Daily News & Analysis: Qatar Scraps Floor, Cap in Gas Price Formula with India

The world's largest gas exporter Qatar has slashed the price of gas it supplies to India by almost half by removing a floor and cap in the pricing formula, but has introduced a small fixed component to protect its interest.

The revised formulation, which came into effect from January 1, has led to a reduced cost of liquefied natural gas (LNG) from Qatar to about $6.5-6.6 per million British thermal unit (mmBtu) from the last billed $12.60 per mmBtu.

Under an existing 25-year contract, RasGas of Qatar will price 7.5 million tonnes a year of LNG it sells to Petronet LNG at 12.66% of the three-month average price of brent crude.

To this, a fixed component of about $0.60 per mmBtu will be added, sources privy to the development said.

So, if the three-month average price of Brent is $45 per barrel, the gas price comes to $5.7 per mmBtu. Once the fixed component is added, that makes it $6.3 at the time of dispatch of LNG in ships from Qatar ports. MORE