India is set to achieve savings of up to Rs95bn ($1.38bn) from its renegotiated liquefied natural gas (LNG) deal with Russian gas giant Gazprom over the contract period, which will last until 2040.
According to the Press Trust of India (PTI), Indian Oil Minister Dharmendra Pradhan stated in a written reply in the Upper House of the Parliament (Rajya Sabha) that the first cargo of natural gas from Russia was received last month under the long-term contract between GAIL India and Gazprom Marketing & Trading Singapore (GMTS).
This comes after state-owned gas utility GAIL India renegotiated price terms agreed in 2012 after Gazprom failed to deliver LNG from the previously agreed Shtokman project in the Barents Sea.
The renegotiated gas price is based on several factors, including project location, contract duration and pricing formula.
Pradhan was quoted by the news agency as saying: “GAIL and Gazprom successfully re-negotiated the long-term LNG sale and purchase agreement reflecting the current global gas market dynamics.
“The renegotiated price, compared to earlier contract price, will result in saving of approximately Rs85bn ($1.24bn) (crude oil at $50 per barrel) or Rs90bn ($1.31bn) (crude oil at $60 a barrel) or Rs95bn ($1.38bn) (crude oil at $70 per barrel) for the years 2018 to 2040.”
Under the renegotiated terms of the 20-year deal, which include price and volume increases, GAIL will import 2.5 million tonnes per annum (Mtpa) of LNG.
The parties agreed to lower the contracted volume from 2.5Mt to 0.5Mt in the first year, 2018-19, while 0.75Mt and 1.5Mt will respectively be delivered in the subsequent two years.
The Russian gas firm has also agreed to extend the contract by three years to initially compensate for the non-delivery of supplies.
The deal will also see GAIL receiving an additional two million tonnes over-and-above the 50Mt it had agreed to take in 2012 over the contract period.
India is one of the biggest importers of LNG and intends to diversify its energy supplies basket.
The country currently has four operational LNG import terminals with a total import capacity of 27.5Mtpa.
