New Delhi: Government has imported 30 per cent less liquefied natural gas (LNG) than it is supposed to under a long-term deal with Qatar as a slide in spot prices has cut demand from local buyers, two sources with knowledge of the matter said on Tuesday.
So far this year Petronet LNG has cut imports by 30 per cent, or up to 24 cargoes, under the deal, said the sources, who declined to be named as they are not authorised to speak to the media.
Petronet has a 25-year deal with Qatar's RasGas to buy 7.5 million tonnes of LNG annually.
Asian spot LNG prices are hovering at about $8.2 per million British thermal units, reflecting a decline in global oil prices.
"Spot LNG prices are about $5-$6 (per mBtu) cheaper than those under the long-term deal so customers are not willing to pay higher prices for the gas offered under long-term deal," said one of the sources.
Pricing of LNG under the long-term deal is linked to the previous 12-month Japan Crude Cocktail (JCC), including caps and floors based on average JCC prices of the past 60 months.
While this formula reduces volatility, it does not reflect price falls as much as spot pricing.
New Delhi has been seeking a 30 per cent cut in long-term supplies from Qatar but RasGas has so far not accepted this demand, the sources said.
Bharat Petroleum Corp, Indian Oil Corp. and GAIL (India) Ltd that sell the imported fuel locally have cut purchases of long-term supplies on low demand from industries including steel, fertiliser and power.
Petronet's head of finance R. K. Garg declined to comment.
The sources said some local customers may have to pay a penalty towards the end of the year if they continued to lift less than promised quantities.
The contracts have a "take or pay clause" starting from purchase of LNG from RasGas to its sale to end-users.
Prior to 2009, the long-term deal included a rebate in order to stimulate India's gas demand, but with the discount now gone the spot market has become more attractive.
Gas accounts for almost 8 percent of India's energy demand and the government wants to lift its use versus coal to cut pollution.