Qatar cuts a deal: get LNG cheap for less tax

‘‘Discussions between (Qatari supplier) RasGas and lead negotiator IOC and Gail are to start in two weeks’ time under which the LNG Sale and Purchase Agreement (SPA) would be re-negotiated,’’ sources said.

Indian Oil Corporation, Gail India Ltd and Bharat Petroleum Corporation Ltd — who were deputed to market the regassified LNG imported by Petronet — have refused to sign the Gas Sale Purchase Agreement (GSPA) with Petronet saying that its prices were very high and unattractive for consumers in the power and fertiliser sectors.

As against the domestic price of $2.75 per million British thermal unit (mbtu), the price of regassified LNG was $4 to $5.4 per mbtu, which the power and fertiliser producers are not willing to pay.

Moreover, the recent gas find by Reliance Industries in the country’s east coast was also prompting the end-customers not to sign a longer contract with the three retailers. A recent tender by NTPC seeking gas supplies for its new and expanded power plants has also robbed the market for Petronet gas. The three are, therefore, seeking a reduction in gas price to $3-$3.5 per mbtu, inclusive of sales tax, without which they will not sign the GSPA. And that standoff is delaying the signing of pacts which guarantee lifting of supplies and payment of compensation in case they do not. These agreements are crucial for completion of the project at Dahej in Gujarat and commencement of supplies of 5 million tonnes of LNG there from December 2003.

In line with Attiya’s request, the Petroleum Ministry would seek infrastructure status for LNG to get customs duty exemption on project imports; ‘declared goods’ classification for LNG to bring down sales tax to 4 pc from the current high of 22 pc ; and, zero customs duty on LNG from the current 5 pc.

It would also seek revision of domestic gas prices within a time-frame, which would be an average of the domestically produced and imported gas prices.

These and a $1 per mbtu cut in LNG price by Qatar would bring down the prices to marketable region, said sources. Until that happens, the three offtakers have decided not to sign the GSPA with Petronet, they added.

India is the largest purchaser of LNG from Qatar after Ras Laffan Liquefied Natural Gas Company Ltd (RasGas) and Petronet signed SPA on July 31, 1999, paving the way for the commencement of a 25-yr gas supply deal.