Qatar has slashed the price of gas it supplies to India by almost half by removing the floor and cap in the pricing formula, but it has introduced a small fixed component. The revised formulation, which came into effect from January 1, 2016, has led to a reduced cost of liquefied natural gas (LNG) from Qatar to $6.5-6.6 per million British thermal units (mmBtu) from the last billed $12.6 per mmBtu. Under an existing 25-year contract, RasGas of Qatar will price 7.5 million tonnes (mt) per year of LNG it sells to Petronet LNG at 12.66 per cent of the three- month average price of Brent crude. To this, a fixed component of about $0.6 per mmBtu will be added. The cost of shipping the gas in its liquid form (LNG) from Qatar to India is $0.33 per mmBtu and so the delivered price of the gas at Dahej in Gujarat will be $6.63. While the international oil prices dropped to multi-year lows in 2015, this ceiling and floor meant that LNG cost to India would remain at highs of $12-13 per mmBtu even though spot prices were trending at half the rate. This floor and ceiling had benefited India when rates remained at $8-9 despite crude oil shooting up to $147 per barrel and LNG rates touching a record $20 per mmBtu. It is the first time that the pricing of LNG under this contract has been changed.
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