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India rejects Qatar’s proposed LNG price

03rd April 2012

Quatar’s price to supply 5m tonnes more of liquefied natural gas for shipping

As the LNG market grows rapidly, the fleet of LNG carriers continues to experience tremendous growth.

India has rejected the price sought by Qatar for supplying an additional 5m tonnes a year of LNG in ships, saying it is too high for domestic consumers.

Qatar sought at least 14.5% of the prevailing price of Brent crude, which rose to USD 123 a barrel on Monday, the Times of India reported.

The price was flagged up during talks with a high-level Qatari delegation led by the country's minister for industry and energy Mohammed Bin Saleh Al Sada.

At an average Brent price of USD 110 per barrel, LNG will cost almost USD 16 per unit at the time of loading in ships at Qatari ports. After adding shipping cost, 5 per cent import duty, regassification cost, pipeline tariff and local levies, the gas would cost USD 20 per unit at consumer's end.

This would be three times the price of domestic gas. Oil minister, S. Jaipal Reddy underlined India's pricing concerns at a public function organised to mark the foundation day of India's biggest LNG importer, Petronet. The company imports 7.5m tonnes of gas from Qatar under a 25-year deal.

"On the pricing front, a major challenge is that for end consumers in India, gas has to compete with relatively cheaper fuels such as coal, especially in the power sector... Therefore, price fixation of gas, whether LNG from abroad or gas through trans-national pipelines, will have to be mindful of this reality," said Reddy.

Qatar is seeking larger and longer export deals amid a surge in global supplies that is encouraging buyers to call for an end to costing the fuel based on oil prices.

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