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Qatar to Offer Cheaper LNG to India in New Long-Term Supply Deal in 2024

According to trade sources cited by Reuters on Friday, QatarEnergy and India are anticipated to soon sign a new long-term LNG supply agreement under which Qatar is set to offer cheaper and more flexible supply to the Asian customer.

Qatar, one of the top exporters of LNG worldwide, has given its Indian customers until the end of 2023 to negotiate a potential extension and/or renewal of the current agreements beyond 2028. Qatar prefers to sign long-term agreements with its buyers.
India, on the other hand, intends to dramatically raise its natural gas consumption in order to increase its energy mix share from 6.3% to 15% by the end of this decade.

But the nation and its LNG importers are especially vulnerable to spikes in spot LNG prices, and they frequently leave the spot market when prices rise. India and its big state-run companies are therefore trying to finalise long-term agreements for LNG supply.

According to one of Reuters’ sources, Indian buyers and the state energy company of Qatar have agreed on the conditions of the new long-term contracts, and a new agreement is anticipated to be signed by the end of January or the start of February. The source also stated that the new agreement, which would be in effect until at least 2050, offers more flexibility in cargo destinations and more affordable supply.

After striking similar agreements with Shell and TotalEnergies for supply to the Netherlands and France, respectively, QatarEnergy signed a 27-year contract in October to ship LNG to Europe. Specifically, the agreement called for QatarEnergy to deliver cargoes for Eni in Italy starting in 2026.Minority investors in the various LNG production trains of the North Field expansion project include Eni, Shell, and TotalEnergies.

The North Field expansion project, which Qatar launched in October as well, is the largest LNG project in the world and will increase the small Gulf nation’s export capacity by 48 million tonnes per year (mmtpa) by 2027.This action is consistent with Indian Prime Minister Narendra Modi’s aggressive goal of increasing natural gas’s percentage in the country’s energy mix from 6.3% to 15% by 2030.

According to negotiations, the pricing structure could have a Brent slope of about 12% per million metric British thermal units (mmBtu).The agreement is expected to be finalised during the next energy conference, which takes place in India from February 6–9.Indian buyers, including Petronet LNG, will have the freedom to select any receiving terminal within India under the terms of the proposed agreement.

It is anticipated that this change from the current setup, in which LNG is only supplied to the state of western Gujarat, will result in cost savings through lower pipeline transportation costs within the Indian grid.

According to one source, the deal will probably be completed at a cost of about 12% of Brent per million metric British thermal units. According to a different source, the range for free-on-board supplies to India was 12–12.5 percent.According to the report, the agreement could be signed between February 6 and 9, during an energy conference in India.In November of last year, S&P Global Ratings stated that until 2025, Qatar’s LNG production is expected to stay constant. Still, as the nation removes its moratorium on additional development at the North Field, it ought to rise by thirty percent between 2026 and 2027.Last year, Qatar inked long-term agreements with Chinese businesses as well as major European players Shell, TotalEnergies, and Eni.

Sources claim that the new contract intends to support India’s expanding demand for LNG and help the country achieve its energy goals, even though neither Qatar Energy nor Indian businesses have confirmed the information.With increasing competition from U.S. suppliers, Qatar aims to increase its liquefaction capacity from 77 million to 126 million tpy by 2027 and pursue a more prominent position in the Asian and European markets.

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