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New Delhi: Petronet LNG is in discussions with Qatar Energy to get the liquefied natural gas (LNG) cargoes lost to this year’s disruption in the Strait of Hormuz delivered before its contract’s recovery window opens in 2028, Managing Director Akshay Kumar Singh said on Monday. Qatar was due to supply 75 to 80 cargoes between March and October, he told the media during a post-earnings press conference on Monday. Only about six of them have arrived.
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The push is driven by price. “Hopefully, we are trying to get it earlier, because once the situation normalises, there is a lot of appetite for long-term volume in the country,” Singh said. “You know what the spot price is and what the long-term price is. There is a huge gap. So efforts are there to get some more cargo, and the talk is going in a positive direction.”
Qatar, however, cannot yet say when it will be able to deliver. “We have been talking with them, but they are not in a position to commit. How can they commit when the situation is not conducive?” Singh said.
Qatar Energy halted LNG production and declared force majeure to affected buyers in early March, after attacks linked to the war involving Iran targeted Qatar’s energy infrastructure. Petronet, in turn, issued force majeure notices to its own downstream buyers. Eight months on, Singh said, everybody is still “waiting for the situation to normalise.”
Qatar has not moved to change where the supply comes from, he said. “We have been in discussion for restoring the supply as soon as the situation normalises, and there are all indications that they are willing to supply the quantity they have committed to us,” Singh said.
If early delivery does not come through, the contract sets out how the lost cargoes will be made good. Under its force majeure mechanism, Qatar has one year after the contract ends to supply the shortfall. That recovery period runs from May 1, 2028 to April 30, 2029, Singh said.
The window also covers around 53 to 54 older cargoes still owed to Petronet under a 2015-16 settlement agreement with Qatar, according to Singh. All of them will be priced on the existing long-term formula. “That is the comfort, that you need not negotiate any price. It is a part of the same contract,” he said.
The existing contract dates back to 1999 and expires in April 2028. In February 2024, Petronet announced a 20-year agreement with QatarEnergy to renew it. The new deal covers 7.5 million tonnes per annum (mtpa) from May 2028 to December 2048, which keeps Qatari LNG flowing to India for another two decades.
The new deal will also change who carries the risk at sea. Petronet now buys Qatari LNG on a free-on-board (FOB) basis. That means it arranges the shipping and takes ownership of the cargo at the loading port. The new contract is on a delivered ex-ship (DES) basis, which moves that burden to the supplier. This year’s crisis showed why it matters, Singh said. “It is not only the cost of the molecule. It is also the war premium, which is substantially high, and those risks will definitely be transferred to the supplier when it is a DES cargo,” he said.
Singh declined to disclose the pricing formula. He said, however, that the terms are better than under the current contract. “We will not be able to disclose the formula and other things, but definitely it is better than what is there today,” he said.
Singh defended Qatar’s record as a supplier. Many long-term contracts were breached during the early phase of the Russia-Ukraine war, when suppliers looked for loopholes to sell cargoes at higher prices, he said. “But we did not find a single default from the Qataris during the entire Ukraine-Russia crisis,” Singh said.
Hormuz has nonetheless pushed buyers to look at where their gas comes from and how it travels. “Price should not be the only criterion. You must have in mind the security of supply, reliability of supply, geography,” Singh said. Shipping routes, from Hormuz and the Suez Canal to the Panama Canal and the Cape of Good Hope, are now part of that assessment, he added.
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In the meantime, other supplies have kept Petronet’s Dahej terminal running. Its ExxonMobil contract for LNG from Australia has not been affected by the crisis, Singh said. Companies that have booked capacity at the terminal are also bringing in cargoes from elsewhere. “A lot of new volumes are coming to our terminal, and we are regasifying,” Singh said. Measured against the terminal’s expanded capacity, utilisation is lower, he said, but “volume-wise, more or less we are in the same range.”
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