Mint: Petronet LNG Breaks Qatar Contract to Gain from Low Spot Prices

Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.

The company is taking only 70% of the volumes it agreed to in 25-year contracts with the Persian Gulf state, potentially triggering a fine, finance director R.K. Garg said. It’s paying about $8 per million British thermal units of spot LNG, about 36% less than its fixed price with Qatar’s RasGas Co.

“The major issue has always been price, and since spot prices are down we continue to have the advantage of the spot prices over long-term,” Garg said by phone, declining to say how much Petronet is saving buying more spot cargoes. The company is “trying to see what can be done about the penalty.”

Petronet, which had agreed to take 7.5 million tonnes of LNG a year from RasGas, is among the first companies in Asia to break a long-term purchase deal as weaker demand, higher supply and oil’s slump push down spot prices. Elsewhere in the region, China is deferring Qatari cargoes, while Japanese and South Korean importers are renegotiating contracts. MORE