India is re-negotiating the terms of long-term gas contract with Qatar to reflect the slump in global energy rates but no binding agreement has been signed so far, Oil Minister Dharmendra Pradhan said on Monday.
Petronet lNG ltd (Pll), India's biggest gas importer, is in talks with RasGas to rework pricing formula after liquefied natural gas (lNG) under the existing 25-year contract coming for double the rate available in spot or current market.
“Pll is in talks with RasGas Company of Qatar to re-negotiate the terms of long-term gas agreement. However, no binding agreement has been executed so far,” he said in a written reply to a question in lok Sabha. Pradhan said Pll has a contract to buy 7.5 million tonnes a year of lNG from RasGas on a long-term contract that ends in April 2028. Officials said the revised price has been in-principle agreed between the two and will help cut the rate by about half to $ 6-7 per million British thermal unit. The revised formula will base the price on a three-month average price of Brent crude oil, replacing a five-year average of a basket of crudes imported by Japan, on condition that Pll buys an additional 1 million tonnes of lNG annually. The trailing three month average Brent price is about $ 48 a barrel, while the average of Japan Crude Cocktail for the five-year period ended September 30 was $100. Credit Suisse, in an equity research note earlier this month, said Pll is 'under-lifting' lNG from RasGas by 32 per cent and is seeking to re-open the price formula, outside of a contractual price review.
“This act appears a clear challenge to lNG contract sanctity,’ it said. The value of the underlifted cargoes in 2015 is $1.5 billion and if the change to price formula was implemented it would suggest a $2.5 billion buyer saving over three years. “In either case, the act of under-lifting to force a price change would set an as yet unseen precedent,” it said.