Qatar Energy is close to finalising a long-term agreement to supply liquefied natural gas (LNG) to Indian buyers, reported Reuters, citing sources.
The deal, which is expected to offer more competitive pricing and flexible terms, could be finalised by the end of this month or early February.
The new contract is set to extend existing supply agreements that are due to expire in 2028 and could last until at least 2050.
Currently, Qatar supplies 8.5 million tonnes per annum of LNG to Indian buyers.
India aims to increase the share of natural gas in its energy mix to 15% by 2030. The current share stands at 6.3%.
The pricing of Qatari LNG is typically linked to oil prices, with a formula based on a slope, or on crude percentage.
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Sources indicate that the new deal may be finalised at around a 12% slope of Brent crude per million metric British thermal units.
For supplies to India, a second source suggested a price range of 12–12.5% on a free-on-board basis.
Qatar, which plans to boost its liquefaction capacity from 77mtpa to 126mtpa by 2027, is looking to cement its position in Asia and Europe amidst growing competition from the US.
The potential agreement could be announced during an energy conference in India between 6 February and 9 February 2024.
Under the current arrangement, India’s leading gas importer, Petronet LNG, imports 7.5mpta of LNG from Qatar with a slope of 12.67% and a fixed charge of $0.52.
Additionally, Indian Oil, Bharat Petroleum and GAIL (India), which have stakes in Petronet, purchase a combined 1mtpa of LNG.
The anticipated deal will grant Indian buyers the autonomy to choose the receiving terminal in India, potentially saving on pipeline transportation costs within the country’s grid.
Currently, Qatar delivers LNG to the western state of Gujarat. This new flexibility could lead to significant cost savings for Indian companies.