India may be looking at Qatar for a ‘sweetheart’ gas deal, but Doha appears in no mood to sell liquefied natural gas (LNG) at anything less than $9-11 per mBtu — at more than double the domestic gas price.
Petroleum Minister Murli Deora earlier this month took along chief executives of public sector oil companies to Doha, hoping that Qatar’s Energy Minister Abdullah al-Attiyah would replicate the ‘sweetheart’ deal of 2003.
The world’s largest LNG exporter had then agreed to sell 5 million tonnes of LNG a year to India at $2.53 per mBtu, and because of the low price it was referred world over as the ‘sweetheart’ deal.
This time, however, Qatar wants 13.5-15.5 per cent of ruling crude oil price (Japanese Crude Cocktail) for the new contract, sources in know said.
At $70 a barrel JCC price, the free-on-board (fob) price of LNG comes to $9.45-10.85 per mBtu.
Added to this would be the cost of shipping the gas in its liquid form in cryogenic vessels from Qatar to West coast, the import duty of 5 per cent and the cost of regasification. The ex-terminal cost would come to not less than $12 per mBtu.
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Also, Qatar was willing to offer only short-term supplies — 2-3 years, while India was looking for long-term (typically 20 years) sources of an additional 5 million tonnes per annum of LNG, they said.
Sources said rates being quoted by Qatar would not be acceptable in India given the fact that gas from the nation’s largest gas field, KG-D6 of Reliance Industries, was priced at $4.205 per mBtu.
Since Qatar is willing to begin supplies immediately, the gas can land only at the almost-complete LNG receipt terminal adjacent to the Dabhol power plant in Maharashtra, as Petronet LNG Ltd's Dahej terminal's entire capacity is booked.
Any LNG arriving at Dabhol will have to compete with Reliance Industries’ KG-D6 gas whose delivered price in Maharashtra was $6.67 per mBtu, sources said, adding that Qatar gas would be more than double this price after adding pipeline transportation and local taxes.
Qatar is facing surplus LNG after its principal importers in Europe and the US cut imports. It has brought on line three LNG production facilities this year, each with a capacity of 7.8 million tonnes per year, with another due to be completed by the end of the year. The four plants would double its 2008 capacity of 31 million tonnes.
Sources said, given the surplus that Qatar is facing, it was surprising that it was dictating the terms while it should have been New Delhi who should have called the shots. India currently imports 5 million tonnes of LNG every year from Qatar’s RasGas under a long-term deal, and supplies are already due to increase to an annual 7.5 million tonnes from January.
Qatar, which has the world’s third-largest reserves of gas, sold LNG under that contract to Petronet at $2.53 per mBtu in the first five years to December 2008. From January 2009, this price has been revised to $3.12 per mBtu, but it is still cheaper than current spot LNG price.
The chief executives of state-run oil firms Indian Oil Corp, Oil and Natural Gas Corp, GAIL (India) Ltd and Petronet LNG accompanied Deora to Qatar, where all that Al-Attiyah did was to advise heads of his nation’s RasGas and Qatar Petroleum to have separate discussions with them.