes to 0.5 MT in the first year 2018-19, 0.75 MT in 2019-20, and 1.5 MT in the third year 2020-21. Also, the price indexation has been changed from the Japan Customs-cleared Crude to Brent, and the oil-linked slope of the contract formula lowered, and therefore the final price.

Also, the renegotiated contract provides for diverting a part of the volume, originally contracted on a delivered ex-ship basis, to other markets.

The deferral will allow GAIL more time to find customers for the imported gas.

"GAIL has renegotiated the long-term LNG sale and purchase agreement with Gazprom," Pradhan said.

GAIL had signed the original deal on August 29, 2012 with Gazprom Marketing and Trading Singapore Pte Ltd (GMTS), Singapore, an affiliate of Gazprom, he said.

Gazprom will supply LNG from Yamal LNG project in the Arctic peninsula.

Last year, India got US energy major Exxon Mobil Corp to lower price of LNG from Gorgon project in Australia, saving Rs 4,000 crore in import bill.

In late 2015, it had renegotiated price of the long-term deal to import 7.5 MT per year of LNG from Qatar, helping save Rs 8,000 crore.