India wants Qatar to lower gas price; Qatar says no to reopening existing contracts

India on Monday pressed its largest LNG supplier Qatar to lower the price of gas under the existing long-term supply contracts, a request that Doha turned down saying sanctity of contracts is important for the credibility of both sides.

India imports 8.5 million tonnes per annum of LNG from Qatar under two long-term contracts with a rate linked to crude oil prices. Landed price of liquefied natural gas (LNG) comes to USD 9-10 per million British thermal unit while the same gas is available in the spot or current market at half the rate. The long-term contract with Qatar is the most expensive with volumes from Australia, Russia, and US on long-term contracts coming on cheaper rates.

Oil Minister Dharmendra Pradhan met Qatar Energy Minister Saad Sherida al-Kaabi to press for the "need for realignment of existing long-term LNG contracts with the market to suit the affordability of end consumers".

Talking to reporters after the meeting, Pradhan said the pricing of gas as a percentage of prevailing oil prices tends to inflate the price of the environment-friendly fuel, and alternate independent benchmarks needs to be developed.

The linkage means that the price of gas will go up every time there is a spike in crude oil prices.

The US and Russia price gas with no links to oil, he said.

"All energy producers have to revisit this old practice and come to the new methodology of pricing keeping demand and supply in mind," he said. "We need to re-examine the pricing mechanism" of the long-term natural gas deal with Qatar.

Kaabi responded saying current contracts cannot be renegotiated but Qatar was willing to supply additional volumes at different rates.

"We don't renegotiate existing contracts. Contracts are contracts for the duration we sign them for. We as businesses understand that the sanctity of contract is important for both sides. And for the credibility of both sides, both parties must respect that," he said. "We are looking forward to adding more volumes in India and negotiating additional volumes."
"For us, we have a contract with India. Both sides are professionals who will stick to contracts," Kaabi said. "We have excellent political and business relationships. Contracts that we have, we abide by them."
"We are not renegotiating existing contracts," he said. "We look forward to supplying additional volumes."