qatar lng ship

A man looks as the world's biggest Liquefied Natural Gas (LNG) tanker DUHAIL as she crosses through the Suez Canal April 1, 2008. REUTERS/Stringer/File Photo

Gas Squeeze Has India Requesting Cargoes Not Wanted in 2015

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October 20, 2021

By Debjit Chakraborty and Ann Koh (Bloomberg) —

The global energy shortage has prompted India to ask Qatar, the world’s biggest supplier of liquefied natural gas, for around 50 cargoes it deemed too expensive six years ago.

State-linked importer Petronet LNG Ltd. asked Qatargas to deliver the cargoes in the coming year, on top of the approximately 115 cargoes that its long-term contract stipulates for 2022, according to people familiar with the discussions. Normally, companies do not retroactively claim cargoes after initially declining them.

Petronet’s unusual move underscores the desperation of buyers as supply disruptions from Peru to Russia and a voracious post-pandemic rebound in energy demand push spot prices to record highs.

“We have requested Qatar to give us the pending 50 cargoes next year,” Akshay Kumar Singh, chief executive officer of Petronet, said on the sidelines of the CERAWeek India Energy Forum. “We require the cargoes now.” 

An email to officials at state-owned Qatar Energy, which is the majority shareholder of Qatargas, wasn’t immediately answered.

Asia’s spot LNG benchmark rose to a record $56.33 per million British thermal units on Oct. 6, valuing a standard cargo at about $190 million. Petronet pays about $11 a million Btu under its oil-linked contract with Qatar, or about the same level the Indian company said in 2015 was too high.

India will have to compete with some of the world’s biggest buyers of the power-generation fuel and their request risks being unsuccessful, according to traders. China National Offshore Oil Corp. signed a 15-year deal earlier this year with Qatar to purchase 3.5 million tons of LNG per annum starting from January.

Qatar’s energy minister, Saad Al-Kaabi, has said the country’s production is “maxed out.”

“We have huge demand from all our customers and unfortunately we can’t cater for everyone,” he said last month.

Strategic Prize

Qatar is spending almost $29 billion to increase its output by around 50%, but the project will take six years to complete.

The Petronet deal will end around that time, possibly aiding a compromise, especially as India is one of the fastest-growing buyers and is seeking to increase the use of gas to lower carbon emissions.

“Regardless of the grounds behind Petronet’s claim to forgone cargoes back in 2015, Qatar Energy will seek a larger strategic prize for a concession,” said Felix Booth, head of LNG at energy-intelligence firm Vortexa Ltd. “Qatar Energy may offer a few cargoes in exchange for a sales and purchase agreement that goes beyond 2028. That’s a strategic prize for Qatar.”(Adds Petronet CEO comment in fourth paragraph.)

–With assistance from Verity Ratcliffe.

© 2021 Bloomberg L.P.

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