The announcement by Petronet LNG Ltd on February 6 has significantly impacted the gas stocks market, as the company disclosed its intention to extend a significant deal with QatarEnergy.
Extending a Crucial Deal
Petronet LNG Ltd, during the India Energy Week, revealed plans to extend a pivotal deal with QatarEnergy, originally established in 2004. The deal involves the procurement of 7.5 million tonnes of gas annually. The original 25-year agreement, set to expire in 2028, is now being prolonged for an additional 20 years.
Market Impact and Renegotiations
Reports indicate that the renewed deal will come at a notably reduced price compared to the current terms, potentially saving India around $0.8 per million British thermal unit.
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Surge in Stock Prices
The market response was swift, with Petronet LNG Ltd’s shares soaring by over six percent, hitting a fresh 52-week high. Similarly, Oil & Natural Gas Corporation (ONGC) and GAIL (India) also experienced significant upticks, with their shares reaching fresh highs.
Impact on Other Gas Majors
The positive sentiment extended to other gas majors, including Gujarat Gas and Mahanagar Gas Ltd, both witnessing substantial gains during the session.
Contract Details and Stakeholders
Petronet LNG imports 8.5 million tonnes of LNG annually from Qatar under two contracts. The new agreement will see LNG supplies commencing from 2028 till 2048. The offtake of LNG volumes under the new SPA will primarily involve GAIL (India) Limited, Indian Oil Corporation (IOC), and Bharat Petroleum Corporation Limited (BPCL).
Vision and Significance
The renewal of this agreement is seen as a crucial step towards India’s vision of becoming a gas-based economy. As India aims to increase the share of natural gas in its energy mix to 15 percent by 2030, this agreement ensures energy security and stable, reliable clean energy supply, furthering the nation’s economic development.
Contract Terms and Changes
The current deal is based on 12.67 percent of prevailing Brent crude oil prices plus a fixed component of $0.52 per million British thermal unit. Under the new contract, while the slope remains similar, the fixed charge of $0.52 would be eliminated, according to reports.
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CEO’s Perspective
Akshay Kumar Singh, MD & CEO of Petronet LNG Limited, emphasized the significance of the existing long-term agreement with QatarEnergy, highlighting its contribution to India’s LNG imports and its alignment with the nation’s energy goals.
In summary, the extension of this crucial deal not only impacts the immediate market but also aligns with India’s long-term energy strategy, signaling a bullish outlook for gas stocks.