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Petronet signs a new long-term agreement to source LNG from Qatar

An existing deal for another 7.5 MMTPA of LNG from Qatar, signed back in 1999, was also recently extended by the company till 2028

Petronet LNG

Petronet LNG

Subhayan Chakraborty Betul, Goa

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Petronet LNG, India's flagship Liquified Natural Gas (LNG) terminal owning company, on Tuesday announced a new long-term deal to source 7.5 million metric tonnes per annum of LNG from Qatar.

Announced on the sidelines of India Energy Week 2024, the deal will see LNG supplies being made-on-delivered basis by state-owned QatarEnergy from 2028 till 2048, Petronet said.

An existing deal for another 7.5 MMTPA of LNG from Qatar, signed back in 1999, was also recently extended by the company till 2028.

Similar to that deal, the LNG volumes under the new agreement shall also be offtaken by GAIL (India) Limited (60 percent), Indian Oil Corporation Limited (30 percent), and Bharat Petroleum Corporation Limited (10 percent) after regasification. Regasification is the process of converting the LNG back to its gaseous state by heating it, after which it is transported through pipelines.

The offtake will primarily take place from Petronet's Dahej Terminal in Gujarat, on a substantially back-to-back basis.

LNG uptake by the fertiliser, city gas distribution, petrochemicals, and refinery sectors are expected to shoot up in coming years after rising year-on-year every month in 2023.

"The existing long-term agreement between Petronet LNG & QatarEnergy today accounts for around 35% of India’s LNG imports and is of national importance," Petronet LNG CEO and MD Akshay Kumar Singh said.

"This agreement will provide energy security and ensure stable & reliable supply of clean energy and help India in its stride towards greater economic development," he added.

Petronet officials said the vast majority of its LNG supplies are part of long-term agreements, with spot purchases being less than 2 percent.

Long-Term Impact

The latest deal will come as a breather to policymakers as supplies of LNG increasingly become tighter and prices turn more volatile.

Last month, the US announced a temporary pause on pending decisions on exports of Liquefied Natural Gas (LNG) to nations it does not have a free trade agreement with, including India. The US is the third-largest source of LNG for India. While India will not be immediately affected by the decision, the move may raise LNG spot prices globally, officials have warned.

However, the Petronet-QatarEnergy deal will further entrench Qatar's position as the overwhelmingly largest source of LNG for India. The government had been trying to expand the list of source nations for LNG, to reduce strategic risks.

In the first 8 months of the current financial year, more than 45 percent of India's LNG imports originated from Qatar, followed by the United Arab Emirates (14.1 percent), Commerce Department data shows.

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First Published: Feb 06 2024 | 6:20 PM IST

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