India buys 7.5 million tonnes a year of LNG on a long-term 25 year contract, indexed to a moving average of crude oil price. The price of LNG from Qatar comes close to USD 13 per million British thermal unit as compared to the USD 6-7 rate at which it is available in the spot or current market.

The high price of LNG under the long-term contract has led to users in fertiliser and power industry finding it cheaper to use alternate fuels like naphtha and fuel oil, a top source said.

Petronet LNG Ltd, which has been buying LNG from Qatar on a long-term contract since 2004, has asked for a 10 percent cut in import volumes this year, they said.
"The contract is a take or pay wherein the buyer has to take the contracted volume every calendar year or pay for it. But the contract also provides for a flexibility that gives the buyer (the option) to defer taking 10 percent less of yearly supplies. These volumes can be taken at anytime during the duration of the contract," the source said.
Similarly, the contract also provides for the buyer to seek 10 percent more quantity over the contracted volume in any year, with the excess volume being adjusted during the remaining duration of the contract.

The source said Petronet has already exercised the 10 percent option and is in negotiations to raise this volume to 25 percent.

Petronet, which is a joint venture of state-owned oil companies, wants these deferred volumes at the price at which LNG from spot market is currently available. It feels that by averaging the long-term price and the spot rate, it can sell Qatar LNG to consumers, the source said.

LNG from Qatar, on the long-term, was once considered the cheapest. The fuel cost USD 2.53 per mmBtu for the first five years, from 2004 to 2009. For the next five years, the price was linked to moving average of crude oil price of last 5 years and thereafter direct indexation with crude oil.The source said Qatar has so far not responded to India's request.
"We have told them that India is a big consumer of their gas. India bought over 14 million tonnes of LNG in 2014. Of this, over 12 million tonnes came from Qatar. Imports from Qatar comprised of the long-term contract as well as purchases on spot basis," he said.
State-run gas utility GAIL, refiners Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd and explorer Oil and Natural Gas Corp (ONGC) are equal promoter of Petronet with 12.5 percent stake each.

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