Petronet LNG, the leading Liquified Natural Gas (LNG) terminal operator in India, unveiled a new significant long-term agreement on Tuesday to secure an annual supply of 7.5 million metric tonnes of LNG from Qatar.
Disclosed during India Energy Week 2024, the deal involves QatarEnergy, a state-owned entity, delivering LNG on a make-on-delivery basis from 2028 to 2048, as per Petronet's announcement. Additionally, an existing 1999 agreement for another 7.5 MMTPA of LNG from Qatar has been extended by Petronet until 2028.
Following a similar structure to the previous deal, GAIL (India) will off-take 60% of the LNG volumes, Indian Oil Corporation Limited 30%, and Bharat Petroleum Corporation Limited 10% after the regasification process. Regasification, which involves converting LNG back to its gaseous state through heating, will take place primarily at Petronet's Dahej Terminal in Gujarat, executed on a substantially back-to-back basis.
Anticipating increased demand in various sectors such as fertilisers, city gas distribution, petrochemicals, and refineries in the coming years, the offtake from Qatar is projected to play a pivotal role. Petronet LNG CEO and MD Akshay Kumar Singh emphasised the national significance of the existing long-term agreement between Petronet LNG and QatarEnergy, accounting for approximately 35% of India's LNG imports.
Singh stated that the newly announced agreement will contribute to India's energy security, ensuring a stable and reliable supply of clean energy to support the country's economic development.
Highlighting that the majority of Petronet's LNG supplies are under long-term agreements, with spot purchases accounting for less than 2%, officials underlined the enduring impact of such arrangements.
In terms of broader implications, the recent deal is seen as a positive development for policymakers, providing relief amid tightening LNG supplies and increasing price volatility. This becomes particularly pertinent following the temporary pause by the US on pending decisions regarding LNG exports to nations without a free trade agreement, including India, potentially impacting global spot prices.
Despite the geopolitical considerations of diversifying LNG sources to mitigate strategic risks, the Petronet-QatarEnergy agreement reinforces Qatar's dominant position as the primary supplier of LNG to India. As of the first eight months of the current financial year, over 45% of India's LNG imports originated from Qatar, with the United Arab Emirates following at 14.1%, according to Commerce Department data.
