In a major diplomatic behaviour, Qatar has halved the price of the selling gas under a 25 year contract and has also relinquished a payment responsibility of Rs. 12,000 crore since India refused to import the committed number of shipments in the year 2015 under its ‘take-or-pay’ clause.
India’s largest gas importer in ships Petronet and Qatar’s RasGas have agreed for a new pricing that would make gas prices drop to $6-7 per unit from the original $12-13. This makes India the second liquid gas buyer after China to have successfully re-negotiated a long-term contract right on track in the midst of the changing pricing and supply surplus in the world energy market. This makes the deal a “win-win” situation for both the countries.
This new step is linked to Brent crude, the European target to entail a saving of Rs. 4,700 crore annually for the fertilizer industry alone. Reduced fuel cost will naturally reduce the government’s subsidy on fertilizer. While here, the impact on power tariffs would be minimal since gas-fired stations account for 7-8% of the total capacity.
The main motive behind this move was the realization of India’s power as a buyer and Qatar’s necessity to maintain market share. If India move to alternate suppliers Qatar may lose the huge market forever and Indian market is Qatar’s big fish because it offers the netback against UK or Japan which is lower by $2-3.
The two countries also have signed a new contract for one million ton of additional gas for the remaining period of the deal which has $15 billion by way of lowering prices during rising of the prices from 2003 onwards.
During the aftermath of the oil and gas prices crash, liquid gas prices in the spot market fell to $7-8 per unit which made Qatar’s gas be bought under the contract not applicable to industrial consumers. As a result of this issue, Petronet’s off takers- the all state run oil companies reduced their off take of the costly gas. Thus Petronet started deferring from atar’s gas and buy from spot market.