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India will save about Rs 4,000 crore after it got US energy major Exxon Mobil Corp to lower the price of liquefied natural gas (LNG) after the new rates kick-in from January next year.
Petronet LNG Ltd, India's biggest importer of liquefied natural gas, in August 2009 signed a 20-year deal to buy 1.44 million tonnes of LNG from Exxon's share in the Gorgon project in Australia. The deliveries under the contract started early this year.
"The revised price is still to be documented. We are trying to get the revised price implemented from January 1," Petronet LNG Ltd MD and CEO Prabhat Singh told reporters here.
Exxon Mobil Corp has agreed to charge 13.9 per cent of the prevailing Brent oil price at the port of delivery rather than previously decided 14.5 per cent of the oil rate at the port of loading. The delivered price was considered too high and so price was renegotiated.
"We will be saving about USD 1 per million British thermal unit or so from the price renegotiations," he said. "Over the contract period it comes to about Rs 4,000 crore."
Besides changing the indexation, LNG pricing will be on DES basis rather than FOB previously decided.
Delivered ex ship (DES) is a trade term requiring the seller to deliver goods to a buyer at an agreed port of arrival. Under FOB, the buyer has to make the shipping arrangement.
At USD 50 per barrel oil price, Gorgon LNG, whose supplies started in January this year, would have cost USD 7.25 per million British thermal unit at the port of loading. Adding another USD 1 for transportation would have led to delivered price of USD 8.25 in the old contract.
In the new formula, Gorgon LNG delivered at Indian port will cost USD 6.95 per mmBtu.
India had used its status of Asia's third largest LNG buyer to renegotiate in 2015 the LNG pricing formula with Qatar's RasGas to buy the gas at half the original price.
Petronet had in late 2015 renegotiated price of the long-term deal to import 7.5 million tonnes per year of LNG from Qatar, helping save Rs 8,000 crore. At that time, it had also signed a contract to buy an additional 1 million tonne per annum till 2028.
Singh said Petronet will buy one million tonnes more LNG from Gorgon project as well but the additional volumes would come in after few years.
Price renegotiation with RasGas led to saving of USD 5 per mmBtu.
Petronet had last year formally sought at least 10 per cent cut in price of Gorgon LNG.
The 14.5 per cent indexation to prevailing oil rates agreed in August 2009 was one of the highest in the world.
Singh said LNG in spot or current market is available at USD 9.5 per mmBtu.
State-owned GAIL, Indian Oil, Bharat Petroleum and Oil and Natural Gas Corp (ONGC) hold 12.5 per cent each in Petronet.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)