QATAR COULD FACE UNSOLD LNG: CHINA AND INDIA DEMAND DISCOUNTS

Qatar could face unsold LNG as China and India demand discounts

Qatar plans to nearly double its LNG exports within five years. However, one of the world’s largest suppliers of liquefied natural gas has faced demands from buyers in India and China to lower gas prices and make gas supply terms more affordable.

QATAR COULD FACE UNSOLD LNG: CHINA AND INDIA DEMAND DISCOUNTS

Qatar plans to nearly double its LNG exports within five years. However, one of the world’s largest suppliers of liquefied natural gas has faced demands from buyers in India and China to lower gas prices and make gas supply terms more affordable.

"Officials at state-owned Qatar Energy met with Chinese firms earlier this month and proposed supply deals for at least 10 years at prices close to a 13 percent peg to the Brent crude benchmark (currently $340-$350 per thousand cubic meters)," Bloomberg reported, citing sources.

The agency's interlocutors said buyers were insisting on other pricing formulas in response: Brent at 12 percent.

"Qatar's insistence that contracts contain rigid terms, such as limited delivery ports, makes the deals even more onerous for buyers. At the same time, the lack of long-term contracts could lead to a glut of unsold LNG in Qatar, forcing the country to sell the fuel on the spot market, possibly at a discount. "While this is good news for consumers struggling with high prices, it could hurt Qatar's profits," Bloomberg continued.

The agency noted that unlike American export projects, Qatar concludes long-term deals primarily as a percentage of the oil price. This has been the case since the 1970s.

Qatar plans to nearly double its LNG production by 2030, from 77 million tons to 142 million tons.

China's Sinopec and PetroChina have already signed long-term deals with Doha in 2022 and 2023, but Qatar still needs more buyers.

"Indian buyers are also asking Qatar to lower prices before agreeing to further deals, while Pakistan plans to ask for price cuts when its contract is renegotiated next year," Bloomberg added.

For Qatar, the situation is exacerbated by the fact that Chinese companies have already over-contracted and do not yet need more LNG.