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Petronet LNG and QatarEnergy Extend LNG Supply Deal Beyond 2028

  • 08 Feb 2024

On 6th February, 2024, Petronet LNG and QatarEnergy signed an agreement to prolong the supply of 7.5 million tonnes per annum (mtpa) of liquefied natural gas (LNG) for an additional 20 years beyond the expiration of their current contract in 2028.

Key Points

  • Negotiation and Agreement: Talks to extend the existing supply contract culminated in an agreement signed on the first day of the India Energy Week 2024 in Goa, involving participation from both countries' governments.
  • Contract Details: The new agreement extends the LNG supply from 2028 to 2048, transitioning from a Free on Board (FOB) basis to Delivered Ex Ship (DES) basis. However, pricing details were not disclosed by Petronet LNG, the largest importer of LNG in India.
  • Price Considerations: The revised contract terms could lead to substantial savings for Indian buyers over the 20-year period, potentially amounting to approximately $6 billion, factoring in lower LNG prices and a shift to DES deliveries.
  • Offtake Arrangements: Under the new agreement, GAIL (India) Limited, Indian Oil Corporation Limited, and Bharat Petroleum Corporation Limited will continue to off-take LNG volumes from Petronet LNG's Dahej Terminal on a substantially back-to-back basis, similar to the original 1999 agreement.
  • Implications for India's Energy Goals: The contract extension aligns with India's objective to increase the share of natural gas in its energy mix to 15 percent by 2030, under Prime Minister Narendra Modi's leadership, facilitating the transition to a gas-based economy.
  • Strategic Significance: Petronet LNG emphasized the national importance of the extended agreement, accounting for around 35 percent of India's LNG imports, ensuring continued supplies to vital sectors such as fertilizers, city gas distribution, refineries, and power generation.
  • Import Dependency and Clean Energy Transition: LNG, as a cleaner alternative to conventional fuels, plays a pivotal role in India's energy transition pathway, offering affordability and reduced environmental impact. Qatar remains a significant contributor to India's LNG imports, comprising over half of the total.