Petronet LNG (PLL) and QatarEnergy (QE) have extended their longstanding contract by 20 years at India Energy Week in Goa.

According to Wood Mackenzie, the sales and purchase agreement (SPA) extension between QE and PLL covers a total volume of 150 million tonnes (Mt) over 20 years, making it the largest LNG SPA ever signed.

Wood Mackenzie Global LNG (Asia) Director Daniel Toleman said: “This agreement plays a crucial role in enabling India to reach its target of increasing the proportion of natural gas in its energy mix to 15 per cent by 2030, a significant rise from the current 6.3 per cent.

“India’s LNG demand experienced a decline due to high prices, however, with the global market rebalancing and the availability of affordable LNG contracts, the country’s LNG demand is expected to rebound and grow to 30 Mt per annum by 2030,” Toleman added.

The original agreement between QE and PLL was signed in 1999, based on a free-on-board (FOB) arrangement.

Since 2016, the agreement has been priced at approximately 12.7 per cent Brent with a constant of 0.6.

This deal surpasses the previous records set by the RasGas 1 deal with Korea Gas Corporation (KOGAS) for 123 Mt, the RasGas II deal with Petronet for 120 Mt, and the RasGas II contract with Edison for 117 Mt.

It also surpasses the two 108 Mt deals signed by QatarEnergy with the China National Petroleum Corporation (CNPC) and Sinopec in the past two years.

The industrial sector, particularly large-scale industries, will drive LNG consumption, while the small to medium-scale industrial sector is also expected to increase its LNG usage steadily.

If LNG becomes more affordable, it has the potential to reduce India’s power emissions significantly.

Replacing coal with LNG in the power mix could reduce emissions by approximately 50 per cent, says Wood Mackenzie.

“The contract, set to expire in 2028, has been extended until 2048. This extension comes as no surprise, as both firms have been in talks throughout 2023,” said Toleman.

This contract extension aligns with Qatar’s plans to ramp up its LNG capacity, as significant volumes will become available with the production commencement of Golden Pass LNG and its North Field mega trains.

QatarEnergy will have ample operational, low-cost supply to market from the end of the decade.

Qatar will now utilise its extensive shipping fleet to deliver the volumes to India.

According to Wood Mackenzie, the long-term cost of delivering cargo to the Dahej terminal on the West Coast is estimated at around US$0.4 per million British thermal unit (MMBtu) on a Q-Flex vessel.

However, it is uncertain whether PLL can receive cargo on the East Coast due to the high delivery cost to the Ennore terminal, which is around US$0.25 higher, at approximately US$0.65/MMBtu.

The extension of this contract is expected to strengthen the cooperation between Qatar and India, and support India’s efforts to reduce its carbon emissions while meeting its growing energy needs.