- $1.8 billion penalty waived for Petronet buying lower volumes
- Petronet to buy additional 1 million tons a year from RasGas
Qatar’s RasGas Co. agreed to cut the price of gas it supplies to Petronet LNG Ltd. by almost half from Friday under an existing 25-year contract with India’s biggest gas importer.
Under the revised terms, Petronet will pay RasGas $6 to $7 per million British thermal units, compared with about $13 earlier, India’s Oil Minister Dharmendra Pradhan told reporters in New Delhi on Thursday. A penalty for taking less-than-contracted volumes this year amounting to about 120 billion rupees ($1.8 billion) on Petronet has been waived by the Qatari company, he said.
The new pricing formula is linked to an oil index that reflects prevailing oil prices, the companies said. Brent, the benchmark for half of the world’s crude trading, has plunged 36 percent in the past year owing to a supply glut.
Quantities not taken by Petronet this year will need to be bought during the remaining term of the contract, the two companies said in a joint statement. New Delhi-based Petronet has taken about two-thirds of its contracted quantity from RasGas this year as gas users, including power plants and fertilizer makers, switched to cheaper supplies bought on the spot market.
Petronet agreed to purchase an additional 1 million metric tons of liquefied natural gas annually from RasGas through the remainder of the 25-year contract, ending in 2028, it said in a statement. This is in addition to the existing contract to purchase 7.5 million tons annually.
The revised terms will lead to annual savings of 40 billion rupees, which will benefit gas consumers, Pradhan said.
Petronet jumped 3.4 percent to 255.95 rupees, its highest close, in Mumbai. State-run GAIL India Ltd., its biggest customer, advanced 1.9 percent.
The pricing deal may stoke similar demands from other buyers, including Korea Gas Corp. and CNOOC Ltd., Credit Suisse Group AG said in a report dated Dec. 9.