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Costly LNG Agreement with Qatar: Weighted Average Pricing may Bring Temporary Respite for Petronet

News

India has imported 30 per cent less liquefied natural gas (LNG) than it is supposed to under a long-term deal with Qatar as a slide in spot prices has cut demand from local buyers, two sources with knowledge of the matter said on Tuesday. Petronet has a 25-year deal with Qatar's RasGas to buy  7.5 million tonnes of LNG annually.

Source:  ET

SNP Insights

With stiff decline of international oil prices, once the most attractive LNG agreement with Qatar RasGas field, has turned out to be immensely unviable contract to abide with. Hence to sustain the contract, deferring the permissible 30% LNG supply in a year & buying that deferred volume through spot market will be the only way out. This weighted average method will bring down the cost of LNG to $10.9 per MMBTU, which is 17% less than current long term contract price. Yet, final solution for this problem will be through Qatar's consent to redefine the price of agreement.

Source: SNP Infra Research