India to Save 'Over $1bn' on Gazprom LNG Deal

The renegotiated LNG contract between Indian state-owned Gail and Gazprom will help India save as much as an estimated rupees 95bn ($1.4bn) over the lifetime of the contract that ends in 2040, India’s oil minister Dharmendra Pradhan said July 18 in the lower house of the country's parliament.

“The renegotiated price, compared to earlier contract price, will result in saving of approximately rupees 85bn (crude oil at $50/b) or rupees 90bn (crude oil at $60/b) or rupees 95bn (crude oil at $ 70/b) for the years 2018 to 2040,” Pradhan said in a written reply to a question posed by another member of parliament. 

“The gas price is negotiated between parties depending on many factors like project location, duration of contract, pricing formula, etc.,” he said.

India received its first LNG cargo from Gazprom June 4 on LNG Kano under a long-term deal at Petronet’s Dahej terminal in the state of Gujarat. Gail will buy 2.5mn mt/yr of LNG under a 20-year contract. The contracted volume has been lowered from 2.5mn mt to 0.5mn mt in the first year 2018-19, 0.75mn mt in 2019-20, 1.5mn mt in the third year 2020-21. Gail will start importing the full 2.5mn/yr by the fourth year and make up for the initial volume reduction over the remaining length of the contract. Its pricing has been changed from nine-month linkage to JCC (Japanese customs-cleared crude) to a three-month average of Brent. In return the full term of the deal has been extended by two to three years.