India buys 7.5 million tonnes a year of LNG on a long-term from RasGas of Qatar on a <g data-gr-id="50">25 year</g> contract, indexed to a moving average of crude oil price.
The price of LNG from Qatar comes close to $13 per million British thermal unit as compared to the $6-7 rate at which it is available in the spot or current market.
With few takers for <g data-gr-id="37">high priced</g> LNG, India has “deferred taking deliveries of 20/21 cargoes so far in 2015 calendar year”, a top source said.
In a full year, 7.5 million tonne of LNG translates into 120 cargoes or shiploads. “Price is an issue,” the source said, adding that high price of LNG under the long-term contract has led to users in fertiliser and power industry finding it cheaper to use alternate fuels like naphtha and fuel oil.
Petronet LNG Ltd, which buys LNG from Qatar on a long-term contract since 2004, has asked RasGas for a cut in import volumes this year, he said. “The contract is a take or <g data-gr-id="56">pay</g> wherein the buyer has to take the contracted volume every calendar year or pay for it. But the contract also provides for a flexibility that gives the buyer (the option) to defer taking 30 <g data-gr-id="53">per cent</g> of the supplies in a year. These volumes can be taken at <g data-gr-id="55">anytime</g> during the duration of the contract,” the source said.
Similarly, the contract also provides for the buyer to seek 10 <g data-gr-id="38">per cent</g> more quantity over the contracted volume in any year, with the excess volume being adjusted during the remaining duration of the contract.
Petronet, which is a joint venture of state-owned oil companies, wants these deferred volumes at the price at which LNG from <g data-gr-id="39">spot</g> market is currently available.
It feels that by averaging the long-term price and the spot rate, it can sell Qatar LNG to consumers, the source said.
LNG from Qatar, on the long-term, was once considered the cheapest. The fuel cost $2.53 per mmBtu for the first five years, from 2004 to 2009.
For the next five years, the price was linked to moving <g data-gr-id="46">average</g> of <g data-gr-id="47">crude</g> oil price of last 5 years and thereafter direct indexation with crude oil.
The source said Qatar has so far not responded to India’s request. “We have told them that India is a big consumer of their gas. India bought over 14 million tonnes of LNG in 2014. Of this, over 12 million tonnes came from Qatar. Imports from Qatar comprised of the long-term contract as well as purchases on <g data-gr-id="52">spot</g> basis,” he said.