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India to import more LNG from Qatar

LNG Industry,

At the 6th Asia Gas partnership summit, after bi-lateral talks were held, India’s Petroleum Minister Murli Deora, and Qatar’s Deputy PM and Energy Minister Abdullah Bin Hamad al-Attiyah agreed that Qatar would ship an extra 4 million tpa of LNG by 2014. However, Qatar is insistent that it wants US$ 10 per unit of LNG, which is more than double the US$ 4.20 that India’s government set the price of gas from the Andhra field being operated by Reliance Industries.

This high price has raised questions that Qatar may be taking advantage of the Indian oil ministry’s desperation for LNG, as the current spot price is no more than US$ 5 – 6 at the moment, a far cry from the US$ 10 per unit that Qatar has been asking for.

Nonetheless, Qatar’s Deputy PM has said that, “RasGas of Qatar and Petronet LNG/GAIL India will engage in discussions of pricing and I hope in the next few weeks they can finalise agreements. The supplies would be long-term, typically 15 – 20 years.”

The current proposal is for exports to increase incrementally, with India receiving an extra 300,000 tpa in 2010, 500,000 tpa in 2011, 2.5 million tpa in 2012 and 4 million tpa by 2014. This is on top of Petronet’s existing agreement to receive 7.5 million tpa until 2028.

India is increasing its imports of LNG to meet growing domestic demand for the cleaner-burning fuel. The economy is also expected to grow by up to 8.2% this year, compared with 7.2% growth for the 2009 financial year.

Qatar is also looking to divert more LNG cargos to the Asian market as they can achieve a better price than in Europe and North America, where Henry Hub, the US exchange that sets price benchmarks, has placed it at around US$ 4 per unit.

Qatar also has a vast amount of new capacity coming online, it is currently producing 62 million tpa of LNG and this is set to increase to 77 million tpa by September. LNG needs back-to-back arrangements in place at the sender and receiver ends. This is because LNG cannot be stored indefinitely and every day a loaded ship remains at sea costs the producer interest and damages. So Qatar is looking east to try to fill up its order sheets to take up this extra capacity.

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