LNG

Petronet LNG, the state-backed owner of the largest Indian import terminal at Dahej in the West Coast state of Gujarat and a smaller facility at Kochi terminal in the southwest state of Kerala and with plans for a third terminal, is set to sign new long-term supply agreements with Qatar.

Petronet currently has three agreements it is renegotiating with QatarEnergy to extend beyond 2028 for 20 years or more.

Shareholders in Petronet, which began operations in 2004, have one agreement with Qatar to supply 5 million tonnes per annum, a second from 2009 for 2.5 MTPA and a third from 2016 for 1 MTPA.

The third deal is with the actual shareholders in Petronet - rather than the Petronet entity. These shareholders comprise the biggest Indian energy players GAIL India, Indian Oil, Bharat Petroleum Corp. and Oil and Natural Gas Corp.

The new deals are expected to be consolidated into two agreements instead of three. They would be for Qatari volumes in one deal of 7.5 MTPA and a second for 1 MTPA of cargoes.

Close to deal

“We are pretty close to signing the deals,” said Indian Oil Secretary Pankaj Jain in a statement.

At present, Petronet buys the 8.5 MTPA from Qatar with pricing based on a slope of about 12.67 percent of Brent crude plus a fixed charge of about 50 cents per million British thermal units and is apparently seeking better or similar terms.

Petronet also confirmed at the end of December 2023 that it was going ahead with a third import facility and its first on the East Coast at the Port of Gopalpur in the state of Odisha.

The company has proposed having a floating LNG facility at Gopalpur before converting to an onshore terminal. 

The total capacity of existing terminals in India rose in 2023 to 47.7 MTPA with the addition of the Dhamra terminal in Odisha owned by French major TotalEnergies and the Indian Adani group.

The new Petronet facility at Gopalpur would be India’s eighth, though would be only be the third located on the East Coast and the second in Odisha.

“Petronet LNG Ltd (PLL) has executed binding transaction documents and sub-lease deed and a Port Service Agreement with Gopalpur Ports Limited on December 27, 2023 for setting up of floating storage regasification unit (FSRU) with capacity of 4 MTPA (Phase-1), with provision for converting to 5 MTPA land-based terminal at Gopalpur Port,” said the company in its end-of-December statement .

Out of the seven Indian terminals operating the largest is Petronet’s onshore terminal at Dahej, located north of Mumbai and with capacity of 17.5 MTPA.

Petronet’s Kochi facility in the southwest state of Kerala has capacity of 5 MTPA, though is under-utilised because of a shortage of pipeline connections to markets.

Earnings

Petronet reported consolidated net profits at the end of October 2023 of 818.10 crore Indian rupees ($98.24 million) for the second quarter of the fiscal year compared with 744.25 crore rupees ($89.37M) in the second quarter of 2022 and 789.85 crore rupees ($94.85M) in the previous 2023 quarter to the end of June.

The company’s consolidated revenues from operations were much lower this year than last because of higher prices that prevailed in 2022.

The fiscal second-quarter revenues dropped by over 22 percent to 12,532.57 crore rupees ($1.30 billion) from 16,079.97 crore rupees ($1.93Bln) reported in the same quarter of last year.

However, the fiscal second-quarter income was higher than the 11,656.38 crore rupees ($1.39Bln) logged in the April-June quarter of 2023.

Shenzhen Energy, the Chinese natural gas and power company, said it signed a long-term LNG supply agreement with UK major BP for volumes to fuel gas-fired power plants in what is the second large contract signed by a Chinese company in November 2022.

Qatar Petroleum entered into a new long-term supply deal with Pakistan State Oil Company (PSO) for the supply of up to an additional 3 million tonnes per annum of cargoes with prices almost one-third lower than in the previous accord.

Under the 10-year agreement, LNG deliveries to Pakistan's receiving terminals will commence in 2022 and continue until the end of 2031.

The accord was signed in Islamabad between Saad Sherida Al-Kaabi, President and Chief Executive of Qatar Petroleum, and Syed Taha, Head of PSO, in the presence of Pakistani Prime Minister Imran Khan and Saoud bin Abdulrahman Al Thani, Qatar's Ambassador to Pakistan.

PM Khan’s Special Assistant on Petroleum Policy, Nadeem Babar, told a later press conference that the volumes in the new Qatari contract will be about 30 percent less expensive than previously.

“It is the lowest publicly disclosed LNG contract in terms of price in the world,” added Babar.

Babar explained that the deal would help the country save a total of up to US$3 billion over 10 years.

“The previous agreement with Qatar was for 15 years under which the price was fixed for 10 years. The new agreement, however, envisages price reopening after four years,” said Babar.

Qatar and PSO signed a previous agreement in 2016 for 3.75 MTPA of LNG and the new deal raises the total of long-term LNG volumes to 6.75 MTPA.

Babar added that under the new agreement, Pakistan would receive two LNG shipments on average per month and after a period of three years, the number of cargoes would increase to four.

“We are delighted to enter into this new long-term agreement with Pakistan State Oil Company and to continue our contributions towards meeting Pakistan's increasing energy demand,” stated the Qatar Petroleum CEO.

“This agreement further extends Qatar's long-standing LNG supply relationship with Pakistan and highlights our commitment to meeting Pakistan's LNG requirements,” he added.

“We are confident that the exceptional reliability of our LNG supplies will provide PSO with the required flexibility and supply security to fuel Pakistan's impressive growth,” said Al-Kaabi.

Pakistan currently has two operational floating LNG receiving terminals, the Engro LNG facility and the Pakistan GasPort terminal.

Both use floating storage and regasification units (FSRUs) and are located at Port Qasim, east of the city of Karachi.

In further comments, Al-Kaabi noted that Pakistan had a well-established gas market and distribution system and was strategically important for Qatar.

“We are encouraged by Pakistan's exceptional growth and excellent economic potential as well as by the prospects of it being one of the world's fastest growing LNG markets,” added Al-Kaabi.

“I would like to take this opportunity to thank Prime Minister Imran Khan for his support and for his patronage of this special event. I also would like to thank Pakistan's energy officials as well as PSO's management for all their efforts,” stated Al-Kaabi.