India's Petronet LNG signs long-term LNG deal with QatarEnergy at around 12% slope to crude oil

Petronet LNG has executed an LNG sales and purchase agreement with QatarEnergy for a volume of 7.5 million mt/year on a DES basis for 20 years from 2028 to 2048, the state-owned Indian gas importer said in a statement Feb. 6.

"This is pursuant to the extension of an existing LNG SPA for LNG supply of around 7.5 million mt/year on FOB basis, signed on July 31, 1999, for supplies till 2028," Petronet LNG said in the statement.

The deal extension with QatarEnergy is likely priced at around a 12% slope to crude oil, for deliveries across India, S&P Global Commodity Insights reported prior to the official announcement citing sources with knowledge of the matter. This price level is one of the lowest for oil-linked contracts signed in recent years and is likely to set an industry benchmark for contract negotiations in the coming months.

"It is the most important contract in India because for the downstream market in India, that price will act as a benchmark considering the volume and tenure," an LNG importer from India said. The original contract between Petronet LNG and QatarEnergy signed in 1999 is considered the bedrock of India's LNG and natural gas industry.

Another source familiar with the matter said the new deal did not have a clause for extension by another five to 25 years. This is significant because some of QatarEnergy's recent contracts in Asia have been for as long as 27 years.

Petronet LNG said similar to the agreement of 1999, the LNG volumes under the new SPA shall also be taken by GAIL Ltd. (60%), Indian Oil Corp. (30%) and Bharat Petroleum Corp. Ltd. (10%), after regasification primarily from the Dahej LNG terminal of Petronet LNG on a substantially back-to-back basis.

"We believe that this new agreement, with our valued customers Petronet LNG and its esteemed shareholder companies, will further strengthen the relationship with India and support its vision to increase the contribution of natural gas in its energy mix," Qatar's energy minister Saad al-Kaabi said in a separate Feb. 6 statement.

"This LNG SPA between PLL and QatarEnergy will ensure energy security of India and assure continued supplies of regasified LNG to major consuming sectors like fertilizers, city gas distribution, refineries and petchem, power and other industries," Petronet LNG said in the statement.

The 7.5 million mt/year volume represents one of the largest contracts signed by Qatar with a single Asian gas importer and was announced as part of the India Energy Week being held in Goa this week.

Long-term contracts
India's GAIL recently announced its sales and purchase agreement with Abu Dhabi National Oil Co.'s LNG subsidiary for 500,000 mt/year starting in 2026 for a tenure of 10 years.

On Jan. 5, GAIL also announced a long-term deal with portfolio company Vitol for 1 million mt/year for a tenure of 10 years starting in 2026. The pricing of this deal was reported earlier around 12.4%-12.45%.

In July 2023, Indian Oil Corp. announced a long-term LNG contract with Total Energies for 800,000 mt/year and a heads of agreement for 1.2 million mt/year starting in 2026 for 14 years.

Despite the contract renewal between QatarEnergy and Petronet, 40% of India's forecast demand will remain uncontracted by the end of the decade, according to Ayush Agarwal, LNG analyst with S&P Global Commodity Insights.

QatarEnergy recently announced a contract with Excelerate Energy for up to 1 million mt/year for delivery to Bangladesh starting in 2026, for a period of 15 years.

In 2023, QatarEnergy signed contracts with Shell, ENI and Total Energies for deliveries of LNG cargoes in Europe, with the contract including exposure to natural gas indexation, S&P Global reported earlier. The Middle East supplier also signed contracts with Sinopec in 2023 allowing deliveries to LNG receiving terminals of Sinopec across China at a price of 12.7%.

Qatar plans to increase its liquefaction capacity to 126 million mt by 2027 compared with 79 million mt in 2023.

Platts assessed the West India Marker -- the LNG price for cargoes delivered to west India ports -- at $9.250/MMBtu for March on Feb. 6, S&P Global data showed.

Platts assessed JKM -- the benchmark LNG price for cargoes delivered to Northeast Asia -- at $9.459/MMBtu for March on Feb. 6, the data showed.

"The existing long-term agreement between Petronet LNG and QatarEnergy today accounts for around 35% of India's LNG imports and is of national importance," Akshay Kumar Singh, CEO of Petronet LNG, said in a statement.

Petronet's second agreement for supply of LNG from Qatar was in 2015 for an additional 1 million mt/year, raising the total annual long-term volume between both sides to 8.5 million mt/year, QatarEnergy said. "This agreement is another key milestone in the long-standing energy partnership between Qatar and India and comes on the heels of the 20th anniversary of the first LNG shipment to India," Qatar's Kaabi said.