India Qatar Gas Deal : On Feb 6 this year India signed 78 billion USD deal with Qatar for importing LNG gas for another 20 years till 2048. Existing deal between both countries would expire in 2028. India has claimed that lifetime savings of the deal would be around billion USD. Let’s decode why India has opted for Qatar and long term contact with them despite huge investment in green energy.
- Why India Need LNG Gas
- Economic Reasons for Deals with Qatar
- Why deal renewed 4 years before the end date of last contract
- Why deal closed 4 years before the end date of last contract
- Additional Gains for India ?
Why India Need LNG Gas
India has envisioned to increase the share of natural gas in the primary energy mix from 6.7 per cent to 15 per cent by 2030.India need gas for producing electricity production, making fertilizer and converting to CNG.
Natural gas is seen as a significantly cleaner alternative to conventional petroleum fuels like diesel and petrol, and is usually cheaper than crude oil.
Economic Reasons for Deals with Qatar
US President Biden on Jan 26 paused the approvals of new liquified natural gas export terminals while directing officials to reassess how to review future projects for their likely impact on climate change.
First time in history of LNG industry, just a few days ago United States has become world’s biggest LNG exporter displacing Qatar.
Two-thirds of U.S. LNG exports in the first half of this year went to European Union countries and the U.K., in large part to compensate for the lack of Russian gas as Russia’s war in Ukraine grinds on.
Despite being the world’s fifth largest natural gas producer, trailing the United States (U.S.), Russia, Iran, and China, Qatar has maintained its position as the leading exporter of liquefied gas in the past year.
Why deal closed 4 years before the end date of last contract
India currently imports 8.5 million tonnes a year of LNG from Qatar under two contracts. The first 25-year deal is to expire in 2028 and has now been extended for 20 additional years. The second deal for 1 million tonnes a year, entered into in 2015, will be negotiated separately.As per agreement, deal has to be renewed five year prior to the end of the supply term. That deadline was in December 2023.
There were heightened tensions when a Qatar court sentenced eight former Indian Navy officials to deal in October for allegedly spying for Israel. In December-end, their sentence was reduced. Accidently, India released its naval officer just few days after the gas deal.
Why India went for Long tern Contract
Despite surge and volatility in LNG prices in last two years, industry experts are of hopeful that it will become a buyer’s market. There are lot of upcoming onstream projects. This scenario, however, is still a few years away.
Last year in FY 23, India imported 54% LNG from Qatar. Data reveals that apart from the 8.5 million tonnes of LNG from Qatar via term contract, another 2.25 million Tonnes (25 %) bought via spot market. The spot LNG market is more volatile in comparison to term contracts.
After Russia Ukraine war, Europe and US were facing huge inflation, and Gas prices are one of the leading factors. That is the reason why most countries have established term contracts.
That is the reason why, Qatar has announced many long term contract LNG supply deals with French, Dutch, and Italian energy companies. Just few month aga Doha has singed contracts to supply LNG to China and Germany.
Additional Gains for India ?
Sources suggest that India Qatar gas deal renewal is at a “significantly” lower price than the existing deal. At current prices, India will save about USD 0.8 per million British thermal unit. It translates into savings of USD 6 billion over the contract period.
New deal will allow the Indian buyers to decide on terminal to receive cargoes. This will result in additional savings of USD 0.30 per Metric Million British Thermal Unit.
Further more the deal will improve India’s relation with West Asia.