Qatar slashes gas prices by half for Indian supplies

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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