India renegotiating terms of its Qatar LNG contract

India is renegotiating the terms of its 25-year gas deal with Qatar, which was signed in 2004, as the LNG price slump made has gas available at half the rate of the contract with India’s state-owned Petronet LNG.

The contract offered India a low rate of USD 2.53 per million Btu for the first five years, followed by a price of USD 12-13 per million Btu for the remainder. The country agreed to an offtake of 7.5 million tpy. LNG prices have dropped to USD 6-7 per million Btu in Asian spot markets, making the contract’s current rate very high.

India’s oil minister Dharmendra Pradhan, said on Monday that Petronet was in talks with Qatari LNG producer RasGas to cut the rate by half on the condition that Petronet buys 1 million additional tpy of LNG.

Swiss financial services company Credit Suisse wrote in an equity analysis note last week that Petronet was buying 32% less LNG than stipulated in the contract and is seeking to waive the USD 1.5-billion penalty for it as part of the deal, which has no precedent.

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