Business Standard: Crude Oil Slump Makes Petronet LNG's Qatar Contract Most Expensive Gas Source

Petronet LNG’s 7.5-million-tonne long-term contract with Qatar, which provides it the bulk of steady regassified earnings, has come under a shadow of doubt as the Japanese Crude Cocktail-linked pricing formula implies lesser sensitivity to a fall in Brent prices, said Antique stock broking in its report.

“Due to the 60 months averaging in fixing the cap, Rasgas term LNG prices theoretically would fall to $10 per million British thermal unit (mBtu) only by mid-2017, even if Brent remains between $50 a barrel and $70 a barrel until then. In fact, against $14 per mmbtu currently, term LNG prices would stay above $12 per mBtu till around September 2016,” said Amit Rustagi of Antique, in his report dated January 12.

Term LNG prices would be 40-50 per cent above the current delivered spot LNG price of $8-9 per mmbtu, implying an unviable 22 per cent slope to Brent, making it the most expensive gas source and, thus unviable for the industry. MORE