Pipeline to Prosperity: Qatar's LNG Boost for India's Future

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Pipeline to Prosperity: Qatar's LNG Boost for India's Future

Oil & Gas 08 Feb 2024 12:45 PM IST SB Team

India's pursuit of a cleaner and more diverse energy landscape takes a significant leap forward with the recent multibillion-dollar LNG agreement between Petronet LNG Ltd and QatarEnergy. This landmark deal, signed during India Energy Week, is expected to reshape India's LNG landscape, providing more favourable rates and securing Qatar's LNG supplies to India until 2048. This move aligns with India's strategic efforts to diversify energy sources, enhance energy security, and promote cleaner fuels.

Current LNG Scenario

India heavily relies on imported LNG, with approximately 45% of its natural gas needs being met through imports. These imports come from various nations, including Qatar, the US, Australia, and Russia. As a key contributor, Qatar plays a pivotal role in meeting India's growing demand for LNG.

Qatar-India Agreement

Under the new agreement, the pricing structure is 12.67% of the prevailing Brent crude oil rate, with an additional $0.5 per million British thermal units. Notably, this deal eliminates fixed charges, allowing Indian purchasers greater flexibility in choosing the terminal for LNG delivery within the country. The extended contract is anticipated to offer more advantageous rates than the existing pricing structure and support India's ambitious goals for cleaner energy.

India's LNG Drive and Energy Transition

As the world's third-largest energy consumer, India sees natural gas as a crucial transition fuel to achieve net-zero carbon emissions by 2070. The government aims to increase the share of natural gas in the country's energy mix from 6.3% to 15% by 2030. Petronet LNG Ltd, a key player in India's LNG landscape, has secured two contracts annually for 8.5 million tonnes of LNG from Qatar. The first agreement, set to expire in 2028, has been extended for 20 years, demonstrating a long-term commitment to cleaner energy.

Qatar's Efforts to Expand LNG Sales to India

Qatar, the world's third-largest LNG exporter, recognises India's growing demand for LNG and aims to capitalise on it. High-level talks between Qatari officials and key Indian buyers, including Gail India Ltd and Indian Oil Corp, are underway during India Energy Week. Qatar is also considering extending its long-term supply contract with Petronet LNG Ltd, which is set to expire in 2028. These negotiations are crucial for both nations as Qatar seeks customers for its ambitious gas expansion project. At the same time, India aims to secure long-term deals to achieve its natural gas targets.

Challenges and Opportunities

Given the government's determined efforts to boost natural gas usage, India's dependence on imported natural gas is expected to increase. The nation currently imports around 50% of its natural gas, and to reach 15% natural gas in the energy mix by 2030, imports are likely to surge. The flexibility offered by the new agreement allows Indian buyers to choose the receiving terminal within the country, a departure from the previous exclusive arrangement with western Gujarat state.

Future Outlook

As India accelerates its transition towards cleaner energy, the Qatar-India LNG agreement emerges as a significant milestone. The deal ensures a stable supply of LNG until 2048 and fosters collaboration between two nations committed to sustainable and cleaner energy solutions. With ongoing negotiations and the potential for further agreements between Qatar and India, the energy landscape in the region is poised for transformation, contributing to global efforts in mitigating climate change and promoting sustainable development.

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