Bulls grab gas stocks as India renews $78 billion LNG deal with Qatar; ONGC, Petronet hit 4% upper circuit

Bulls tightened their grip over gas stocks after Petronet LNG Ltd announced on February 6 that it is likely to sign a deal with QatarEnergy for extending a 2004 deal to buy 7.5 million tonne a year of gas. On the sidelines of India Energy Week, India's biggest liquefied natural gas (LNG) importer said that the first 25-year deal is to expire in 2028 and is now being extended for 20 additional years. 

The second deal for 1 MTPA (millions of tonnes per annum) entered into in 2015, will be negotiated separately. According to reports, the renewal of the deal is at a significantly lower price than the current deal. At current prices, India will save about $ 0.8 per million British thermal unit at the renewed terms.

Also Read: Petronet set to sign long-term energy deal with Qatar

Gas stocks today

Shares of Petronet LNG were locked at over six per cent upper circuit to hit its fresh 52-week high of ₹296.15 apiece on the BSE. Similarly, shares of Oil & Natural Gas Corporation (ONGC) were locked at over three per cent to hit its fresh 52-week high of ₹273.35 apiece on the BSE.

Additionally, shares of GAIL (India) also rose around four per cent to hit an intra day high of ₹183, against its 52-week high of ₹186.50 on the BSE. Shares settled 3.07 per cent higher at ₹181.50 apiece on the BSE. 

Similarly, shares of state gas majors such as Gujarat Gas and Mahanagar Gas Ltd also saw significant gains during the session earlier today. Shares of Gujarat Gas were locked at over three per cent upper circuit to hit its 52-week high of ₹617.35 apiece on the BSE, while Mahanagas Gas shares were locked at six per cent upper circuit to hit its fresh record high of ₹1,5399 apiece on the BSE.

India-Qatar LNG deal

Petronet imports 8.5 million tonne per year (MTPA) of LNG from Qatar under two contracts. This is pursuant to extension of an existing LNG SPA for LNG supply of around 7.5 MMTPA LNG Sale & Purchase Agreement (SPA) on FOB basis, signed on 31st July 1999 for supplies till 2028. Under the new agreement, LNG supplies will be made on delivered basis commencing from 2028 till 2048,'' said Petronet LNG in its regulatory filing to the stock exchanges.

Similar to earlier agreement of 1999, the LNG volumes under the new SPA shall also be offtaken by GAIL (India) Limited (60 per cent), Indian Oil Corporation (IOC) (30 per cent) and Bharat Petroleum Corporation Limited (BPCL) (10 per cent) after regasification primarily from Dahej Terminal of PLL on substantially back to back basis, according to Petronet LNG.

Petronet LNG is a joint venture company with equity participation from four oil & gas Maharatna public sector undertakings i.e., GAIL, ONGC, IOC, and BPCL each holding equity of 12.50 per cent, and together totalling to 50 per cent.

Also Read: Bulls tighten grip over OMCs after ₹15,000 crore capex infusion; IOC, BPCL, HPCL hit 6-9% upper circuit

India, the world's third biggest energy consumer, sees natural gas as a transition fuel for migrating to net zero carbon emissions by 2070. As part of this, the government is targeting to raise the share of natural gas in the country's energy mix to 15 per cent by 2030 from 6.3 per cent now.

The current deal is priced at 12.67 per cent of prevailing Brent crude oil prices plus a fixed component of $0.52 per million British thermal unit. Under the new contract, the slope would remain more or less the same but the fixed charge of $0.52 would be scrapped, as per reports.

Akshay Kumar Singh, MD & CEO, Petronet LNG Limited said “the existing long-term agreement between Petronet LNG & QatarEnergy today accounts for around 35% of India’s LNG imports and is of national importance. Renewal of this agreement is a step towards achieving vision of Hon’ble Prime Minister of India to make India a gas-based economy and increase share of natural gas in India’s primary energy basket to 15 per cent by year 2030. This agreement will provide energy security and ensure stable & reliable supply of clean energy and help India in its stride towards greater economic development.”