Offshore Technology

Petronet to extend its LNG contract with Qatar with lower prices

Petronet currently imports 8.5 million tonnes per year of LNG from Qatar on a contract that expires in 2028 but only has until the end of 2023 to renegotiate.

Indian state-run liquified natural gas (LNG) trader Petronet LNG will seek to extend its long-term gas supply deal with Qatar at a lower price.

The current agreement sees Petronet purchase 8.5 million tonnes per annum (mtpa) of gas from Qatar at a price based on a slope of 12.67% of the Brent crude oil price and $0.50 per million British thermal units.

Speaking to the press, Petronet CEO AK Singh stated that the company is “seriously engaged” with Qatar for renegotiating the deal beyond its 2028 end date. The company has until the end of 2023 to do the same.

In February, Singh told reporters that the company wants to add 0.75–1mtpa to its 8.5mtpa offtake from Qatar upon the deal’s extension.

Indian gas production fell by 3% in the year to April 2023; however, it is still among the world’s largest gas importers. If domestic production continues to fall, it will necessitate negotiating a more favourable LNG import price to facilitate continued gas usage.

Petronet imports 1.42mtpa of gas from ExxonMobil via its Gorgon Australia gas project. From the financial year 2025-26, Petronet will increase this by 0.6mtpa, up to a total of 2.02mtpa. Further still, this will increase after 2028 by another 0.6mtpa.

Petronet currently operates two LNG terminals, with a third under construction. Currently in production is the 17.5mtpa plant in Dahej in the state of Gujarat and the 5mtpa plant in Kochi, Kerala. A third 4mtpa floating LNG plant is being built in Gopalpur, Odisha.

Across these three facilities, Petronet is seeking to acquire as much as 12mtpa of additional LNG capacity, including 5mtpa allocated to the Dahej site. Dahej is already among the world’s biggest regasification terminals.

In April 2022, the company revealed it is also considering a fourth floating LNG import and regasification site. This is because of the growing demand for gas in the country, much of which has to be imported due to low domestic production. This heightens the necessity of renegotiations with Qatar for increased LNG imports under more favourable terms.