Thursday, 31 December 2015

Qatar Lowers Gas Price for India. CNG May Become Cheaper


Qatar Lowers Gas Price for India. CNG May Become Cheaper

In a significant development, India's biggest gas importer Petronet LNG will buy liquefied natural gas (LNG) from Qatar at virtually half the original cost. This could help bring down the CNG prices in India, say analysts.

An agreement was signed between Qatar's RasGas and Petronet LNG on Thursday. Qatar is one of the world's largest exporters of LNG while India is one of the biggest importers of the commodity.

RasGas will supply LNG to Petronet at $6-7 per million British thermal units (mmBtu), sharply lower than $12-13 per mmbtu agreed earlier.

The Qatari supplier has also waived off the $ 1 billion penalty fee for lower gas offtake.

Oil Minister Dharmendra Pradhan said the fresh agreement with Qatar will save Rs 12,000 crore for the Indian economy.

Petronet has a 25-year contract to annually buy 7.5 million tonnes of liquefied natural gas from RasGas but has reduced purchases by about a third this year due to high supply prices, making the Indian company liable for the $1 billion penalty. Petronet has been increasingly substituting costly Qatari LNG with cheaper spot shipments.

Deven Choksey, managing director of KR Choksey Investment Managers, said the lower gas prices will benefit Petronet LNG in terms of lower working capital and higher volumes.

More importantly, the end-consumers will benefit from lower prices as the importers are expected to pass on the lower cost, he added.

However, Petnonet LNG shares had rallied earlier in anticipation of this agreement and it is already discounted in the share price.

Petronet shares, which are up nearly 45 per cent in the past three months, ended 3 per cent higher at Rs 254 on Thursday, outperforming the Sensex, which rose 0.60 per cent.