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Qatar lowers gas price, waives India’s Rs 12,000 crore liability

01 Jan 2016 Evaluate

Qatar has nearly halved the price of gas it sells under a 25 year contract and has also waived a payment liability of Rs 12,000 crore arising from India’s refusal to import the committed number of shipments in 2015 under the 'take-or-pay' clause. Petronet LNG, India's largest importer of gas in ships, and Qatar's RasGas agreed to a new pricing formula that would see gas price dropping to $6-7 per unit from the original $12-13.

The new formula is linked to Brent crude, the European benchmark, and would entail a saving of Rs 4,700 crore annually for the fertiliser industry alone, the biggest consumer of liquid gas. A lower fuel cost would automatically reduce the government's fertiliser subsidy. Under the new formula, the impact on power tariffs would be nominal, if at all, since gas-fired stations account for 7-8% of total capacity. Gas utility GAIL would stand to benefit since the lower price would prompt gas demand, raising utilisation of the utility's pipelines.

Besides, in return for the renegotiation, the two companies also signed a separate contract for one million tonne of additional gas for the remaining tenure of the deal, which has given a benefit of $15 billion by way of lower prices when they were going up in the 11 years since supplies began in 2003.India is the second liquid gas buyer after China to have successfully renegotiated a long-term contract in tune with the changed reality of slump in prices and supply glut in the global energy market.


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