India will save as much as Rs 20,000 crore as it has renegotiated a long-term gas import deal with Qatar, Prime Minister Narendra Modi said on Monday.
India buys 7.5 million tons a year of liquefied natural gas (LNG) per annum from Qatar. The price formula for this was fixed 13 years back and the rate went out of sync when global energy prices slumped last year.
"We are dependent on other nations to meet our requirement of energy and petroleum (oil) supplies. And so long-term agreements have been entered into to get assured quantity at a pre-determined price," Modi said in his Independence Day address to the nation from the Red Fort.
In the changed world economic scenario, the Qatar LNG price posed a huge burden on Indian economy, he said, adding that India used its foreign policy to reopen the price.
"What was Qatar's right and we were bound to pay, we managed to get Qatar to renegotiate...To make possible something which was impossible," he said.
India will save Rs 20,000 crore by renegotiating the LNG price lower, Modi said. "They (Qatar) were entitled to take Rs 20,000 crore (as per the long-term signed contract) but our diplomatic ties ensured that we renegotiate the terms."
RasGas of Qatar supplies LNG to India under a 25-year long term contract since 2004.
The price of imported LNG under this agreement had been linked to crude oil (Japanese Customs Cleared Crude or JCC) and had a concept of floor and ceiling indexed to last 5-year average. The rate thus arrived at was higher than the LNG available in the spot or current market in 2015.
Petronet LNG Ltd, the firm that buys LNG from Qatar, sought renegotiation of the deal and RasGas agreed to modify the pricing formula to link it with last 3-month average rate of Brent crude oil.
While Modi said the revision in price formula would help save Rs 20,000 crore, Oil Minister Dharmendra Pradhan had recently told Parliament in a written question that at the revised formula, the country will save Rs 8,000 crore over the remainder of the contract, that is up to 2028.
State-owned GAIL, Indian Oil, Bharat Petroleum and Oil and Natural Gas Corp (ONGC) hold 12.5 per cent each in Petronet.