P-LNG and Qatargas meet for talks on January 27

Vol 23, PW 5 (16 Jan 20) Midstream & Downstream

Petronet-LNG is embarking on a second round of high-level talks in an attempt to crack open the 25-year SPA it signed with Qatargas predecessor RasGas more than 20 years ago.

This report learns oil minister Dharmendra Pradhan, accompanied by Petronet-LNG managing director Prabhat Singh, is meeting his Qatari counterpart and Qatar Petroleum vice-chairman Saad Sherida al-Kaabi at the Oberoi Hotel in Delhi on January 27. Also in attendance will be IndianOil chairman Sanjiv Singh who is hosting the meeting.

In preparation for the meeting Petronet-LNG is preparing an in-depth analysis of spot LNG price trends based on December (2019) and January (2020) deliveries. Their aim: to illustrate the continuing disparity between expensive landed 'term' cargoes from Qatargas and cheap 'spot' imports.

"If spot LNG prices continue to rise," says a source, "Petronet-LNG will have a hard time convincing Qatargas to bring down its price." Not helping Petronet-LNG is the lingering threat of war between the US and Iran following the assasination of Iranian general Qasem Soleimani on January 3 and its impact on Brent-linked spot LNG prices.

Four days after Soleimani's death Brent touched $71.17 but by January 14 had dropped back to $64.71. "If Brent stays at $65-$68 levels," adds a source, "LNG spot prices will go up, they're already heading north."

Hoping against hope, Petronet-LNG is banking on Brent dropping by March (2020) so spot LNG to India returns to $5/mmbtu or less.

Spot LNG prices are undoubtedly rising from their all-time lows. On October 23 (2019) Reliance-Shell landed a spot cargo at Hazira from ADGAS at $4.31/mmbtu but by December 2 (2019) GAIL's cargo at Dabhol from ADGAS landed at $7.18/mmbtu. Qatargas 'term' LNG meanwhile continues to land in India at around $8.4/mmbtu. No one doubts Qatargas will fiercely resist calls for a price cut as it did in its last meeting with Pradhan and Petronet-LNG in Doha on September 12 (2019). “The message then was clear," we hear. "They won't reduce the price.” On the table in the forthcoming meeting as with the last will be the 25-year SPA signed on July 31 (1999). In December 2015 Petronet-LNG forced a concession from the Qataris when they agreed a revised 12.67% slope to Brent plus a $0.52/mmbtu 'constant'. Still uncertain is if Qatargas is ready to agree a further cut to 11%. Last year (2019) none of the Dahej offtakers IndianOil, GAIL or BPCL defaulted on the strict SPA 'take-or-pay' conditions - unlike in 2015. "But if the price difference increases,” warns a source, "a default can't be ruled out."

P-LNG and Qatargas meet for talks on January 27

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