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RasGas of Qatar had in 2002 agreed to sell sell 7.5 million tons a year of liquefied natural gas (LNG) to Petronet at $16 a barrel oil price floor and $24 per barrel ceiling.
This translated into a minimum gas price of $2.01 per mmBtu and a maximum of $3.04 per mmBtu.
However in 2003, PLL renegotiated the price and agreed to having a fixed price at $20 per barrel oil ($2.53 per mmBtu) for five years from 2004 to 2009. For the next five years, it agreed to a price linked to moving average of the last 5 years of crude oil price and thereafter direct indexation with crude oil.
Sources said this led to price going up by $1 per year for five years from 2009, and from January 2014 to $12.66 per mmBtu at oil price of $100 per barrel.
Had Petronet not changed the contract, the price of LNG from Qatar would have been $3.04 per mmBtu for 25 years. But now, users will have to pay $12.66 per mmBtu for 15 years beginning 2014.
The extra to be paid will be $3.7 billion a year and $55.5 billion (about Rs 2.5 lakh crore) for 15 years, they said.
Sources said the then GAIL Chairman and Managing Director P Banerjee had raised concerns over Petronet not signing on the $16-24 per barrel floor-ceiling formula agreed at promoters meeting. But it is not know what response did his communications elicit.
GAIL, along with Indian Oil, Bharat Petroleum and Oil and Natural Gas Corp (ONGC), is an equal promoter with 12.5 per cent stake each.
Sources said originally it was GAIL which had in 1998 invited bids for supply of LNG at a price of $20 per barrel oil price. Later, Petronet LNG was formed and the tender transfered to it.
RasGas had in that tender quoted $2.53 per mmBtu price at $20 per barrel oil price and indexation impact of 2 cents per mmBtu for every $per barrel increase or decrease in oil price.
This meant that if oil price were to be $100 per barrel, the LNG price would be $4.13 per mmBtu and $2.33 per mmBtu if oil price were $10 a barrel.
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